Jump to content

The Gotrocks and the Helpers


Guest Peter James

Recommended Posts

  • 2 weeks later...
Guest Peter James

1% charge on your pension doesn't sound much.

Till you realise its not 1% of the profits, its 1% of the total, and its taken every year.

Over 50 years thats like 50 x 1% = 50% - half your fund - OK thats an oversimplification, but shows how it adds up, and many people lose over two thirds of their private pension in charges - a more accurate calculator here: http://www.thisismoney.co.uk/money/investing/article-1633426/Isa-fund-charges-calculator-How-fees-affect-returns.html

 

Link to comment
Share on other sites

Warren Buffet is 82 now and all but retired – he always stated go for value which is no bad thing.

 

But, Peter, I am intrigued that you quote from an article he wrote in 2006 – two years before his specific “method” was shown to be deeply flawed as it went more than a little pear shaped in late 2008.

 

This article gives a better overview to my mind:-

 

http://online.wsj.com/article/SB10001424127887324735104578119232002545480.html

 

As for your calculations – it is not an oversimplification – it is just plain wrong.

 

If you put £1000 in a pension pot then the charge if 1% would be £10.

 

If you accrued £100,000 then a 1% charge would be £1000. But all providers we use apply a discounted charge for large “pots” so over £100K (the usual kick in point) 1% no longer applies.

 

Other funds we use have a charge that falls significantly if the fund performance falls from the upper quartile. The idea being that poor performance is not rewarded. Most people like that concept.

 

A 1% a year charge for 50 years does not add up to 50% of the final fund.

 

By that same flawed methodology the actual fund value would be 99% times 50 = 4950% :-D

 

In reality a good performing fund like the M&G Corporate Bond fund has an AMC of 1% because it really is actively managed by a superb team. The performance over the last year has been circa 10%. Which most of our clients we recommended this fund to are more than happy to have paid the 1% to achieve!

 

In fact using your second link – entering £10,000 as a lump sum with the 3% Initial Charge and the 1% AMC that would apply if you bought the ISA Direct, of the page – caveat emptor applying, this would net you £173,269.79 after 50 years.

 

But if you bought from us with our huge fund based discounts – the Initial Charge would be only 2% and the AMC only 0.43%. That would net you £232,822.48. On a fully advised basis with annual reports and access to a qualified adviser as part of the deal.

 

And the performance of that M&G fund is no flash in the pan – it achieved 51.4% overall over the last 5 years.

 

That said – investors need to be careful because such performance will drop off when interest rates start to rise again – as they will – but for now – with at least another year or possibly two of low interest rates, such a fund has to be considered.

 

You pays your money – you takes your choice. If you pa for bad advice – then obviously that advice is HUGELY expensive. But GOOD advice can be very worthwhile indeed.

 

But then I would say that wouldn’t I.

 

But then again – I have the data to back up what I say.

 

Peter – but you have an article from 2006 and some dodgy math.

 

Sorry to be blunt Peter but if you do not want to pay for advice – that is fine – but where it is clear that advice works – and even the Consumers Association recommends getting good independent advice – then I would suggest that the facts differ from what you try to make out them to be. :-S

 

Link to comment
Share on other sites

Guest Peter James

 

As I understand it, the point of the story The Gotrocks & The Helpers'? is that the helpers add nothing, so their fees are a dead loss. Your link is interesting, but I don't see how it changes the story.

Yes the illustration of 1% x 50 years = 50% is an oversimplification as I said, but it produces a more accurate illustration of the overall charges than just saying 1%., or the suggestion that the AMC represents the total charges?

Bond funds have done well recently, but Bonds have done even better.

Link to comment
Share on other sites

Yes Peter Bonds have done marginally better - but only if you bought the right ones.

 

And if you bought the wrong ones or so so ones - best of luck getting shot of them when the interest rates recover.

 

In contrast - if you want to bail out of a unitised Bond fund - then you simply give an instruction and a fund transfer takes place. Simple - no charges and not a chargeable event either.

 

As I say - each to his own. :-D

Link to comment
Share on other sites

Guest Peter James
CliveH - 2012-11-18 8:43 PM

 

Yes Peter Bonds have done marginally better - but only if you bought the right ones.

 

And if you bought the wrong ones or so so ones - best of luck getting shot of them when the interest rates recover.

 

In contrast - if you want to bail out of a unitised Bond fund - then you simply give an instruction and a fund transfer takes place. Simple - no charges and not a chargeable event either.

 

As I say - each to his own. :-D

I just pick up the phone to buy or sell straightaway I don't see how a fund could be easier than that. Or that it will be any easier to get out of bond funds than it is bonds when interest rates recover.

Of course we don't always pick the best shares, but then we don't always pick the best funds either do we :$

Link to comment
Share on other sites

You miss the point Peter.

 

You can buy and sell a bond/gilt direct if you wish but I doubt you can do it without some dealing costs.

 

And then you have the palarva of sorting out the “Clean” or the “Dirty” price.

 

Individual investors are taxable on interest receivable on bonds/gilts (including the interest uplift on index-linked gilts). Interest is normally payable gross, but investors may opt for net payment on application to the Gilts Registrar, Computershare Investor Services PLC (CIS).

 

Individual investors may be taxable on accrued interest on transfers of gilts.

 

Whilst Individuals are not liable to capital gains tax on the disposal of gilts, gains and losses accruing to UK individual investors on gilt strips are taxable on an annual basis.

 

So it is not a simple as you make out. Plus the onus is on you to select the right issue. Get it wrong and you could end up with an investment whose running yield is lower than what you can get on deposit.

 

But as I say – if that is what you like to do – then fine.

 

But the majority find access to the Fixed Interest Sector far easier via a cumulative vehicle, where internal transfers (both to funds and other Fund Houses) are free and there is no tax liability on switching, no HMRC reporting requirement and perhaps most important of all, a past track record of performance in a volatile market.

 

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...