Traditionally, investment styles fall into two broad categories: growth and value. While the end game for both is to get a return on the investment, the ways of going about that are quite different. The rivalry between the two camps can be intense, each side convinced that their method is superior.
It can be tempting to try timing your investments to get the best possible returns. Especially during market falls, when it can be scary to watch your hard-earned savings fall in value.
Significant sums of money tend to follow the talented few in the world of investing. For example, six of the UK’s largest funds attracted close to 21% of total net flows during August, equating to £353 million, according to data provider Morningstar. Fund managers can quickly find themselves managing multi-billion pound funds once they have shown they can deliver superior performance and beat their rivals. But is big necessarily best?
It is no surprise that the COVID-19 pandemic has continued to dominate the backdrop for investment markets over the past quarter. However, a sense of calm has been restored following the extreme market moves during the first half of the year. The MSCI World Index posted a healthy gain of more than 6% in the third quarter, but unfortunately things were more gloomy in the UK where the main stock market index fell more than 4% in the period.
Investor sentiment turned negative in September with fears that the economic recovery will be derailed by a second wave of COVID-19. Political uncertainty provided another reason to unsettle investors with new concerns over a no-deal Brexit continuing to weigh on sentiment for UK stock markets in particular.
Historically, investment trusts have delivered higher returns for lower costs than more popular open-ended funds such as unit trusts and open-ended investment companies (OEICs), but what are they and how are they different?
Exchange-traded funds, or ETFs, have been trending for a while. Much like traditional tracker or passive funds, most ETFs simply track the ups and downs or a market index or a basket of assets; there’s no human fund manager picking the investments and possibly getting it wrong. Subsequently, it can be easier to understand where your money is invested (the fund does what it says on the tin) and costs can be lower.
Whether you are buying a new car or a pair of shoes, it’s perfectly natural to shop around. You don’t want to buy a sub-par product just because it’s cheap, but equally you don’t want to spend an arm and a leg if you could have bought the same thing cheaper. It’s the same when it comes to investing. All investment products and services carry a price tag and it is important to know what you are paying for and how it compares to the wider market.