DIY Investor Magazine
/
2015 Issue
49
Those that practice index investing are not looking for
instant gratification, they are seeking long term returns
with diversified risk – they’re betting on the tortoise
and, at least according to Aesop, could just be backing
a winner.
3. INDEX INVESTING CAN BE CHEAP
Low cost index trackers can be bought from your
online broker and most offer ultra low commissions
on regular investments. By pooling investments on a
certain date many brokers will allow you to invest sums
as little as £50 per month and build your portfolio
slowly over time.
This is a good first step toward becoming a DIY
investor – and by saving on commission and avoiding
the cost of advice your portfolio will grow all the more
quickly.
4. INDEX INVESTING FOR THE TIME POOR
With masses of information and fundamental
financial data to paw over, stock picking can take up
an enormous amount of time; those flourishing the
hazelnut may argue that its discovery justifies the
amount of squirrel ordure under their nails, but index
investors are able to achieve solid long term investment
performance without living and breathing their
portfolio.
5. INDEX INVESTING FOR THE DIY INVESTOR
The government’s Retail Distribution Review
(DIYs passim) changed the investment landscape for
ever for many.
As they realized that the previously ‘free’ advice they
received from their adviser was nothing of the sort
some concluded that the performance of their portfolio
did not justify paying for fee based advice and turned
to DIY investing; their number was swelled by those
deemed not to be sufficiently lucrative and therefore
‘orphaned’ by their adviser.
As an entry point to DIY investing, investment
community The Motley Fool concluded, ‘all things
considered, here at the Fool we believe that an index
tracker is the most suitable initial investment vehicle for
the vast majority of people’.
Those considering constructing an investment strategy
around index trackers would do well to understand the
risks they are exposed to and dilute this to a level they
are comfortable with.
It is advisable to work out how much you will need
to invest in order to achieve your financial goals and
create a number of alternative scenarios by factoring in
variables such as the effect of inflation.
Finally, keep a watching eye on costs – even small
increases to dealing commissions or platform fees can
make a big difference to the long term return on your
investments – then be confident and Do it Yourself.
