Five passives for your ISA09 March 2015
Passive investments that seek to track movements in a market index, rather than beat it through trying to select winners, have become increasingly popular in recent years, as investors have become more sceptical of the value added by active fund managers in many markets.
In conjunction with the popularity of passives, investors have also become more cost-conscious when choosing which products to invest in. The good news for investors is that there is currently a price war in the passives market which is driving down the price on many investments.
Jason Hollands, Managing Director at Tilney Bestinvest commented: “In some stock markets - such as the US for example - active managers have struggled to add value. Indeed, even legendary investor Warren Buffet recently admitted that a low-cost S&P 500 Index tracker was a sensible way to invest in the US.
“Investors do need to keep an eye out on the cost of investing in passives however. For example, there is a staggering difference in charges available between "legacy" trackers such as Virgin UK Index Tracking (1% ongoing charge) versus the lowest cost UK index funds such as Fidelity Index UK (0.09% ongoing charge via Tilney Bestinvest).
Tilney Bestinvest’s Jason Hollands highlights five passives investors may consider for their ISAs this tax year:
1. For UK exposure: Fidelity Index UK – 0.09% ongoing charge
2. For US exposure: for a straight S&P 500 Index tracker Vanguard S&P 500 UCITS ETF (0.07% ongoing charge). However, with the US market at a record high, anyone investing now might instead consider the PowerShares FTSE RAF US 1000 UCITS ETF (0.39%) as it tracks an index weighted on fundamental attributes such as revenue, cash flow, balance sheet strength and dividends as opposed to market-capitalisation
3. For European exposure: HSBC European Index C – 0.19% ongoing charge
4. For Japanese exposure: iShares MSCI Japan GBP Hedged UCITS ETF – 0.64% ongoing charge (there are lower cost options such as Vanguard Japan Stock Index GBP at 0.23% ongoing charge) but this ETF hedges the currency exposure to the Yen back into sterling and the Yen has been weakening materially as the Bank of Japan is aggressively printing more money
5. For Emerging Market exposure: Vanguard Emerging Market Stock Index GBP – ongoing charge 0.27%
Hollands concluded: “There is no need to be dogmatic between ‘active and passive’ investments as both can play an important role in a portfolio: a passives only approach is just as flawed as one that confines itself to actively managed funds. However, when choosing an active fund, it is vital that investors are very selective and confident that the fund’s manager has the skills to add real value.”
- ENDS –
The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This press release does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers.
Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. ETFs can be high risk and complex and may not be suitable for retail investors. You should make sure you understand all the risks involved before investing.
Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could either increase or decrease. These investments therefore carry more risk.
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About Tilney Bestinvest
Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.
We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.
We have won numerous awards including UK Wealth Manager of the Year, Low-cost SIPP Provider of the Year and Self-select ISA Provider of the Year 2013, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.
Headquartered in Mayfair, London, Tilney Bestinvest employs almost 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.The Tilney Bestinvest Group of Companies comprises the firms Bestinvest (Brokers) Ltd (Reg. No. 2830297), Tilney Investment Management (Reg. No. 02010520), Bestinvest (Consultants) Ltd (Reg. No. 1550116) and HW Financial Services Ltd (Reg. No. 02030706) all of which are authorised and regulated by the Financial Conduct Authority. Registered office: 6 Chesterfield Gardens, Mayfair, W1J 5BQ.
For further information, please visit: www.tilneybestinvest.co.uk
Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years. Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.
We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.
Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.