----- Original Message -----
Sent: 6 July 2001 8:16 PM
Subject: Re: [sharechat] What will change
this -- UK Investment Trusts
Hi Mark,
I have sizeable holdings in Anglo & Overseas
Investment Trust (dual-listed on LSE & NZSE).
Which trusts do you have holdings in?
With this kind of investment vehicle, I think it's
essential to take a long-term view.
I started investing in AOT in late September 2000,
and have added to my holdings at opportune times since then.
Overall, my investment is 6% below break-even, but
I could have done a LOT worse by putting money into various managed funds that
are heavily into NASDAQ-listed stocks, or indeed by putting money into other
investment trusts such as Finsbury Technology etc.
The other thing to take into account is the movement
of our dollar against the GBP.
If our dollar stages a comeback, the value of your
holdings in NZ$ terms will reduce.
However, that prospect is looking increasingly
unlikely as the year progresses.
For the past few months, the Euro, GBP, AU$ and NZ$
have been moving more-or-less in concert, so I don't see too much risk
there. If some event was to happen that caused the GBP to decouple from
the Euro block, then things could change. However, even in that
scenario, keep in mind that most UK-listed investment trusts have global
holdings, so to some degree, you are insulated from the full extent of
movements in any one currency.
This is the beauty of diversification!
I for one don't have time to follow countless
companies which are worth investing in on the various bourses around the
world. So I am happy to let a fund manager do it for me, especially one
such as AOT which only charges 0.35% managment fee. This is more than
covered by dividends from the various holdings of the trust, so you still get
a small dividend as well.
Maybe I am preaching to the converted here, but I say
HANG IN THERE at least with your European Trust.
The worst is over, you will no doubt see some further
volatility this year, but I would be surprised if the Dow sets any new lows
this year. It has already recovered significantly since April. As
for the NASDAQ, that's another story, but I also doubt that it will go below
the 1638 set in April.
For the Nikkei: All bets are off
there.
A few weeks ago, some commentators were picking a
recovery, but it has slumped further.
The whole of Asia is just too volatile and
unpredictable for my liking.
AOT has small holdings in Japan, but nothing else in
Asia.
Have you compared the performance of the various
Investment Trusts on Trustnet?
There is also a passive fund called the Spyder Fund
that models itself on the S&P 500. On this basis, you should always
equal the performance of the S&P 500, which over the last 10 years, is the
best-performing index around the world. Whether it will be so for
the next 10 years is anybody's guess. But you could never lose by
investing in this fund. Other more actively-managed funds may outperform
it in the next 10 years, it's hard to say. But during the last 10 years,
few have.
Work on a 10-year timeframe and see how they all
stack up.
I suggest you disregard the 1-year and 3-year returns
because many commentators believe the 98-99 technology boom distorted figures
on most markets. Such exceptional returns are unlikely to be achieved
again for some time, if ever (well for much of our lifetimes at
least).
The beauty of this kinds of fund is that it frees you
from the constant monitoring required by direct investments. Indeed, you
could check your holdings just once a year, from your tropical island
hideaway, and make the decision whether to stay in that fund, or change to
another one. Because of their diversification, these funds offer truly
RELAXED investing. The returns may not be as high as those achieved by
someone actively trading the markets, BUT they will never tank overnight
either.
I, for one, plan to move much of my portfolio into
this kind of investment vehicle over time, as our dollar hopefully grows a
little stronger. It pays to do it on a drip-feed basis so you aren't
committed to buying all your foreign currency at any particular exchange
rate.
Well, I've rambled on long enough, but I hope I've
managed to encourage you a little :)
Cheers
Grant
Keymer
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