I’ve been dazzled by all the hype and am jumping on the bandwagon – the Neil Woodford Bandwagon, that is.
Woodford is known as the chap/legend/guru/wizard* (*delete as applicable) who managed the Invesco Perpetual High Income Fund, which was the best performing fund in the equity income sector, turning a £10,000 investment into £230,000 over 25 years.
Now, he’s gone and set up his own investment company and started his own fund, CF Woodford Equity Income and I’ve decided I want a piece of the action. Yes, I’m aware that past performance isn’t a guide to future returns but I’m willing to risk a punt on Woodford (oh dear, I’m gambling again…!)
Sell and Buy
In order to fund the purchase, I sold one of my existing funds in my SIPP. Although I was selling one active fund to buy another, the annual charge for Woodford’s fund at 0.6% is a bit cheaper than the other (I sold the other fund at an 8% gain). I’ll be buying 1.2k units for £1.2k.
Passive or Active
Before I’d come across websites like Monevator, I didn’t know the difference between passive and active funds or that they even existed – they were all just ‘funds’ to me. Therefore, I didn’t know that management charges for passive/index funds were a lot cheaper.
So in my ignorance, my current portfolio is made up of mostly active funds (about 86% in fact) but it’s not all been bad. So far, my charges appear to have been relatively low, probably because my investments are still on the small side. These active funds also appear to have performed quite well, averaging around 13-15% gain in a year (and they’re not ‘dog funds’ as per BestInvest’s ‘Spot the Dog’ guide, which lists under-performing active funds.)
Anyway, this is the last new active fund I will be buying into – I will gradually swap more of my active funds into index funds or perhaps ETFs (exchange traded funds) in order to reduce charges although I don’t intend to get rid of all the active funds.
In the meantime, I shall regularly track the highs and (hopefully not too many) lows of this new fund.