That blog would concern me if I was a client as it shows a few gaping holes in the knowledge.
Create own ETF (Alternatives to ETFs)
- Thread starter sparkdev
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1. Ever changing tax rules and UK UCITs might come under 41% rule same as Irish domiciled ETFs
2. Performance of the funds is in the hands of the active manager
3. High fees
4. Currency exchange risk
5. Protection of investment if the unit trust goes out of the business
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Thanks for your valuable inputs. The Pies are limited to 50 shares per pie, so that is a bit of an issue. Nested Pies is a new feature that they are trying to bring soon. I would like to balance through buying only, not selling.
interested21
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I'm far from an expert on this compared to others on this forum, but here's my take on those points:
- True, but isn't this the case to an extent with any investment? Tax rules can change all the time and all we can do is play the game we're currently presented with. There's no guarantee the CGT rules will stay the same forever for single-share picks either
- A fair assessment, however this can go both ways. Managers can outperform the index too (and if you read their materials, most claim that they do). I found this article comparing the Polar Capital Technology Trust with the Allianz Technology Trust. One reason it states for the relative underperformance of the former is that it is more wedded to the index
- Hard to argue with this. I would imagine you'd rack up a fair few fees maintaining your own "ETF" as well though?
- Unless you're buying shares in companies that operate in Euros only, you're always going to have this
- This feels like a fairly remote possibility. Some of these funds have been around 150 years
UK-domiciled investment trusts are not UCITS.
If they were domiciled in Ireland, they would never be authorised as UCITS. For that matter, they would never be authorised as investment companies here.
Structurally investment trusts are completely different to open-ended funds.
- Investment Trusts and UCITS are two different things
- Fees and an active manager is no bad thing if you are getting a good return. My main fund has an annualised return of 18%, does it make sense to pay an extra 0.25% if fees to get that return?
- When you invest in any multinational there are all kinds of FX risks built in, some you clearly don't even know about
- If you are concerned about safe guarding your investment, then why would go buying fractional shares which you don't own and have the underlying instruments lend out by the broker? It just does not make any sense.
Like hundreds before you, I know you will do this no matter how much advice you are given. So go with it, if you are lucky you'll end up with the money you put in or many be a little more, if not you'll have learned an expensive lesson.
Thanks for your suggestions Jim. I agree with you. May I know which investment trust do you use? Any guide on choosing the good trust with diversified portfolios? Thanks again for your time.
I agree with all your points. Regarding point 5) if any of these investment trusts go bust like Lehman Brothers, is there any minimum protection to the investment? like 100k??
Eh, no.
Okay. I am reading that trading 212 has some money protection as written in the below link. Do you think it is of any better protection than investment trusts offer. It might be a dumb question, but I am new to all of these.
Learn. Trade. Invest. - Trading 212
Invest in Stocks and ETFs with zero commission. Trade Gold, Oil, Currencies and more. Trusted and secure, FCA regulated.
Your broker may be covered by a compensation scheme (ie if the broker itself goes bust) but the investment trust won’t be covered.
Similarly, if you invest directly in the stock of any other company that goes bust you won’t be covered by any compensation scheme.
Similarly, if you invest directly in the stock of any other company that goes bust you won’t be covered by any compensation scheme.
We are not allowed to discuss individual instruments here. But if you do some research you should be able to find some interesting ones.
Here, in the case of investment trusts working similar to ETFs (i.e. holding the stocks of other companies). In that situation, if they go bust, I expect there should be some mechanism to protect the investor, isn't it? Like if Vanguard goes out of business, there should be some protection right? or am I wrong with my assumptions?
Lehmans and an investment trust are completely different things. An investment trust, an ETF or similar financial instrument can't go bust in the same sense as the likes of Lehmans. But it can suffer a serious loss due to it's investment strategy, leverage, synthetic instruments and a who series of other issues.
At this point base on you postings. My advice would be to push the pause button and spend the next 18 months or so learning all about investing.