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Holly's Blog: Navigating our way through cr@p

11/01/2019

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Trying to explain what we actually do at work to our children is hard. Visually they see me sitting in front of two white rectangles (screen and keyboard), endlessly tapping away. Mummy taps. Last night was one of the times I found myself explaining investing to a 10 year old. He has a small Junior ISA, invested in a mix of global shares. When I told him he owned a bit of Apple, his eyes nearly exploded with temporary delusions of grandeur. I had to slightly burst the bubble by further explaining that if Apple were a person, he would own about one hundredth of one eyelash. But you get the point – at its heart, the concept of investing is engaging.

But 90% of the products are ‘rubbish’….

This week I attended the launch of Hargreaves Lansdown’s new shortlist of recommended funds. The Wealth 50. It’s a good list of decent funds with costs which have been bartered down to competitive levels. As a retail investor you can’t buy many of these funds at a lower price anywhere else and it’s a useful filtering tool for anyone who wants some help in picking a few funds.

In the presentation, their head of research Mark Dampier, a nice and fundamentally no-nonsense bloke who knows a lot about the world of investing, said that he thought that over 90% of funds out there were ‘rubbish’.

90 per cent! [repeat in a mildly hysterical voice]. Call me naïve but this number has been playing in my mind all week – it’s absurdly and unacceptably high. Can you imagine any other sector where over 90% of products were deemed to be rubbish? And I’m not talking about shoes or sofas here – these are people’s life savings.

No-one knows who to trust, there are thousands of funds too many, consequently many retail investors hedge their bets to the point of holding more than 50 funds which is technically known as a bugger’s muddle, and too many fund managers are doing a sub-standard job. #facepalm

OK Holly. Cheers for that but it’s not very constructive.

So what to do? How to avoid the dross? I think as a general rule that these fund lists on platforms are super helpful. The choices on them are coming down (helpfully) and most now offer a manageable number per investment type and region. This week Interactive Investor also launched its new Super 60 list and there are other helpful options – we share links below.

If you stick to these lists I don’t think anyone will go too far wrong - as long as your timeframes are long enough to wear the inevitable downs as well as ups, and you pick a decent mix of stuff which spreads the investment love around by region and sector. As a very rough and crude rule of thumb I think 8-16 funds should be enough for most DIY investors. If this fries your brain look at a robo adviser for a single ready-made option instead.

Hmm. Nice list but the sun does not shine out of Hargreaves’…..

I have been generally positive about the research team and the fund selection lists of Hargreaves. But as the cost of investing gradually falls around them, their 0.45% admin fee remains stubbornly high.

Let’s put this into perspective. I accept that good service costs. I have nearly 30 test accounts and I still use Hargreaves as my main account. Here are two little practical examples why. It’s tax return time, I need to find tax certificates for all my test accounts. I can find this certificate on HL in about 30 seconds and get the pdf. With some others, I look aimlessly for 20 minutes then phone them and wait for a scribe to write this out on velcrum and give it to a carrier pigeon. If I need to phone someone, at Hargreaves a polite young graduate who sounds like they are good at sport, have a well organised sock drawer and were Sixer of the Pixies, answers the call in less than 10 seconds and helps me. At other places I wait for more than 15 minutes then have to press buttons and be told how important I am as I wait for Godot.

That said, on the other hand I can see the financial impact of using them as higher admin fees nibble away at my savings. Their research team argues passionately about the importance of low charges for good investment returns. They need to have a word with their colleagues on the administration side. I’ve written more on this here for anyone interested and I’m sure it will be debated in the weekend money press.

Soapbox

Although I see a generally improving industry around me, we still manage to make a right royal cock-up of moving from the exciting notion of owning a piece of Apple, to the practicalities of how to invest in something decent where we won’t be ripped off. I have plans for campaign and change this year but I can’t do it alone. Any finance boss who is as outraged by the 90% suggestion as I – please get in touch. We need to move this dial.

 

Have a good weekend everyone,

Holly

 

Preferred fund lists:

AJ Bell – AJ Bell Favourite funds includes 88
Barclays – Barclays Funds List has 57
Charles Stanley – Foundation Fundlist includes 57
Fidelity – Select 50 has 50
Hargreaves Lansdown – The Wealth 50 includes 50 active funds and 10 passive funds
Interactive Investor – ii Super 60 has 60

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The better Wealth 50 highlights an inconvenient truth

For the more technically minded, Holly wrote this piece which analyses the new Hargreaves Lansdown Wealth 50 preferred funds list which was launched on 9th January 2019.

The Better Wealth 50 Highlights An Inconvenient Truth

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Which funds should I invest in for 2019? Ask the money elves

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    David | 18/01/2019 | 0

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  • I've been reading recently about how investment trusts are much the same as funds, but are cheaper to own. A: Is this true? and B: Do you have an article on Investment trusts on your site?

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  • Hello, I really enjoy your website and find it useful and concise. My question is, what is meant by long term savings? I am 54, so what should I consider to be an appropriate time frame for any investment I make, that could supply the best results?

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  • Can you recommend some very basic books for a 69-year-old widow who is now having to manage her money? Thanks

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    Holly Mackay's Response

  • We have four grandchildren (2 English living in UK, and 2 Irish living in Eire). We have decided to start savings plans for their futures. Their ages are 18yrs, 11yrs, 8yrs and 4yrs respectively. My age is 75yrs, and my wife is a little older. What should we do, please?

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    • Junior ISA
    • Lifetime ISA
    • Shares
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    Martin's Response

  • Given the recent poor performance in Woodford Equity Income, do you think I should sell it or wait for the fund to recover?

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    • Funds
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  • I am already receiving a pension from a final salary scheme and I am retired. I have a sum of money I want to invest. Can I start another pension as a saver and, if so, how much can I put in every year?

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    • Private Pension
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  • I am getting long in the tooth at 79, a little forgetful and I am going through a painful divorce. This has shattered my confidence and I need help.

    Richard | Kent | 05/11/2017 | 3

    • Private Pension
    • Funds
    Holly Mackay's Response

  • Have you a review on Halifax stocks and shares isa

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    • Stocks and Shares ISA
    Dr Richard Bradley's Response

  • My mother is 84 and has around £35,000 in cash, realised when she moved to a smaller house. She would like to invest it and draw income that would be slightly higher than the natural yield - say around £2,000. What is the best vehicle for that please?

    Ed | SXE | 18/09/2017 | 4

    • Stocks and Shares ISA
    • Cash
    Danny Cox's Response

  • I have just sold my house and have a significant sum of money I want to invest. I may want to draw some income but also want to achieve capital growth. Are there funds that aim to achieve both or should I just invest for growth and draw money as I need to for income?

    Jon | SRY | 13/09/2017 | 1

    • Funds
    Peter Matthew's Response

  • I am interested in the Fund piece that Holly refers to in today's Money Supplement in the ST’s with 'Lindsell Train Global Equity'. I am looking for a fund for myself (54 yrs old) but also my son (19 yrs old). Is this fund suitable for either of us with an investment strategy of 10 years +.

    Richard | 22/01/2017 | 0

    • Funds
    Holly Mackay's Response

  • I am confused about index funds, e.g. Vanguard Equity fund. Do they track an index or include the yield? In the case of Vanguard, their low cost is attractive but their portfolio is made up of other Vanguard funds. I assume these probably each carry a fee structure - is this correct?

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    • Online Investment Platforms
    • Funds
    Mark Dampier's Response

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    • Private Pension
    • Shares
    • Funds
    Helena Wardle's Response

  • I've got £20,000 from an endowment policy (astonishing, I know), and I'm looking into how best to invest to get a reasonable return without excessive risk. Any thoughts much appreciated!!

    Penny | Peterborough | 09/08/2018 | 0

    • Stocks and Shares ISA
    • Cash
    • Online Investment Platforms
    • Life Insurance
    Danny Cox's Response

  • I am looking for a fund for myself (54 yrs old) but also my son (19 yrs old). Is this fund suitable for either of us with an investment strategy of 10 years +.

    | 29/05/2018 | 3

    • Robo Adviser
    • Funds
    Holly Mackay's Response

  • I use H&L and although they are a bit 'plumy' on the phone I quite like their website and the costs are OK. So I was thinking of H&L for [my son]. I would be telling him to open these two funds and regularly invest and forget about them for 10 years!

    R | Greater London | 29/05/2018 | 1

    • Lifetime ISA
    • Robo Adviser
    • Online Investment Platforms
    • Funds
    Holly Mackay's Response

  • Given the recent poor performance in Woodford Equity Income, do you think I should sell it or wait for the fund to recover?

    | 29/05/2018 | 0

    • Funds
    Boring Money's Response

  • I have a bit of excess money to play around with and I have been looking at Investment funds. What is the typical % growth rate of an investment fund?

    David | Greater London | 07/09/2017 | 7

    • Online Investment Platforms
    • Funds
    Cherry Reynard's Response

  • How risky is a Stocks and Shares ISA?

    Alexandra | Greater London | 06/09/2017 | 2

    • Stocks and Shares ISA
    Holly Mackay's Response

  • Should I be even thinking about the stock market?

    Lysa | Greater London | 06/09/2017 | 0

    • Stocks and Shares ISA
    • Shares
    Holly Mackay's Response

  • Pensions vs ISA - which one is best?

    Roderick | Greater London | 06/09/2017 | 0

    • Stocks and Shares ISA
    • Junior ISA
    • Lifetime ISA
    • Pension
    Holly Mackay's Response

  • What funds could my millennial children invest in?

    Anthony | Greater London | 06/09/2017 | 1

    • Funds
    Holly Mackay's Response