Live by the sword ...

'Fund managers are as capable of making mistakes as any of us'

The other day a neighbour accosted me in my local village pub, wanting to know how I invested my own money. When I told him that my portfolio was probably little different to thousands of other investors he clearly didn't believe me. Surely there must be some "special" investments I have made that are just for those in the know, he queried. Not so. Like most reasonably successful investors, it is all down to planning and discipline. Inside information seldom plays a part these days. Indeed, it would be illegal if it did.

The other day a neighbour accosted me in my local village pub, wanting to know how I invested my own money. When I told him that my portfolio was probably little different to thousands of other investors he clearly didn't believe me. Surely there must be some "special" investments I have made that are just for those in the know, he queried. Not so. Like most reasonably successful investors, it is all down to planning and discipline. Inside information seldom plays a part these days. Indeed, it would be illegal if it did.

Perhaps most surprising of the answers I gave him, from his point of view that is, was that a fair proportion of my investment capital was held in managed funds. This is a way in which the more thoughtful and knowledgeable investor can add value. Knowing how good a fund manager is or appreciating the strengths of a particular investment house - particularly understanding the way in which they manage their investment process - will give an edge (see funds survey, page 6).

Like many who work in the investment industry, my portfolio is a combination of funds and individual shares, but there are plenty of investment professionals who never bother investing directly. Is it better to invest directly or use funds? There is no simple answer.Different people have differing opinions and there are pluses and minuses on both sides.

Take cost. Investment funds have a management fee, but the managers and administrators have to be paid. But fund managers are likely to deal on more advantageous terms than individuals, paying small, if any, commission to stockbrokers and benefiting from the offerings of new issues that are not always available to the general public. And there are tax advantages. Changes to a portfolio that take place within a unit or investment trust are not subject to Capital Gains Tax. The only time the Capital Gains Tax may become payable is when the fundholder sells.

But fund managers are as capable of making mistakes as any of us. These days fund management groups tend to adopt much more disciplined processes to ensure the people they employ are diligent in the pursuit of the particular policy that the funds they are managing require. Still, it is quite possible to take the wrong view of the market - such as ignoring technology shares or adhering to the value approach at a time when growth and momentum techniques are making the running.

Investors would do well to remember that managed funds are often the most effective way of gaining access to specialist markets. They provide a broader spread than most people are likely to be able to achieve themselves, which in turn should limit the risk. But the value of your investments can fall as well as rise. In the end you can only be as successful as the manager in whom you are entrusting your money. Making that choice is just as important as picking an individual share.

* Brian Tora is chairman of the Greig Middleton Asset Allocation Committee

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
Lois Pryce... Life Without a Postcode. Lois lives on a boat with her husband.. Registering to vote in the election has prooved to be very difficult without a fixed residential post code. (David Sandison)
newsHow living on a houseboat meant I didn't officially 'exist'
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Sport
Steven Fletcher scores the second goal for Scotland
cricketBut they have to bounce back to beat Gibraltar in Euro 2016 qualifier
News
news
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

    Robert Parker interview

    The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
    How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

    How to make your own Easter egg

    Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
    Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

    Bill Granger's twist on Easter Sunday lunch

    Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
    Joe Marler: 'It's the way I think the game should be played'

    Joe Marler: 'It's the way I think the game should be played'

    The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
    Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

    Cricket World Cup 2015

    Has the success of the tournament spelt the end for Test matches?
    The Last Word: Justin Gatlin knows the price of everything, the value of nothing

    Michael Calvin's Last Word

    Justin Gatlin knows the price of everything, the value of nothing