Your Money: Close your eyes and pick a fund

When they choose a fund, many investors feel as if they are thrashing about in the dark.
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We are repeatedly warned not to pick investments on the back of past performance because it is no guide to the future, and fund management houses tend to be selective with the figures and benchmarks they use. But what else is there?

The track record of individual fund managers used to be a fairly reliable guide, but they move around more frequently these days than government ministers. And the company itself is no real guide: bigger doesn't always mean better, as funds become unwieldy once they get above a certain size.

In an effort to help consumers decide which is the best investment for them, the Financial Services Authority, the City watchdog, last week launched the first of several comparative league tables showing basic fund details for around 100 UK growth funds (

These tables should prove useful for investors who don't want to take the first investment product they come across. One of their best features is that they present the effect of charges in pounds rather than percentages. This will make it easier to see how charges affect investment returns and why you need to take them into account when picking a fund. Remember those charges quoted are standard; a discount broker should be able to offer a better deal.

But that's as far as the tables go, which is a shame because the FSA has missed a real opportunity. There are no recommendations or rankings of funds, so investors won't get an at-a-glance feel of how they have performed in relation to others. Participation in the tables isn't compulsory, and without a full list, consumers won't get the full picture.

Past performance isn't going to be included either. The Consumers' Association rightly points out that this is ridiculous, given that the FSA allows it to be used in advertising. Consumers are going to continue to be misled if they don't have an independent benchmark against which to measure these claims.

Investment risk, or the investment strategy pursued by the fund managers, is also missing. Yet this is fundamental information that you need before choosing any fund. The danger is that consumers might think the FSA's tables give them all the information they need, when really they are just a starting point for further research.

No matter how good the tables are, if consumers don't know about them, they might as well not exist. And that might well be the position, because providers and advisers don't have to show them to consumers when advising them on products that feature in the tables.

Next to come is a pensions table, followed by investment bonds and savings, and mortgage endowments. A good idea – but it doesn't go far enough.

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