December 31, 2012 10:07 AM Subscribe
Mathematics-filter: If there are seven funds with various charges, how can I work out the allocation to these funds of a fixed amount so that the weighted mean charge is below a certain level and the allocations are of similar sizes?
posted by djgh to Work & Money (13 answers total)
Background: I'm looking at putting some of my savings in index trackers. In order to try and balance risk, I would like to spread my savings around various tracker funds, which have varying levels of charges. I would like to keep charges below a certain level, and try and keep the investment in each fund roughly similar (otherwise the risk isn't so evenly spread).
The seven funds have the following charges:
Fund 1: 0.57%
Fund 2: 0.57%
Fund 3: 0.59%
Fund 4: 0.62%
Fund 5: 0.62%
Fund 6: 0.65%
Fund 7: 0.71%
My (admittedly extremely limited) maths skills are failing me - the closest I could get was the allocation of savings (i.e. weighting) for each charge rate, but then this leaves those funds with the same rate receiving half of the relevant allocation, which means that the amount in each fund is not balanced.
How can I work out what percentage of my savings should be placed in each fund so that the average charge is 0.58% or lower, whilst the amount in each fund is as similar as possible?