Trackerfunds.com is obviously critical of the active managers for
years (see Tr@cker Magazine archived articles). But we argue that
tracker funds are complementary to well managed active funds – not
substitutes. It’s therefore very helpful to have someone of the
stature of Ron Sandler to weigh into the fray, coming to similar
conclusions when making recommendations to the Government.
What actions should investors take now?
It’s hard to imagine anyone is brave enough to invest now. But
with stockmarkets in turmoil right round the world this is precisely
the time both to review your existing unit trust holdings and to start
thinking about investing new money.
Chucking out funds with high charges that consistently fail to
produce results makes sense. After all why pay the active managers
whilst they look on helplessly as markets fall?
However, switching out of under-performing funds demands rather
less courage than investing cash at a time like this. But there’s no
doubting the benefit of buying low and selling high. No-one can
predict the bottom of the market unless they are just plain lucky. But
if you start a regular savings program now, one of your monthly
payments will get very close to calling the turn in the market.
And when markets do recover you’ll get more out of your
investment because of the benefit of POUND COST AVERAGING.
‘Pound cost averaging’ is explained as follows:
The average COST of the units you buy through a monthly investment
program will always be LOWER than the average price of the units
you bought.
This is proved arithmetically as the illustration shows below:
When the going gets tough, the tough get going! So when most
investors are running scared is the time to start making those
sensible, reasoned investment decisions. Here are two ideas:
Stop paying those high charges where they aren’t justified
and
Start a regular investment program to get the benefit of pound cost
averaging.
There’s no denying that, with the hare and the tortoise in
partnership, no-one’s the loser.
