Underperforming Investments – Is Your Pension Amongst Them?

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Published Tuesday, June 21st 2011

70% of investments underperform – Is your pension invested amongst them?

As an investor, you want to choose the best for your investments. It’s certainly not an easy task. And with pensions at the front of many investors’ minds at the moment, the performance of investments you’re relying on for the future, a performance check for your investments is time well spent. Particularly when in a recent report, it was revealed that there are close to £26 billion in underperforming funds (1).

Amazingly when we look at the biggest sector that most UK investors invest into – the UK all companies sector, the information is even less enthralling. A staggering 70% of investments in this sector actually underperform the average for the sector with most of the performance coming from just the top quarter.

Most of our pensions are exposed to these, so how will we know if our investments are amongst the over or the underperforming?

To go back to basics for a moment, it’s worth a reminder of what exactly a ‘fund’ is. Simply put, it’s a range of stocks and shares and other assets such as property, cash, gold etc. Amongst the UK all companies sector are a huge range of companies, including some well known names. Having a well-known name, however, doesn’t guarantee a good performance, as you’ll see below.

All of Barclays’ funds in the sector underperform the average and the same applies to Halifax. Only three of Legal and General’s fifteen funds outperform the average. Marks and Spencer suffer the same fate, so it’s easy to see why the marketing folk will try and push us all toward tracker funds.

Tracker funds are often seen as a way of getting the best from your investments. It’s very likely that you have amongst your portfolio some tracker funds and it’s possible that you’ve been told they are an inexpensive and less risky way to gain a return on your investments. They’re a popular choice for many investors, but you should be aware that they might not be doing the best they could for your money. Only one tracker outperforms the average with the vast majority well below the norm.

We’ve looked at the average performance over a year for these funds, but does performance over five years tell a different story? Yes and no. 104 funds outperform the average within those 235 that compare over 5 years and there still isn’t a big argument for tracker funds from this data. Only one of Barclays’ outperforms the average and of HSBC’s five funds, only one fund is above average.

If this makes for worrying reading, then there are steps you can take to ensure you’ve got the best funds for your needs and that your investments are outperforming the rest of the field.

Speak to an independent financial adviser who can offer you truly independent investment advice, including the benefit of detailed and extensive research to find out exactly which are the best performing funds. We’ve mentioned some of the laggards above, but those doing well and making some returns well above the average include Standard Life, and MFM Slater with two funds each in the top ten.

If you’re paying a fee for your investment advice, that fee should provide you with the very latest research. At Worldwide, like any investment specialist, we make sure it does. Our research includes speaking with fund managers and looking at the relationship between risk and return, to make sure that a fund is not taking too high a risk with your money, for too little reward. Research is detailed and thorough, using all the latest analysis tools and statistics. We’ll make sure you stay ahead and get the best returns possible from the best funds in the field.

Source (1) FundWeb

For a free factsheet on the best performing funds, call Worldwide on 0845 230 9876 or e-mail info@wwfp.net.

 

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