This portfolio is diversified in the following distinct holdings such as M&G Index Tracker Fund and Ordinary shares in a constituent of the FTSE-350 (M&G Investments, 2015). Te existing portfolio of Dr. Fster holds M&G Index Tracker Fund and ordinary shares of FTSE-350. Sch construction of portfolio indicates that it is highly equity oriented. Tus it is severely exposed to risk with an expectation of high return. Cnsidering M&G Index Tracker Fund, i is an equity oriented mutual fund that replicates the index movement of London Stock Exchange.
i has chosen FTSE All-Share Index. Terefore, mvement and return of the fund highly depends on the fluctuation and return of FTSE Index (FTSE, 2015). Oe positive aspect of selecting index fund is that such funds include passive fund management. I other words, te investor does not need to rely on the potential and capabilities of the fund managers. Hnce, oly market risk is associated with such investment, n risk related to the fund managers’ decision can affect the return possibility of the investment (M&G Investments, 2015). Terefore, te charges and brokerages for churning the fund tends to be low as compared to any other equity funds.
A the investment horizon for this fund of Dr. Fster is not known, i is assumed that Dr. Fster had kept the money into the fund for either 1 year or 5 years. Cnsidering that, D. Fster had invested for 1 year, fom the above graph it is evident that the fund has encountered high fluctuations over the period of time and has been able to generate a return of 6 is almost similar to the returns of dent funds.
Wereas, oer a long period of 5 years the same fund has grown, sarply generating a return of more thn 11% (FTSE, 2015). I general, i has been noticed that though the idex fund takes the opportunity of upside trend of market, tere is no scope for downside protection when the market is falling steadily. I fact, te scope for churning the portfolio is very less. Fr instance, i a balanced fund, when the porfolio manager suspects that marekt is to be bearish, h shift certain amont from the fund to some debt instuments so that the fixed return can be obtained and the aggregate porfolio does not show a negative return.
Terefore, b investing in the M&G Index Tracker Fund, D. Fster has to forgo as such possibilities. ..
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