New funds for old...

Once, you were knocked down several rungs on the social stepladder if you bought your own silverware – the implication was that you'd made your own money rather than inheriting wealth (and those knives, forks and spoons). These days, that's a distinction confined to Edwardian etiquette advice.

However, from TV shows, books and advice columns on “upcycling” (turning a tatty table into an object of desire with a coat of cover-everything chalk paint) whether to buy new or “pre-loved” remains a live debate.

The new/used dichotomy becomes more important on big ticket items such as cars where new once meant a few years' reliability, freedom from rust and no need to empty the ashtray, while second hand suggested you were not important enough to have a company car.

Life on the road has moved on. But the debate remains vital although often overlooked in investments where serious cash is at stake. And the distinction has now achieved new traction with the varying success for new stock market arrivals – plus heated discussion over ditching existing unit trusts if a winning manager moves on.

There are no absolute answers in the investment world, only infinite shades of grey. It's often posing questions to see how responses fit into your personal strategy.

When companies first come to the stock market, they issue new shares, an event once called “flotation” - a term now superseded by the American Initial Public Offering (IPO). It is generally the only time when shares are actively marketed – the British Gas “Tell Sid” campaign from the mid 1980s has its place in advertising history.

New shares have advantages such as no stamp duty, no purchase fees (although bankers, stockbrokers, lawyers, accounts and others all take their cut behind the scenes) and what should be a warts and all prospectus. The company's prospects should also be subject to intense scrutiny. However, that's not always so because banks and brokerage firms may be involved in selling the IPO – so their analysts won't say anything negative.

Many shares owned by individual investors were once “new”, mostly resulting from privatisations and building society conversions. The most recent government sell-off was Royal Mail whose shares have gained substantially but as individuals were limited to £749.10 worth of shares, it is unlikely profit will make much difference to anyone's life prospects.

Besides considering prospects – and recently, some other heavily marketed IPOs disappointed – investors have to check how the shares fit into their overall strategy. And to treat the hype with caution.

Once you take a new car home from the showroom, it becomes used. Once a share starts trading, it is also used – like any other. It can quickly lose its initial shine and power – Royal Mail accelerated to the front of the performance grid in Autumn 2013 but has since slipped back. It's no longer new, it's no longer special.

The new vs old debate in unit trust investments is different. You'll probably only hear from those with vested interests in selling them to you. They'll come up with a positive prognosis with facts and statistics picked to back the concept – United States shares, technology stocks, European equities and so forth - on sale.

There is no cost advantage buying a freshly minted unit trust. Purchasers must hope the trust offers both bright managers with an impressive track record – and a focus on a stock market sector that is about to blossom. Sadly, funds are too often launched after most of the gains so that promoters can show a record of success. Or they capture “flavour of the month” ideas – the most notorious was technology during 1999 dotcom boom which turned into dotcom dust.

But it's always worth checking on old trusts you may have as well. Due to recent regulatory changes, some old trusts have been supplanted by new “clean” funds, covering the same investments but with lower charges.

Brokers and unit trust companies rarely prompt holders to switch – it's not in their interest. But there's plenty of online resources to help – try “clean funds conversion” for starters.

Finally, whether it's an individual share or a packaged product such as a unit trust, the key is to ask “what does this bring that's new to the party?” If the answer is unsatisfactory, then the shiny appeal of new could soon be tarnished.


Tony Levene is a renowned financial journalist, who has previously been a columnist for Guardian Money. He has written several books, including 'Investing for Dummies' and won the ABI lifetime achievement award and the Headline Money award.