When it comes to fund selection, we know that things can get tricky. Why? Mostly for the following three reasons:
Firstly, the most common fund categories are: actively managed funds, passively managed funds and ETFs. Each come with their own pros and cons.
Are more expensive with the expectation that they’ll produce better risk-adjusted returns, at a rate higher than their benchmark (a market index within which the fund managers can pick stocks). If funds fail to do better than their benchmarks, however (in part, often times due to their high fees) then investors will see a delayed return on their principle. Remember, no one can control the market. Also with actively managed funds react better during market falls. It’s also important to understand the kind of index they seek to beat: equally weighted indices enabling better stock picking or market-cap weighted indices biased towards the most expensive stocks forcing managers to own more of those expensive stocks. All this put together, one needs to check how consistently able a fund manager is to keep a risk-return profile. This is what we call performance consistency.
Tend to be a good way to get a long-term exposure to markets. They replicate the performance the index is meant to follow.
Can be categorized as passive replica of indices. As such, these may pose the same challenges as passively managed funds. They also may expose you to risks that you may not be remunerated for.
Understanding the information above, you can probably see how there usually isn’t one singular perfect fund category to make up your financial portfolio.
For this reason, we at S:YB evaluate a host of criteria to enable you to curate those funds you are most interested in. These include:
S:YB is an Appointed Representative of Laven Advisors LLP, a UK FCA authorised and regulated entity. If you are unsure of how suitable an investment is for you, please seek personal advice from a financial advisor.
The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments.
This website aims to provide information to help you make your own informed decisions.