plonkee money an english-er's thoughts on personal finance

June 21, 2007

interview part 4: lessons learned

Filed under: investment — plonkee @ 4:53 pm

My posts concerning interviewing Christopher Traulsen from Morningstar UK have turned into a� bit of a trilogy in four parts. (See part 1, part 2, and part 3.) In this post I’m going to write about what I’ve learned from speaking to him.

First the things that are interesting but don’t help me with my personal finance:

  1. Not everyone that works in investment is odd
  2. Convexity is a term used in fixed interest investments
  3. Investments are� generally� cheaper in the US
  4. I can understand some Americans on the phone

Now onto stuff I can actually use in my investments. The things I sort of knew already:

  1. When I’m looking at investments, the last thing I should consider is past performance
  2. Charges for funds are pretty important when considering where to invest
  3. Fund managers do not have my best interests at heart
  4. Index funds are a good (but not the only) core for a portfolio

And now the things I learnt (that I should probably be ashamed to admit I didn’t already know):

  1. When I’m looking at fund costs I need to consider the Total Expense Ratio (TER)
  2. Not all indices are well-diversified and the FTSE 100 isn’t well-diversified
  3. Fund return isn’t necessarily the same as investor return
  4. Exchange traded funds are generally index funds but they might have high fees – especially for small trades

I should really be ashamed, my stakeholder pension fund is invested solely in the Virgin UK Index Tracking Trust and when I was doing my research for the interview I found that this was not rated as a good buy because it has high fees (1%). In my defence, I am planning to switch out of this once it reaches £5000 (as explained here). When we discussed high cost index funds I didn’t admit that I was invested in one. I’ve come clean now though.

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