View more on these topics

&#39Index-tracking higher risk than public realise&#39

Index-tracking funds can be higher-risk investments than people looking to avoid sector or stock-specific risk realise, according to the latest survey by Standard & Poor&#39s.

The rating agency says it is concerned that trackers are still regarded as the cheapest, easiest and lowest-risk option for investors who only worry about their fund underperforming the index.

Director Guy Boden says this view fails to take into account that the top 15 UK stocks account for almost two-thirds of the market, which represents a significant gamble to investors looking to avoid stock-specific risk.

Boden points to the fact that in the year to June, the FTSE All-Share index plunged by 14.2 per cent but the average size of the 10 All-Share tracker funds shrunk by only 11.7 per cent, suggesting that many investors continued to make monthly payments into trackers.

The average size of the four funds tracking the FTSE 100 decreased by more than the 15.2 per cent index fall over the same period.

Boden says: “Most people are not aware of the composition of the indices their funds are tracking and need to be more aware. Trackers are often just bought off the shelf but investors should investigate what they are buying.”

Recommended

Euro rules threaten flexi loans

“Paternalistic” European Commission proposals pose a death threat to flexible mortgages, warns the Council of Mortgage Lenders.At the CML Scotland annual conference, director general Michael Coogan said the EU&#39s proposal for a new consumer credit directive places such onerous restrictions on flexible mortgages that lenders would either be forced to stop offering them or they […]

Davies says falling markets are no reason for compensation

FSA chairman Howard Davies has described regulation that compensates people for losses as a result of weak equity markets as madness in a speech given last night in the city.Speaking at the Lord Mayor&#39s City Banquet, Davies also attacked the EU for imposing a “one size fits all approach on European markets” which he said […]

Heartland offers RIs chance to buy stake in the company

This week marks the 10th anniversary of Black Wednesday, the day on which Britain crashed out of the European exchange rate mechanism. The £ was suspended from the ERM on September 16, 1992 after just two years following its failure to remain within the currency band and under pressure from Germany, who wanted it devalued.National […]

Garage is top to add house value

Building a garage is now the best way to increase the value of your home, outstripping kitchen and bathroom refits, according to research from Virgin One.The survey conducted by valuers for the lender found that interior refits are no longer the most valuable home improvement as Britain&#39s 23 million car-owners see off-road parking and garages […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment