Despite the uncertainty of the past year, some share prices have recorded massive rises. For example, the discovery of a vaccine for COVID-19 has delivered a massive boost for many pharmaceutical companies.
So, on top of the good news that an end to the pandemic may be in sight, shareholders have also enjoyed strong performance. For many investors, any holdings in those companies will have been through a managed fund rather than a direct investment in the company.
The debate about whether it’s best to have a direct investment, or to delegate the responsibility to a fund manager who chooses the companies to invest in, is one that has raged for years.
Among the advantages of a direct shareholding – investing through a stockbroker or online – are the fact that the costs apply when the shares are bought and sold. There is no ongoing charge. The shareholder also receives any dividend the company might pay. A potential disadvantage is that there is often greater risk in this type of investment than if it is spread across a portfolio of holdings.
A fund run by an investment manager will have the benefit of extensive research, access to the company’s management, and will hold the shares of several companies, meaning the risk is spread. This comes at a cost, known as the management fee.
A carefully chosen fund may perform well enough to offset the charges, but professional advice is crucial. As providers of wealth management in Shropshire, we recommend you give us a call.
