Income And Growth Survey: The investment two-step
Saturday 20 March 1999
l Consistency. This means the performance of a fund over different time frames. Some will do better over some periods. Others will be worse at other times. What matters is being in the top 25 per cent or so (the "top quartile") on a regular basis.
But what if a fund which delivered good returns for five years suddenly starts doing badly over one year? That doesn't necessarily make it a bad fund. The thing to do is wait and see whether it improves over the next 18 months or so.
Most investors believe that if a fund delivers poor performance their role is simply to sit there quietly without complaint. At worst, they switch funds. In fact, if a fund performs badly, you should be prepared to write to the manager asking why returns are so bad and what action is being taken to improve matters.
l Offer-to-bid. When measuring performance, be sure to take charges into account. For example, you may be provided with information which shows that a fund has delivered returns of 20 per cent on a "bid-to-bid" or an "offer-to-offer" basis.
If so, the figures have ignored the performance of any initial charges. If in the first year the initial charge is 5 per cent, the actual return will be 15 per cent.
Moreover, when annual management fees (typically between 0.5 and 2 per cent) are deducted, it becomes impossible to calculate what their impact is if a bid-to-bid or offer-to-offer figure is given.
You should ask for the figures to be be given to you on an "offer-to- bid" basis, which means performance taking into account the price you bought the investment at and what you would receive should you want to sell it.
- 1 What marriage would look like if we actually followed the Bible
- 3 The Chinese city where men have 'three girlfriends because there are so many women'
- 4 'Heartbreaking' Syria orphan photo wasn't taken in Syria and not of orphan
- 5 Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition
Britain to take more refugees as Cameron bows to pressure after more than 250,000 back our campaign
Senior British politicians tell David Cameron: When dead children are being washed up on beaches – it's time to act
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
If these extraordinarily powerful images of a dead Syrian child washed up on a beach don't change Europe's attitude to refugees, what will?
If you're not already angry about the refugee crisis, here's a history lesson to remind you why you really should be
Make your voice heard: Sign The Independent's petition to welcome refugees
iJobs Money & Business
£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...
£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...
£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...
£14000 - £16000 per annum: Recruitment Genius: This company was established in...