If you had $1000 to spend on a new business, what would you spend it on
and why?
Let's say that someone gave you
$1000 to start a new business with. And they said to you, you can create any
business you want, but in 6 months time, I want to get my $1000 back with
interest. What would you spend it on and why?
How would you turn that $1000
over by 6 months time? What sort of things would you do (buy) with it to see
your money earned back, doubled or even trebled+ in 6 months time?
If you want to earn profit and money in six months then the best thing
to do is probably selling something. You don't have enough money to acquire
an existing business so you will need to start your own business. If you do for something like a website or
app, then it will take too long to build up traffic to earn money with it
and your main source of revenue will probably be ads which is not very reliable
with just 6 months time to earn $1000 back. Therefore ecommerce is the way to
go. Firstly, you need to find cheap supply of products. Then I would use a open
source ecommerce software like Magento and customise it to your own needs to
save money. Then work on SEO, marketing and do everything yourself and
hopefully this will succeed. This is just a suggestion of what I will do.
However, starting a business requires a lot of thought and planning so I won't
go into too much detail today.
If you had put £10,000 into a good savings account 10 years ago, you
would now have £11,361.
After inflation, that means a
loss in real terms. Frankly, you would have got better value by blowing it on a
holiday. But had you invested that cash in
any one of half a dozen different equity income funds, you could have doubled
your money.
In fact, if you had chosen well you could now have brought over £22,000.
The figures come from a study by
Hargreaves Lansdown, which tracked the performance of 30 equity income fund
managers over the 10-year period from December 2006 to December 2016. Given that the period included
the financial crisis, when stock markets crashed, it is quite an achievement. But Britain's best-known fund
manager - to those familiar with the industry - is not top of the table. Neil
Woodford, who is getting ready to launch his newest fund, comes in at number
six.
What is an equity income fund?
- Equity income funds invest in shares, with the
idea of producing an annual income for the investor, paid out of the underlying
dividends
- Funds typically require a minimum investment of
£100
- They are distinct from funds that purely aim to
increase the capital value of the investment, known as growth funds
- However, some of the most successful equity
income funds have succeeded in increasing the capital, as well as producing an
income or yield
To make it into the study, managers had to have been in the business for at least 10 years.
Top performer was Francis Brooke,
pictured above, who runs the Trojan Income Fund. Investing with him would have
turned £10,000 into £22,697 over the 10 years. That sum includes £8,000 in
capital gains, and £4,000 in income. The figures include charges. His fund is one of the least
volatile, and is the only one in the sector not to have cut its dividend in the
last decade.
He puts
his success down to a rigorous focus on quality, ignoring "market
noise" and not chasing returns.
"Our aim is to protect
investors' capital, and to increase its value year-on-year. Our approach is
conservative, with attention always paid to the downside risk of any
investment," he told the BBC.
The study also shows that the
country's best-known fund manager, Neil Woodford
has not performed quite as well over the last 10 years as his former colleague
Mark Barnett.
The two men previously worked together
at Invesco Perpetual in Henley-on-Thames, and ever since their relative
performances have been closely scrutinised. But while there may be some quiet
satisfaction this weekend in the Barnett camp, some experts still favour
Woodford.
"Both have been successful.
One has simply been successful over a longer time period," says Laith
Khalaf, senior analyst at Hargreaves Lansdown.
"For us that probably means
that Woodford edges it over Barnett, but actually they're both very good
managers. They're both very good custodians of your money." In just over two weeks' time,
Woodford, pictured above, will launch his newest fund, the Income Focus Fund. But unlike his existing Equity
Income Fund, which pays investors around 3.6%, this one will aim to pay 5p in
the pound during the 2018 calendar year.
However, he
points out that the combined returns from the Equity Income Fund -
taking both capital gain and income into account - are likely to be bigger than
from the Income Focus Fund. Last week he told journalists
that 2016 had been a poor year for him, but he was optimistic about the
prospects for the new fund.
"My view is there's more
opportunity in the market than I've seen for a long time, and I see a lot of
undervalued stocks." As one who has pro-Brexit
instincts, he also believes that the current economic
forecasts are too pessimistic.
"I think the economy will
continue to perform better than people think."
If you do want to invest in an
equity income fund, the Hargreaves Lansdown research shows you have to choose
carefully. As the chart above indicates, good and even average managers have outperformed the
wider market.
The
average manager has turned £10,000 into £17,796.
However, a poorly performing
equity income fund would have returned you only £11,849, scarcely better than
putting your cash in the bank. A high interest savings account would have given
you just £11,361. In both cases you would have been
much better off buying a simple tracker fund. A FTSE All-Share tracker would
have grown your money to £16,367.
