Reach a little higher

Steering first-timers through the maze of fund management

If you are new to saving and investing, you may feel instinctively that building society savings accounts are safe and any stock market investment is risky. But if you leave all your spare cash on deposit, its value will be eaten into by inflation - at whatever level - and it can never grow in a real sense.

If you are new to saving and investing, you may feel instinctively that building society savings accounts are safe and any stock market investment is risky. But if you leave all your spare cash on deposit, its value will be eaten into by inflation - at whatever level - and it can never grow in a real sense.

Figures from the Association of Unit Trusts and Investment Funds (Autif) show that an investor who placed £10,000 in the average UK equity income unit trust 10 years ago, would have received £4,800 in income over the 10 years to 1 October 1999. They would have also seen their savings grow to £17,910. Income from a deposit account over that time would have provided £4,530, but the original investment of £10,000 would have remained the same.

Such performance cannot be guaranteed, but as little as £10 a month can get you a slice of the equity action. But be prepared to leave your investment undisturbed for at least five years. Anything less is gambling. And you do not have to invest a large lump sum straightaway. Many management groups welcome regular monthly savings from £10 upwards. If you invest via their ISA, they typically reduce the initial charge from 5 per cent to 3 per cent.

There are 1,700 funds spread across more than 20 sectors that cover the world as well as separate industries. Some funds are run on an ethical or environmental basis, while some of the cheapest are so-called tracker funds that simply follow a stock market index up and down.

Autif supplies basic information onfunds and their performance. It runs the Unit Trust Information Service, with free guides to the industry: call 0208-207 1361. Autif can also give you a list of local IFAs by passing your details on to Independent Financial Advice Promotions (IFAP). Magazines and personal finance websites, such as MoneyWorld, may also help. (See below for details.)

Fund managers are concerned first-timers do not get burnt. Graham Campbell, of Edinburgh Fund Managers, says: "A new investor will tend to be looking for a low-risk investment in the stock market. The best thing to do is to look for an established, consistent track record. Look to see continuity of management. My research shows funds that have had the same manager for three years tend to do the best."

Of his own funds, Campbell recommends Edinburgh Income, with assets spread across bonds, cash and equities. It is designed for those who want a bit more yield than the market "but do not want to risk their shirt". Its current yield is 3 per cent while the yield on the FT-SE All-Share is 2.3 per cent.

Jonathan Fry, managing director of Premier Investment Management, suggests his Global 100 fund, which invests in the world's 100 largest companies. "It is never going to be the best fund, but it is never going to be the worst. It is there if you believe in globalisation and is an index-type fund with active management."

Stephen Glynn, Jupiter Fund Managers' sales and marketing director, points to the merits of an income fund where income underpins growth, such as the Jupiter Income trust, providing above-average market income and lower volatility.

Worth considering too is the Marks & Spencer Investment Portfolio, with a spread of investments across the world's bond and stock markets. It has been a top performer in its sector since launch in 1988. Fund management is by a board that selects different fund managers for differing elements of the portfolio. If they don't perform they go! Initial charge is normally 3 per cent, annual charge 1.5 per cent. M&S says IoS readers who call before 15 November and state reference number P417 will get a 2 per cent reduction on the initial charge.

IFA Ian Beestin, of the ISA Shop, focuses on some of the funds in his company's ISA guide that have 10-year performance records and have excelled in their sectors. "A lower-risk equity investor might consider Perpetual High Income. This invests in the UK and mixes high-yielding equities with convertibles and fixed interest securities. Given this mix its 10-year growth of 305 per cent is outstanding." He also likes Jupiter Income, Invesco European Growth, Fidelity American. But the star is Aberdeen Technology with more than 1,000 per cent growth in 10 years.

Another discount IFA, Best Investment, is offering its free Cautious Investor guide: call 08705 501112. It has information on protected equity and corporate bond funds, and other investments.

When setting up the ISA regime, the Government introduced guidelines on cost, access and terms (CAT) to ensure that first-time investors would not be ripped off. Only funds that follow these guidelines can be called CAT-marked.

But a CAT-mark is no guarantee of performance. Nor does it mean you have bought the cheapest fund. Some CAT-marked index tracking funds with no initial and a 1 per cent annual management charge are three times more expensive than the cheapest actively managed fund - Alliance Investment Trust - that does not have a CAT-mark.

Mr Beestin said: "A cost-conscious investor may consider a CAT-marked tracker fund that can give a very wide spread at relatively low cost. Over the last 10 years the FT-SE All Share has gone up 239 per cent: Legal & General's index tracker has no initial charge, and an annual charge of just 0.5 per cent.

Income is at a premium with low interest rates on deposit accounts and paltry income available from shares in general. Those seeking a higher return are looking to corporate bond funds - funds that invest in debt instruments issued by companies and governments.

Patrick Connolly, of Chartwell, said: "Income seekers should look at corporate bonds as they are not as risky as equities and have the advantage of attracting 20 per cent tax credit, while equities in ISAs only have 10 per cent tax credit till 2004. Mercury High Income Bond Fund is diversified between UK and Europe and [aims to preserve] capital. It has the resources of parent Merrill Lynch, one of the world's experts in corporate bonds." Chartwell charges £20, but rebates 3 per cent of the fund's 3.25 per cent initial charge and 0.25 per cent of the 1 per cent annual charge. But be careful of corporate bond funds offering above 6.5 per cent or so.

IFA discount brokers: Best Investment, 0171-321 0100, e-mail: best@bestinv.demon.co.uk. Best's quarterly report, Best PEP & ISA is available free on 0990 112255. HCF Partnership, 0800 908938; the ISA Shop, 0115-958 7555. e-mail enquiries@isa-shop.co.uk; Chartwell Investment Management, 01225 321700. Web site www.chartwell-investment.co.uk.

Advice and information: 'What Investment', 'Bloomberg Money', and 'Money Observer'. A number of personal finance web sites may also help, including 'MoneyWorld' (www.moneyworld.co.uk), 'MoneyeXtra' (www.moneyextra.co.uk) and Interactive Investor International (www.iii.co.uk).

Compare with the Independent: See how much you could save by switching credit cards. Compare now

Arts & Entertainment
Shaun Evans as Endeavour interviews a prisoner as he tries to get to the bottom of a police cover up
tvReview: Second series comes to close with startling tale of police corruption and child abuse
Arts & Entertainment
A stranger calls: Martin Freeman in ‘Fargo’
Review: New 10-part series brims with characters and stories

Arts & Entertainment
Schwarzenegger winning Mr. Universe 1969
arts + entsCan you guess the celebrity from these British Pathe News clips?
Sport
Raheem Sterling and Luis Suarez celebrate during Liverpool's game with Norwich
football Another hurdle is out of the way for Brendan Rodgers' side
VIDEO
Arts & Entertainment
The star of the sitcom ‘Miranda’ is hugely popular with mainstream audiences
TVMiranda Hart lined up for ‘Generation Game’ revival
News
Portrait of Queen Elizabeth-II by David Bailey which has been released to mark her 88th birthday
peoplePortrait released to mark monarch's 88th birthday
Life & Style
The writer, Gerda Saunders, with her mother, who also suffered with dementia before her death
healthGerda Saunders on the most formidable effect of her dementia
Sport
Manchester United manager David Moyes looks on during his side's defeat to Everton
footballBaines and Mirallas score against United as Everton keep alive hopes of a top-four finish
Sport
Tour de France 2014Sir Rodney Walker on organising the UK stages of this year’s race
Arts & Entertainment
Jessica Brown Findlay as Mary Yellan in ‘Jamaica Inn’
TVJessica Brown Findlay on playing the spirited heroine of Jamaica Inn
News
YouTube clocks up more than a billion users a month
mediaEuropean rival Dailymotion certainly thinks so
Arts & Entertainment
The original design with Charles' face clearly visible, which is on display around the capital
arts + ents The ad shows Prince Charles attired for his coronation in a crown and fur mantle with his mouth covered by a criss-cross of white duct tape
Arts & Entertainment
‘Self-Portrait Worshipping Christ’ (c943-57) by St Dunstan
books How British artists perfected the art of the self-portrait
Sport
Luis Suarez celebrates after scoring in Liverpool's 3-2 win over Norwich
Football Vine shows Suarez writhing in pain before launching counter attack
News
People White House officials refuse to make comment on 275,000 signatures that want Justin Bieber's US visa revoked
News
Sir Cliff Richard is to release his hundredth album at age 72
PEOPLE
Sport
Lukas Podolski celebrates one of his two goals in Arsenal's win over Hull
football
Arts & Entertainment
Quentin Tarantino, director
film
News
The speeding train nearly hit this US politican during a lecture on rail safety
news As the saying goes, you have to practice what you preach
Sport
Mercedes Formula One driver Lewis Hamilton of Britain (front) drives ahead of Red Bull Formula One driver Daniel Ricciardo of Australia during the Chinese F1 Grand Prix at the Shanghai International circuit
sport
Arts & Entertainment
Billie Jean King, who won the women’s Wimbledon title in 1967, when the first colour pictures were broadcast
tv
News
Snow has no plans to step back or reduce his workload
mediaIt's 25 years since Jon Snow first presented Channel 4 News, and his drive shows no sign of diminishing
Life & Style
food + drinkWhat’s not to like?
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Database Team Lead ( Leadership, Sybase, Computer Science)

    Negotiable: Harrington Starr: Database Team Lead ( Leadership, Sybase, Compute...

    C#.NET Delphi SQL Developer (C#,DELPHI,SQL)

    £40000 - £50000 per annum + Bonus+Benefits+Package: Harrington Starr: C#.NET D...

    VB.NET SQL Junior-Mid Level Developer (VB.NET,SQL,Excellent com

    £25000 - £35000 per annum + Bonus+Benefits+Package: Harrington Starr: VB.NET S...

    Trade Support, Application Support, Operations Analyst, CRM MS

    £45000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Trade Suppor...

    Day In a Page

    How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

    How I brokered a peace deal with Robert Mugabe

    Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
    Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

    British Muslims's Happy video attacked as 'sinful'

    The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
    Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

    Michael Williams: Do as I do, not as I pray

    Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
    A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

    A History of the First World War in 100 moments

    A visit to the Front Line by the Prime Minister's wife
    Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

    Jenny Collier: 'Sexism on stand-up circuit should be extinct'

    The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
    Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

    Cannes Film Festival

    Ken Loach and Mike Leigh to fight it out for the Palme d'Or
    The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

    The concept album makes surprise top ten return

    Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
    Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

    Lichen is surprise new ingredient on fine-dining menus

    Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
    10 best baking books

    10 best baking books

    Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
    Jury still out on Manchester City boss Manuel Pellegrini

    Jury still out on Pellegrini

    Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
    Ben Stokes: 'Punching lockers isn't way forward'

    Ben Stokes: 'Punching lockers isn't way forward'

    The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
    Mark Johnston: First £1 million jackpot spurs him on

    Mark Johnston: First £1 million jackpot spurs him on

    The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
    Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

    Ricky Gervais: 'People are waiting for me to fail'

    As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
    Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

    Mad Men returns for a final fling

    The suits are still sharp, but Don Draper has lost his edge
    Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

    Google finds a lift into space will never get off the ground

    Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit