The need for constant monitoring of your shares investment has been highlighted again by a report stating that 90 well-known UK investment funds are now seriously underperforming, when compared to their benchmark index.
The new report* reveals that while the number of seriously underperforming funds has risen from 77 to 90 over the last six months, the amount of money invested in these s0-called ‘dog’ funds is now £14.25bn, almost double what it was in January 2009. This is because adverse conditions in the markets in recent years have caused some of the country’s largest funds to slide into the ‘dog’ category.
“The last three years cover a period in which markets have fallen sharply and then recovered strongly. Funds which have managed to perform poorly in both conditions need to be inspected closely,” said Bestinvest.
In order for a fund to qualify for the ‘dog’ category in the Bestinvest report, it must be a UK-registered unit trust or open-ended investment company (OEIC) investing mainly in equities. The fund is then compared to the relevant benchmark or index, which for most is the FTSE All Share Index.
Then the fund must have underperformed the selected benchmark in each of the last 3 years, and have underperformed its benchmark by 10% cumulatively over three years as well.
The report serves as a reminder that any shares investment or stocks investment needs to be monitored on an ongoing basis, as a fund performing above its benchmark this year may not maintain its performance in the future.
One way to ensure that a shares investment is still performing well is by taking financial planning advice, preferably from an independent financial planner.
Principle First Financial Advisers offers a free funds portfolio analysis within its investments advice service, which will analyse a client’s existing shares investment portfolio, identify any underperforming funds, and recommend changes that should be made. Clients interested in setting up funds investments, Principle First offers a range of investment portfolios.
*Bestinvest’s quarterly ‘Spot the Dog’ guide to UK funds, Spring 2010
Would you like to discuss funds investments, or check how your funds are performing? Contact us by making an online investment enquiry or ring freephone 0800 678 5929 now
