Buying UK (or other) mutual funds

[roberta]

I am trying to find a way to gain some income from investments, other than through bank interest, which is too low to be worth considering. Since bond yields are now also almost negligible, or even negative, I feel the only road open to me in these present times is to seek income from dividends on equities. I have been hoping to find a few mutual funds within the "Equity Income" category, and have identified some through online resources (Morningstar and Trustnet) which look quite attractive. However, these are all funds domiciled in the UK (although investing globally), and without any address in the UK it seems to be impossible for me to buy shares in these funds. I do have a brokerage account with TD Direct in Luxembourg, and they at first sight offer a universe of nearly 1000 funds, but in fact they offer only three funds in the category (Global Equity Income), and all three show poor historical performance; I would not consider investing in any of them. I have no particular reason to prefer UK funds, but I think it would be even more difficult to buy US funds. I would be grateful for any advice or suggestions.

[Sealbash]

Find an on line broker. Use the services of your bank.

[KittenKong]

Can't you buy ETFs via TD Luxembourg? You should be able to find something suitable in those.

The domicile of the funds should make no difference: I own several different ETFs all domiciled in Ireland, all priced in GBP and all bought via my UK broker.

[peterrabbit]

After a lot of reading and research I'm thinking a physical gold EFT based in Switzerland so its untouchable by my government if.

George Soros and a couple of other fund managers are buying Gold now. Nobody knows where we are going because we are in unprecedented times.

[Oxx]

Rather than funds, look at investment trusts. All investment trusts listed on the London Stock Exchange can be bought through your TD International account. There are 25 investment trusts in the UK equity income sector, including such highly regarded trusts as Finsbury Growth and Income (managed by Nick Train) and City of London. The latter yields 4.3%.

Looking beyond the UK for equity income, there are trust such as Henderson Far East Income (7.2%) and Aberdeen Asian Income (4.2%).

I also rather like Henderson Diversified Income, which is a bond fund with a strong track record. Currently yields 5.7%.

As always with investment trusts, do take a close look at the discount to NAV before you buy.

[roberta]

Thanks for the suggestions. What is the difference between "Investment Trusts" and "Exchange Traded Funds (ETF)"? What is the best resource for research into these types of securities, and ranking them by performance and other factors?

I am not looking to invest in the UK. I want to diversify globally as much as possible. It's just that all of the best performing global mutual funds I could find seem to be only sold in the UK. Investing through my TD account would be much easier, but I looked at the funds offered there and could not see anything attractive.

[Oxx]

Investment trusts have a manager who chooses what he/she considers to be the best investments according to the trust's objectives. ETFs effectively try to copy the performance of an index (this can be achieved in various ways).

Investment trusts typically charge more than ETFs (but less than unit trusts), but you're paying for all the research material and the fund manager's expertise.

Which an investor uses depends upon whether one believes a fund manager can outperform an index. Some managers can do so consistently, but many can't.

Broadly speaking, I prefer to use ETFs for bonds and investment trusts for most equity markets.

[Oxx]

There's a beginner's guide to investment trusts at http://www.moneyobserver.com/how-to-invest/investment-trusts-beginners-guide

Incidentally, you're not the first person to look to equities to provide an income. This has pushed up the price of higher yielding shares, reducing the effective yield. It has also led some managers to take on additional investment risk in the hunt for yield. When interest rate policy normalises (whenever that may be) I'd expect to see the prices fall as money moves from equity income to other classes of equity and bonds. Fund values will almost certainly fall.

[Oxx]

What is the best resource for research into these types of securities, and ranking them by performance and other factors?

I am not looking to invest in the UK. I want to diversify globally as much as possible. It's just that all of the best performing global mutual funds I could find seem to be only sold in the UK.

Forgot to answer your question. Morningstar UK has sections for both investment trusts and ETFs.

http://tools.morningstar.co.uk/uk/cefquickrank/default.aspx?Site=UK&Universe=FCGBR%24%24ALL&LanguageId=en-GB

http://tools.morningstar.co.uk/uk/etfquickrank/default.aspx?Site=UK&Universe=ETALL%24%24ALL&LanguageId=en-GB

[wordchild]

Some really excellent advice from Oxx above. Personally I prefer to invest directly , but for those who want managed funds, investment trusts are a great choice. For a long term investor, they have some advantages over mutual funds; cost/charges tend to be lower (which is why many ifa,s don't like them), and the manager is able to gear the underlying fund which can enhance returns. There are , as Oxx mentions, some really well run funds available with a range of strategies. the main disadvantage is they can sometimes trade at significant discounts to their asset values when they are out of favour, but, for the long term investor, this shouldn't be a major issue and should really be seen as buying opportunity.

There are also property focused investment funds (REITS) many of these offer attractive yields and some have good long term dividend paying records, the OP might also want to consider one or two of these for diversification. Singapore has a number of quite well run REITS and the market there is well regulated.

For investment trusts, I would focus on those traded on the UK stock market and for REITS the Singapore market. These are also tax efficient for an international investor. Investing in the US adds a layer of complexity and can be less tax efficient.

Edited May 22, 2016 by wordchild

[roberta]

In reply to wordchild;

I have been looking at the Singapore stock market, as there are many stocks with high dividend yield there. Most of the REITS seem to invest mainly in China, and that scares me a little. I have no idea how to pick out a few good ones. I must say the dividend yields look attractive, but I am afraid of making an expensive mistake. It would be really helpful if you could make some suggestions...

[Oxx]

for REITS the Singapore market

There's actually a rather nice Thai fund which invests in Thai and (predominantly) Singapore REITS. It's TMB Asset Management's Property Income Plus fund and it currently yields over 5%.

Factsheet (a bit out of date): http://www.tmbam.com/v6/en/mutual-fund-detail.php?f=423&accept=1

[wordchild]

http://www.thaivisa.com/forum/topic/869273-lets-talk-reits/. Have a look at this.

[wordchild]

it is not the case that the majority of Singapore REITS are focused on China. There are a few that are explicitly China focused (eg CapitaLand Retail China) but for the most part local (Singapore) property assets dominate their portfolios; Australian property also makes up a fairly significant part of some portfolios.

If the OP wants to focus on REITS with limited or zero China exposure but which also have a solid record (and are well regarded) there are plenty to choose from; eg CapitaLand Commercial (Singapore office) Ascendas REIT and Mapletree Industrial (both mainly invested in Industrial property in Singapore), Parkway Life (hospitals and rest homes in Singapore and Japan), SG REIT (retail assets Singapore and Australia) Keppel DC REIT(datacentres in Singapore, Europe and Australia). And there are plenty more to choose from.

Its worth spending a bit of time looking at respective investor relations websites, checking out recent presentation material to get a feel for the different portfolios and also looking at the long term pay out records. With the exception of Parkway (which yields a little less) the others mentioned above all have dividend yields in excess of 6%.

Edited May 23, 2016 by wordchild