The Lemon Fool

Further to my recent thread on 2018/19 ISA usage, I have set up a monthly direct debit to pay into a Hargreaves Lansdown Vantage ISA and have requested that it is invested in the Vanguard Life Strategy 80 fund.

Having set up my direct debit as part of the ISA application, it gave me the option of selecting a fund which I did as per above. I had to specify how much to be invested in the fund, so I set it to the same value as my direct debit.

Does this mean that the full amount will be invested in VLS 80 each month or do I have to keep telling them where to put the monthly amount?

Secondly, is what I have set up a cost-effective way of doing this? Would I have been better to pay a lump sum in i.e. would dealing costs be less with the lump sum?

Thanks
Clariman

Sounds like you have set it up correctly - the full £80 will go into the chosen fund. There is no charge for fund purchases (or sales) so no savings would be made by a single annual purchase. For Investment Trusts, ETFs, shares you would pay £1.50 a month to buy them, or £11.95 for a single annual buy, so a small saving.

DrBunsenHoneydew wrote:There is no charge for fund purchases (or sales) so no savings would be made by a single annual purchase.

If the money is already available, why hold cash when you could invest?

Alaric wrote:

DrBunsenHoneydew wrote:There is no charge for fund purchases (or sales) so no savings would be made by a single annual purchase.

If the money is already available, why hold cash when you could invest?

Does drip-feeding not mitigate risk of volatile fluctuations in value i.e. if value drops then my next investment will invest at a cheaper level? Other than that there is a practical issue in that I have forgotten the PIN for my Ulster bank e-savings and it will take 10 days for them to send me a new one, so rather than wait until then I've set up a direct debit from my current account for 10 months. I could just invest the rest when I can transfer the money.

Clariman wrote:Does drip-feeding not mitigate risk of volatile fluctuations in value i.e. if value drops then my next investment will invest at a cheaper level?

In the absence of fluctuations, prices generally increase with time.

Has anyone published a study showing in practice how anyone would have fared by investing the whole allowance on 6th April against 12 monthly instalments?

Alaric wrote:

Clariman wrote:Does drip-feeding not mitigate risk of volatile fluctuations in value i.e. if value drops then my next investment will invest at a cheaper level?

In the absence of fluctuations, prices generally increase with time.

Has anyone published a study showing in practice how anyone would have fared by investing the whole allowance on 6th April against 12 monthly instalments?

Vanguard have published this, which shows that it's better to put in the lump sum immediately two-thirds of the time, provided you accept the one-third possibility of downside risk and potential feelings of regret. If the latter is important to you, phase in the funds gradually. https://personal.vanguard.com/pdf/s315.pdf

Hargreaves Lansdown provide a very good service, but likely to be an expensive place to invest in a Vanguard Lifestrategy fund due to their 0.45% annual platform charge on OEICs. Vanguard themselves would be cheaper at only 0.15%, capped at £375. Others such as Halifax/iWeb, may work out cheaper still.