Build your own fund?


#1

I thought I would kick off a discussion.

So with the power of £0 fees comes the opportunity to build your own fund, e.g. I can now buy all ftse 100 shares at £10 each for a total of £1000, or put £1000 into a ftse 100 etf.

Now true it is a lot of shares to have to manage by yourself but it does mean that you definitely own the shares, rather than the fund owning the shares and you having a stake in the fund.

Also yes some funds do give access to hard to buy assets.

But for some extra effort you truly could mirror a fund or etf but not have to pay any fees thus actually out perform such funds?


(Vladislav Kozub) #2

That would be interesting to do to an extent, but S&P 500? Hell no :sweat_smile:

Also, these trackers do not always have equal weightings, for instance, utilities are generally less weighted, whereas physical goods are more.

Overall, I would be more interested in having a bunch in an ETF and the majority in the companies I like.

TSLA, WFC and GE are in S&P 500 and there is no chance I will copy those! :joy:


(Kenny Grant) #3

Really like this idea; suggested something similar to freetrade when they asked for ideas. Two similar ideas that appeal to me:

  • Freetrade simple trackers for a low fixed fee (would rather give freetrade that money than someone else and it would be another great selling point)
  • Build your own fund and have it be purchasable as one security, so one item in your portfolio, and shareable.

Then let people share those funds with others in a sort of user universe of funds (perhaps some v low fee to freetrade and the user). Would be nice to be able to pick tracker products as well as individual shares - trackers shouldn’t really need a human manager and if freetrade did that legwork for all major indices once everyone could use it.

This ties in with the idea someone had of showing others what you invest in, but in a neater way I think as then easy to combine several ‘funds’. So anyone can become a fund manager and it is demistified somewhat. Clearly there are possible problems with liability!


#4

Haha imagine having to manage 500 shares! Full time job! :sunglasses:


(James) #5

This wouldn’t really make sense, in terms of reward for time spent managing hundreds of stocks, for an everyday investor on normal income.

Would it be possible for Freetrade to create some sort of automated buy-list that tracks the FTSE100 or S&P500? I’m thinking a button which automatically buys shares that make up S&P500, and then automatically buys/sells when the actual index composition is changed.


#6

Unless you’re going to the trouble of rebalancing the portfolio whenever the various stocks change value, this isn’t really a ‘DIY tracker fund’ rather just a regular collection of stocks.


#7

Ooh I like that idea. You build a fund/portfolio setting the products and allocations and then boom just a single click to purchase buys all the products in that homemade fund.

Yes let’s do that!


#8

True you will need to rebalance as stocks enter and leave. Do we know how often stocks come in and out of ftse100? I.e. would I need to rebalance daily, weekly, monthly etc


(Vladislav Kozub) #9

@stephen and then I will have Viktor knocking on my door saying that I am costing them more than the revenue I produce and will be subsequently banned from using Freetrade :joy:

@JamesGibson Why would not you buy the actual tracker instead? The outcome would be the same but fewer processes in the background that could end up being heavy depending on the hardware being used. And there will be significantly more data processing if many people used such a feature. Maybe an idea for Alpha only users :thinking:

@stephen, that would be nice to build your own fund and buy/sell it partially, rather than different securities separately. It will also keep you diversified and you will not have a risk of “Shot, I should not have sold X on that day as it is skyrocketing now!”

And of course you could rebalance it in case you do not like something in the fund.


(Craig) #10

A FTSE100 tracker will likely be balanced by size vs a straight £10/company. i.e. FTSE100 trackers would normally hold % of shares depending on the market capitalization of the entity. So you could come out with a totally different outcome if you did £10/company…maybe better…or maybe not. Although buying 100 companies shares sounds like a good way to test out the new app (when we get it…)


(Kenny Grant) #11

Would like to see freetrade build their own trackers, then give us the tools they created to do so (for example choosing weight % and let the tracker auto rebalance periodically). Or perhaps this is something people could build with the api later.


#13

A freetrade cryptocurrency tracker fund that has some of the lesser known coins as well would be interesting.


(Tommy Lowe) #15

Like the idea! Mentioned something similar to @viktor in September over on the Monzo thread

Launch a fund and name it after the victor :joy:

Good one! :joy_cat: What would the fund contain? :thinking: A weighted index of all Freetrade users’ stock picks? (Although we can’t do anything like our own funds, still it’s interesting to explore this idea.)


(Greg) #16

I was also thinking of doing this, and building a kind of index but excluding companies I either have no faith in or wish to boycott.
For the US market that should work fine but for the UK market bear in mind that you have to pay 0.5% stamp duty on each equity trade, whereas you don’t need to for an ETF :frowning:


#17

Is anyone thinking of building ‘close-to’ index portfolios through the app, wherein rather than buying the iShares/Vanguard you make the tracker yourself by buying the constituent shares in proportion. This wouldn’t have been feasible with regular brokers but 0 commission and fractional shares makes it a possibility. It would only really make sense to do this if you wanted the end portfolio to be materially different to the regular index tracker I.e excluding certain shares or increasing the weighting of dividend paying shares etc.

Advantages would be avoiding exposure to any stock/sector undesirable to user for whatever reason (poor value, “vice stocks”)
Would allow indexing along any number of metrics rather than just market cap.

The extra admin burden when having to rebalance might weigh this out. Also the saving on fees on some ETF trackers being as low as 0.07% might be deemed not worth the effort.


First Orders Through the App!
#18

@astonelesschip

There seems to be an old topic which may be relevant to your question.

https://community.freetrade.io/t/build-your-own-fund


(Alex Sherwood) #19

Thanks, I’ve moved the discussion here to keep it all in once place, I hope that’s ok!


(Jeff puckering) #20

One reason I find this really attractive is because of the company shares I have convinced my partner to buy in the company she works for. To stop myself getting over exposed I would want to remove her company and similar industry shares from the tracker to keep things balanced.