Tracking a fund by buying individual shares...

R

ronaldo

Registered User
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Okay, I haven't thought this through much but was wondering if any of you have any opinions on the advantages/disadvantages of the following method of investing.

The general theory seems to be that you need 10 different holding in your portfolio in order to be relatively diversified.

Now let's say you have enough money to invest whilst keeping charges to a minimum. If using NIB's sharedealing service, this would require €2,666 per share - a total of €26,666.

Would it possibly be a good idea to:
  • Select your prefered style of investment, e.g. Growth, Value, etc.
  • Choose a fund that follows this style,
  • Purchase shares in the companies listed in the top ten holding of this fund (after doing some of your own research of course)
You could also possibly select two funds that follow your chosen style of investing and select your own 10 out of the two groups of top ten holdings.
 
I agree with you. You haven't thought it through much. :)

It is probably more tax effective to hold an ETF or shares in a low charging unit-linked fund. It will save you the admin hassle as well.

People buy funds to track indexes. Why would you buy shares to track a fund?

It has been argued that you could mimic Buffett's performance by buying the shares in Berkshire Hathaway. However, the lag between their deals and your deals would knock a good bit out of the performance and you would not have access to some of the private companies he buys.

Brendan
 
Not only does the idea seem a non-runner from a cost/tax point of view, but how would you get a breakdown of all shares held by a partiular fund at any given time?
 
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