Investing in software and IT, e.g. Softcat, Sophos, Saas

[TheMotorcycleBoy]

I'm kinda torn now between either opening an MSFT or PCT position. I like the idea of PCT because it seriously diversifies my US/tech, but I hate the 1.75% fee. (I briefly glanced at ATT Allianz tech, but that's even worse at 2.0%).

The good news is that Polar Capital Technology's annual management fee isn't 1.75%. It's a bit less than 1% (more on this later). The high fee is due to a performance-related fee of 15% of any outperformance against its benchmark (Dow Jones World Technology Index). So if the managers are getting more than 1% it's because the shareholders are doing well as they will have beaten the index by a reasonable amount (or a lot as in 2017-18).

In 2017-18 PCT's management and performance fee was 1.76% (source p 43 annual report). The annual management fee was 1% on the first £800 million of assets, then 0.85% on anything above. The excellent performance meant that the mentioned performance fee pushed the overall fees to 1.76%.

PCT's fee structure was changed on 15th April 2019 (RNS linked below). The annual management fee is now 1% of the first £800 million of assets, then 0.85% on the next £800 million, 0.8% on the next £400 million and 0.7% on everything above £2,000 million. The performance fee is reduced to 10% of any outperformance against its benchmark (Dow Jones World Technology Index)

https://www.investegate.co.uk/polar-cap ... 00051139W/

I don't have any opinion about Microsoft (it's not in my circle of competence, to quote Warren Buffett), but IMHO there is a lot to be said for buying shares in a foreign company if only because it expands your investment horizons. The third share I ever bought (back in 1985) was American and I've never looked back. IMHO investors who stick to their national stock exchange are restricting their opportunities, particularly for diversification.

Thanks for your indirect suggestion for me to look at PCT. I have and I've opened an initial holding there (about 2% of our foli).

We've also both lodged w8ben forms with iWeb so I'll start to research the odd US stock from time to time. I'd like to find a good marijuana type venture at some stage.

Matt

[TheMotorcycleBoy]

Sure. My issue with the US at present is the current poor £ to $ exchange rates. I'm not ruling out ever making state-side investments, but I just don't think now is the best time for me to do so. Any opinions?

I have a "rule" that my £ liabilities are matched by my £ assets. After that, I don't worry about the currency denomination as my short-term currency crystal ball hasn't worked for ages.

Long term, the £:$ ratio has been sliding in favour of the dollar, with short-term noise cluttering the graph, but overall I have a gut feel the US economy will at least equal that of the UK, if not thrash it soundly, but whether either will outperform other currencies I have no idea, but also no real worry, as most of my so-called £ assets have a fair chunk of non £ earnings anyway!

I think the real question is whether you believe a USD denominated company is a sound investment. Remember that Apple, MSFT etc have non USD earnings as well, so you will get some protection in that a weak dollar in any reporting period will have inflated foreign earnings and vice versa.

As Buffet didn't say, worry about a great international company* and the currency will take care of itself.

VRD


*International as trades internationally, not within a single country.

Mind you, I have discovered another irritating thing with holding US shares with (my iWeb) UK broker. That is, with dividends, they are immediately converted from USD to GBP. So it means should wish to reinvest in US stocks then I've been hit by 2 extra currency conversion cycles.

Is this the usual practice for UK brokers?

What do people here do about that...just try to hold growth US stocks without divis perhaps?

Matt

[Alaric]

Is this the usual practice for UK brokers?

The approach of Interactive Investor using the inherited TD Direct platform in the dealing Account, is to have a separate cash account for each currency they support. They aren't allowed to operate ISAs in that manner, so any dividend arising in an ISA will get automatically converted to sterling. So immediate conversion is the usual (and only) practice for ISA accounts.

[PrefInvestor]

What do people here do about that...just try to hold growth US stocks without divis perhaps?
Matt

Hi Matt, Well personally I avoid US stocks like the plague, tried a few direct investments and always lost money. US stocks are just crazy volatile for the most part and the majority pay no dividends. As THE central tenet of my investment philosophy is the reinvestment of dividends combined with Einstein’s eighth wonder of the world (compound interest) then investing in ANYTHING that doesn’t pay a dividend isn’t on my agenda.

Now I know that many are in love with and have profited greatly from us growth stocks like Apple, Amazon and Facebook etc. but as I think I told you before, I tried it and made a loss. Yes i have looked at Microsoft and wished I’d bought earlier but I can’t see me ever actually doing it, there are just too many more interesting investments that more closely fit my investing style. And as you have found there are costs to investing directly in US stocks.

But to come back to your question, i think many people who go into investing in US stocks in a big way open an account with a broker that lets them hold money in USD. That way they only incur the FX charge when they choose and can invest directly in USD and keep any dividends they receive in USD to fund further investments. You won’t be able to ISA or SIPP such an account though I reckon, so watch out for CGT and dividend taxation.

I also think, as you say, that many US stock investors are typically into growth stocks and don’t care too much about dividends, could be wrong…..

ATB

Pref

[TheMotorcycleBoy]

Thanks yes, I can see that (UK) ISA may have rules requiring that all client monies are in GBP.

So I appreciate that investors who are really keen on US (or other foreign) need to use more specialised brokerage services.

Seeing as Mel and I's combined ISA entitlement is £40k and we would be unlikely to ever consume more than £30k of that per year (hard to predict bonuses etc.) I don't think we would profit much by opening a non-ISA share dealing account that can hold USD.

So I should probably look more at IT ways of pursuing US and hence tech investment. But having said that if I perceive certain US investments to grow fast enough and can buy cheap in a dip, then it may well be worth doing some sums, and opening a small US-holding sometime.

Matt

[SalvorHardin]

Mind you, I have discovered another irritating thing with holding US shares with (my iWeb) UK broker. That is, with dividends, they are immediately converted from USD to GBP. So it means should wish to reinvest in US stocks then I've been hit by 2 extra currency conversion cycles.

Is this the usual practice for UK brokers?

What do people here do about that...just try to hold growth US stocks without divis perhaps

The forced conversion of US dollars into sterling only applies to shares held in ISAs, because of the ISA rules. Otherwise the broker can hold the dividends in US dollars.

I have held several dividend paying American and Canadian shareholdings in ISAs for many years (e.g. Disney). The conversion charges aren't significant IMHO compared to the advantages in holding foreign shares. The cash tends to be recycled eventually into UK shares, or paid out.

[TheMotorcycleBoy]

I have held several dividend paying American and Canadian shareholdings in ISAs for many years (e.g. Disney). The conversion charges aren't significant IMHO compared to the advantages in holding foreign shares. The cash tends to be recycled eventually into UK shares, or paid out.

Hi Salvor,

That's cool, thanks for providing "the post of positivity!"

Yes I'm choosing to not rule out make a direct US-stock investment in our ISA. I think I just need to very much choosy, since it really must be a LTBH.

Matt

[Alaric]

There's a specialist Investment Trust raising money at the moment through an IPO. It's not a new Trust, rather it's raising new funds with a public offer. It's called Augmentum Fintech plc, which as in its name invests in the Financial Technology sector. Amongst its holdings is the Company which trades as Interactive Investor.

https://augmentum.vc/

[PrefInvestor]

But having said that if I perceive certain US investments to grow fast enough and can buy cheap in a dip....

Well clearly I am no expert in investing in US stocks as Ive had several attempts (both with direct investments and ITs) and never managed a plus score, but it seems to me that timing your purchase is absolutely key with some of the big named US stocks. eg If you had bought TSLA at the beginning of the year it was ~$350, at the end of May it was down to $185 and now its $225. Buying at $185 looks like it might have been a good entry point but who knows with this stock whose NAV is ~$30 I think......

In the US they are prone to these cyclical moves in the markets where pretty well everything moves up or down pretty radically all at the same time. The last bottom was S&P 2350 around December 2018 time, that was a good time to buy. But being WAY above that now is it a good time to buy now ?. If you believe in Donald Trump maybe. But they are close to All Time Highs again and buying now is well, risky, I would say.

As usual I wish you all the best with your investments. I find watching the US markets moderately interesting, but just scary personally. Sorry if thats not very positive !!!

ATB

Pref

[TheMotorcycleBoy]

But having said that if I perceive certain US investments to grow fast enough and can buy cheap in a dip....

Well clearly I am no expert in investing in US stocks as Ive had several attempts (both with direct investments and ITs) and never managed a plus score, but it seems to me that timing your purchase is absolutely key with some of the big named US stocks. eg If you had bought TSLA at the beginning of the year it was ~$350, at the end of May it was down to $185 and now its $225. Buying at $185 looks like it might have been a good entry point but who knows with this stock whose NAV is ~$30 I think......

In the US they are prone to these cyclical moves in the markets where pretty well everything moves up or down pretty radically all at the same time. The last bottom was S&P 2350 around December 2018 time, that was a good time to buy. But being WAY above that now is it a good time to buy now ?. If you believe in Donald Trump maybe. But they are close to All Time Highs again and buying now is well, risky, I would say.

As usual I wish you all the best with your investments. I find watching the US markets moderately interesting, but just scary personally. Sorry if thats not very positive !!!

ATB

Pref

I just want to be in position where I've got a few US-stocks in my cross hairs and wait for some temporary stock-exchange meltdown. I'm sure we can rely on DJT to provide one soon!

I haven't fully read this yet

https://www.vox.com/2019/5/22/18635564/ ... imit-trump

but I reckon that given that it says (and also given the next big Brexit milestone) I predict that this October might be interesting.

Matt

[JamesMuenchen]

What do people here do about that...just try to hold growth US stocks without divis perhaps?
Matt

… i think many people who go into investing in US stocks in a big way open an account with a broker that lets them hold money in USD. That way they only incur the FX charge when they choose and can invest directly in USD and keep any dividends they receive in USD to fund further investments. You won’t be able to ISA or SIPP such an account though I reckon, so watch out for CGT and dividend taxation.

Yes, this is what I do now using Interactive Brokers. They are also very cheap to trade stocks in USD … $1 a trade with no stamp duty.

I also think, as you say, that many US stock investors are typically into growth stocks and don’t care too much about dividends, could be wrong…..

Yes and no. I had some GBP versions of Vanguard funds (VUSA, VFEM, VJPN) that paid me divis in USD.
Maybe that is not normal, it could have been due something I missed or some setting on my account. But it suited me anyway.

[TheMotorcycleBoy]

What do people here do about that...just try to hold growth US stocks without divis perhaps?
Matt

… i think many people who go into investing in US stocks in a big way open an account with a broker that lets them hold money in USD. That way they only incur the FX charge when they choose and can invest directly in USD and keep any dividends they receive in USD to fund further investments. You won’t be able to ISA or SIPP such an account though I reckon, so watch out for CGT and dividend taxation.

Yes, this is what I do now using Interactive Brokers. They are also very cheap to trade stocks in USD … $1 a trade with no stamp duty.

Any chance of a link to Interactive Brokers?