Do Income based IT's/OEIC's reduce portfolio risk?

[Itsallaguess]

If you have 10 funds there (I didn't count them), charging fees, say 0.3%, then you are paying 3% for an illusion.

That's not correct.

If we take an example where there are 10 funds of equal size of £10,000 and each are charging 0.3% (£30), then the overall charge is still 0.3% (£300), and not the 3% that you've stated -



Cheers,

Itsallaguess

[EssDeeAitch]

Diversification produces average returns minus costs.

For the financial industry it is the biggest gravy train ever known.I can' t imagine how much is tied up in funds and pension schemes.Imagine being guaranteed a %age of it every year

It is clear that fund/trust fees eat into the returns produced by the markets, but to what degree is uncertain (but definite). I know the way to keep fees down to a minimum is to buy trackers; and that is what I might end up doing. It is a non intellectual choice but it does take all risk away from choosing trusts/funds (other than the risk of the market obviously).

My original post is certainly not to make a point, but to ask the question. And the more responses I get, the closer I am to making a decision on what to do. So thanks for your reply, even if the maths are disputed.

[Hariseldon58]

The passive low cost tracker has done very well for me if recent years and previously largely income based invest trusts did well.

I am not averse to using active trusts bought at the right price, If I buy a Trust on say a 10% discount and for the sake of argument I achieve a 12% return then I will achieve a gross 1.2% pa gain and this may well bring the cost of the active investment trust to around the same cost as a passive fund.

I found equity income trusts performed fairly well for me from 1990 through to around 2011 but less well afterwards and I turned to largely global passive investments but personally I am starting to return to trusts now, as I see better value.

In bad times bad returns ! Correlation of various risk assets tend to 1.0 but at the bottom the market is not discerning and I have made good recoveries and gains in bad times.

Income producing assets are reassuring when all is going to Hell !