In the past weeks we mentioned a couple of time “Investimenti Arancio” (“orange investments”), if you want to know , ING Direct consumer-targeted investment funds, linked to the “Conto Arancio”saving account. It may be interesting to get a little in-depth on what they are and how they work. (As usual, what you read here is just our opinion, and you should read official statements and official source of information before investing your money, and most of all think with your own brain…).
The first, most important fact you have to be aware is that “Investimenti Arancio” are investment funds, not some kind of “saving account upgrade” (as some people seem to think, in my opinion also as a consequence of the close link with the saving account), therefore they have a financial risk side that you should evaluate carefully before investing your money, otherwise you may get your fingers burnt.
Dividendo arancio was the first one of Investimenti Arancio. The fund invest in nearly 150 companies worldwide, selected by various indices and factors: the main one is constant dividend distribution. From this point of view, this choice is appreciable, since companies that distribute dividends to shareholder should usally be the most solid and reliable ones, and therefore the one that should less suffer also in bear market periods. Add to this that the worldwide approach means a country and industry diversification. Indeed, Dividendo Arancio seem to have well reacted also in not-so-good period as February-March 2007, in comparison to other fund categories. On the other end, the worldwide horizon means that the fund is sensitive to Euro/Dollar exchange rate, thus adding another risk element to be considered.
The Euro Arancio fund invests in bonds issued by public authorities, credit institutions, companies, with at least an A Standard&Poor’s rating evaluation. Only euro listed securities are included in the fund portfolio, thus eliminating issues connected to monetary exchange rate trends.
Actually, until now Euro Arancio showed a really low volatility, but also a quite small growth (only +0.1%). In other words, the Conto Arancio saving account seem to be more remunerative, and so one may think twice before to invest in Euro Arancio and expose his money at (small) risk.
Euro Arancio however may be useful as temporary investment, as you can switch on it your capital from the other Investimenti Arancio funds when you expect a brief negative period.
As we said in the past, Mattone Arancio invests in shares of companies in the real estate business. I insist on this point: Mattone Arancio is a stock fund, not a real estate fund, with all the consequences this means. The real estate sector is pretty in trouble in these days, after a explosive growth in the last years, so you really should think very well before to invest your money in this fund (Mattone Arancio’s last month performance is -9.2%).
Personally, I always was quite puzzled from ING Direct’s official statements, saying that Mattone Arancio is less risky than Dividendo Arancio, when the first one isn’t does not diversify its portfolio on different business sectors (although Mattone Arancio isn’t exposed to currency risk, since it invests only in the Euro-area), and the higher volatility seem to confirm my opinion.
Convertibile Arancio is the last fund added in the Investimenti Arancio “family”: it invests in international convertible bonds, that are bonds that can be converted into company shares. Convertible bonds value is therefore halfway between the company share value and the company bond value. The trend usually follows the share value, but has a lower volatility.
All Investimenti Arancio funds have some positive aspects:
- They are easy to use
- They have low management fees, in comparison to the average
- There are no initial or exit charges, and also switch between fund is free.
On the other hand, there are a few negative aspects worth to be considered
- They may be even too much easy to use, and this may lead to not think enough before investing, and to underestimate the risk. The close linking with the saving account may also lead the unexperienced investors to not fully understand the deep difference.
- Some reports on ongoing operations NAV value (the fund’s share pricing, in other words) may be confusing, since sometimes it’s not clear if it’s referring to NAV date or to the date NAV is published. This because NAV is calculated the next day: for example, June 11th NAV is calculated and published June 12th, and sometimes there is a mixing up between the two dates. Actually, every operation (buying, selling, switch) is executed the next working day (if it’s ordered before 4:00 pm), and NAV applied is that one.
Italian translation of this post: Investimenti arancio
Banche e Risparmio [http://www.banknoise.com]