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Investors put past performance first when picking funds

Tahmina Mannan
Written By:
Posted:
14/06/2013
Updated:
14/06/2013

Nearly a third of investors put past performance first when selecting funds, despite the traditional warning that the value of investments can go down as well as up.

According to the latest Halifax Share Dealing Market Tracker, nearly a third of retail fund investors put past performance as the most important consideration when choosing funds, while more than a quarter (27%) said yield and 16% said costs (annual management charges/initial charges) were the most important filters.

Risk (8%) and industry ratings (6%) were significantly less popular.

Damian Stansfield from Halifax Share Dealing said: “After several years of volatile market performance it is natural investors want to feel comfortable when making their investment decisions, and are attracted to funds that can demonstrate a solid track record. Nevertheless, it remains true that past performance doesn’t necessarily guarantee future returns, and investors should always examine a wide range of factors when seeking to rank a list of funds.

“The results serve to highlight the importance of making the best use of all the information available to investors to inform their decisions.”

According to Halifax, the financial services sector became the most widely held investment sector in May (60%), following a period of strong gains.

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While this remains lower than the same time last year (65%), the percentage of investors holding energy & mining stocks fell from 65% in April to 53% in May – almost 16 percentage points lower than May 2012.

However, sharp share price falls from a number of financials nearly sent the FTSE 100 index to a four-month low yesterday.

More than half (55%) of investors reported an increase in the value of their investments in the last six months, with just 18% reporting a fall.

Stansfield added: “We are seeing more investors move towards an increasingly balanced portfolio, and while the most widely held sectors remain financial services and energy & mining, consumer services and retail products are becoming more popular at the moment.

“After the recent months of strong gains, there has been something of a pause in investors’ expectations in the short term, however, the medium and long-term outlook remain more positive and almost two thirds (64.3%) expect the FTSE to be higher in 12 months than it is now.”