Dazzled by Jargon

[mc2fool]

Halifax only charge £2 to buy in a Sharebuilder with no annual fee nor opening fee.

Which is vastly more expensive than the Vanguard ISA, now that the OP says they'd like to invest £100 per month (and so qualify for the Vanguard a/c).

The Vanguard ISA has no dealing fees and charges a 0.15% annual admin fee, levied quarterly. So for the first year it'll cost the OP £1.125, and it'll take the value getting up to £16,000 before the 0.15% admin fee matches the £24 monthly dealing with the Halifax will cost every year.

Of course, he could invest less frequently, like just once a year, but is it really worth not having the regular habit (and pound cost averaging) to save just a very few quid (indeed, pennies in the first few years)....

[Urbandreamer]

I'm pretty sure that fractional shares cannot be held in an ISA, so this might be a slight issue for the OP if he decides, as I think is the best policy, to hold whatever he purchases in an ISA and the price of a share is more than the regular subscription amount.

There seems to be a slight confusion between Vanguards different offerings. It is NOT possible to buy fractional shares in either a company, investment trust or ETF (like VWRL), as they are all treated as shares. It IS common to buy fractional units of a unit trust like LifeStratergy. The same holds where an investment trust manager also provides a unit trust. You can buy frational units in the unit trust but not the investment trust.

https://www.moneywise.co.uk/investing/f ... -unit-fund

We could all make a case for our favourate investments and methadology, but the OP needs to decide what suits them. Is it more important to fully invest each month than to allow the remainder's to accumulate until they can be invested? Are annual platform fees for holding unit trusts an issue? Is the fact that the price of the ETF changes by the min and the fact that the unit trust is fixed once a day an issue?

[staffordian]

I'm pretty sure that fractional shares cannot be held in an ISA, so this might be a slight issue for the OP if he decides, as I think is the best policy, to hold whatever he purchases in an ISA and the price of a share is more than the regular subscription amount.

There seems to be a slight confusion between Vanguards different offerings. It is NOT possible to buy fractional shares in either a company, investment trust or ETF (like VWRL), as they are all treated as shares. It IS common to buy fractional units of a unit trust like LifeStratergy. The same holds where an investment trust manager also provides a unit trust. You can buy frational units in the unit trust but not the investment trust.

https://www.moneywise.co.uk/investing/f ... -unit-fund

We could all make a case for our favourate investments and methadology, but the OP needs to decide what suits them. Is it more important to fully invest each month than to allow the remainder's to accumulate until they can be invested? Are annual platform fees for holding unit trusts an issue? Is the fact that the price of the ETF changes by the min and the fact that the unit trust is fixed once a day an issue?

Sharebuilder does allow their investor to hold fractional shares in companies, ITs etc, and they do it by purchasing whole shares and splitting ownership within their records. This "shared ownership" of shares is the reason they are not permitted in ISAs, I believe, because ISAs by definition are individual, not shared or jointly held investments.

My first encounter with fractional shares was many years ago when I was purchasing Greggs shares on a monthly basis, and they were north of £30 a share. In those days my monthly savings were less than this and I was buying about 70% or 80% of a share per month.

[hiriskpaul]

For regularly investing £50 or more per month into an ISA, I would recommend fidelity.co.uk. Annual charge is 0.35%, which they deduct by cancelling units, which means you don't have to worry about having cash in your account.

Global funds start at 0.12% for the Fidelity tracker, but this does not include emerging markets. HSBC have a global tracker for 0.19% which does include EM, or there is a Vanguard fund for 0.24% which includes more small caps.

For simplicity, use an accumulating fund.

Once you have a few thousand invested, it will pay to transfer out to somewhere without a platform fee, such as HSDL or iWeb.

There are no additional dealing or exit charges to pay with Fidelity, unlike many other brokers.

[BobGe]

For clarity, as of present, I believe this is correct:

HSDL 'monthly cheap dealing' is £3.95/trade, manually executed, quantity or value defined, (not for intended for fractional purchases AFAIAA, not sure about sales), 12:15-14.15p.m., a 2hr period, for UK shares and all day (typically 0800hrs-2100hrs) for international shares.

HSDL 'regular investments' is (normally) 4x per month and £2.00/purchase, for a set monetary amount, automated, fractional, according to a set calendar. The trade must be set-up the day before and will only execute if adequate cleared funding is available in the respective a/c.

HSDL 'regular investment funding' can be set to automatically debit the linked bank a/c typically 3 (working) days before the regular investment day (and in turn credit the dealing or sharebuilder a/c). It is not mandatory to use this method for regular investments - clients may fund their accounts manually (via their linked bank a/c, of which only one is allowed).

[mc2fool]

Well TLA, given that you'd like to invest £100 per month into a global tracker a good option would seem to be buying the Vanguard FTSE Global All Cap Index Fund accumulation (ACC) units in a Vanguard ISA.

The fund is an OEIC and so avoids the money-left-over issue that comes with only being able to buy whole shares of ETFs in an ISA, as you can buy fractional units in an OEIC and so the whole of your £100 will be invested each time.

The "accumulation (ACC)" bit means that the fund automatically reinvests dividends within itself, so you don't have to faff with that.

The Vanguard ISA has an annual fee of 0.15%, levied quarterly, and that's it. There are no dealing fees, or exit fees, and you can pay the fee either by leaving some (uninvested) money to the account or by getting them to automatically sell a little of your holdings each time to cover them.

As, unless there is spectacular growth, it's going to take several years for the account fee to get out of single figures, personally I'd just stick an extra tenner in at the beginning to cover the first three or so years fees....

[hiriskpaul]

If you can stretch to £100 per month, I would go with Vanguard as well.

[hiriskpaul]

Well TLA, given that you'd like to invest £100 per month into a global tracker a good option would seem to be buying the Vanguard FTSE Global All Cap Index Fund accumulation (ACC) units in a Vanguard ISA.

The fund is an OEIC and so avoids the money-left-over issue that comes with only being able to buy whole shares of ETFs in an ISA, as you can buy fractional units in an OEIC and so the whole of your £100 will be invested each time.

The "accumulation (ACC)" bit means that the fund automatically reinvests dividends within itself, so you don't have to faff with that.

The Vanguard ISA has an annual fee of 0.15%, levied quarterly, and that's it. There are no dealing fees, or exit fees, and you can pay the fee either by leaving some (uninvested) money to the account or by getting them to automatically sell a little of your holdings each time to cover them.

As, unless there is spectacular growth, it's going to take several years for the account fee to get out of single figures, personally I'd just stick an extra tenner in at the beginning to cover the first three or so years fees....

You can also pay the platform fee by direct debit.

[tikunetih]

Decide first on the type, style and pattern of investment and then look for an ISA that facilitates that most cost efficiently.

This is the most important comment on the thread, but may well itself still be putting the cart before the horse:

The OP should be laying out:

- what they are seeking to achieve from this investment that they're considering making;
- what's the likely (or range) of investment time horizon(s);
- what other savings and investments do they have, such as pension provision, in order to see how this proposed investment fits in with existing savings plans;
- describing any previous investment experience that might shed light on their risk and volatility tolerance, or whether they are entirely new to investing;
- etc.

It's particularly important that they consider their existing pension provision (if any), to see whether this proposed investment should be directed towards pension saving vs. using an ISA wrapper as many posters assume.

In summary, the OP TLA should consider their financial position and plans holistically, to ensure this proposed investment is optimal. There's no indication that's yet been done. The detail all comes later once the big "strategic" stuff has been well thought through first...

[ThreeLetterAcronym]

Like drinking from a firehose, you guys are posting quicker that I can process the advice! This is great stuff!

To address tikunetih's questions:

- My intention is to put a little bit of spare money each month into something I can forget about that may make a smidge more money than if I just dump it in a savings account. I don't have a sum in mind to achieve, but more than I put in would be nice, and if it could be shielded from tax in an ISA all the better. I imagine that's what everyone wants, right?

- I'll be 44 in September, so an investment that would mature between 10 and 20 years would be lovely in the unlikely event I get to retire early.

- I've got a pension I contribute to monthly through Parmenion. I don't remember the details of the fund, but it's a bland managed beastie. We've usually got a little bit of money in a normal savings account for emergencies.

- No investment experience here. I've spent too long being intimidated by the initial complexity of investment to have a go, which is why I'm here asking. The closest I've got is paying into a personal pension backed by a pretty low risk fund. I've never had an ISA. Given my intended investment duration, something riskier would probably be fine.

[Urbandreamer]

Like drinking from a firehose, you guys are posting quicker that I can process the advice! This is great stuff!

To address tikunetih's questions:
...
- No investment experience here. I've spent too long being intimidated by the initial complexity of investment to have a go, which is why I'm here asking. The closest I've got is paying into a personal pension backed by a pretty low risk fund. I've never had an ISA. Given my intended investment duration, something riskier would probably be fine.

TBH (To Be Honest) tikunetih is stateing the common FA (Financial Adviser) start point. Why are you doing this, what do you hope to achieve by doing this, what are you failing to do etc.

I started in my 30's as a bit of a game! Fit's really well into those questions doesn't it.

The numbers seem to show that on average in the short term stock market investment is VERY dodgy. So don't do it to save for this years holiday.

While in the long term it has usually provided better returns than lending money (ie deposit accounts), so it's a good idea if you are young and saving for your old age.

House deposits? Well, the question is how soon.

Age has an impact upon your choices as well.

At your age most to all of my savings went to a stocks and shares ISA/PEP (Personal Equity Plan, pre ISA), as I could get at the money when I wanted if I wanted, funding short term costs from income. Alternatively I paid off mortgage capital now and then. Given my current age they go into a SIPP (Self Invested Personal Pension) as I (because of my age) can get the money when I want and the advantages are slightly better than an ISA (contibutions discounted in student loan calc for kids, free of inhertiance tax etc).

Questions about existing pension provision are also important. I pay into a salary sacrifice scheme with my employer. Not only does doing so reduce my income tax band by manipulating my income (hence effecting stuff like child allowence), but contributions are boosted by the NI (National Insurance) that both I and my employer would have paid. Hence it COSTS me to pay into my SIPP rather than the company scheme.

Even if (like me) you are a standard rate tax payer, pensions provide a fractionally better return than ISA's all things being equal. Assuming that you won't need the money early.

Over the long term very small fractional differences in return make a HUGE difference. Compound interest is the 8th wonder of the world (according to Einstein).

Hope the above give food for thought and areas of further research.

[nmdhqbc]

The "accumulation (ACC)" bit means that the fund automatically reinvests dividends within itself, so you don't have to faff with that.

I believe £50 a month was original mentioned. So if getting to £100 a month is not fully comfortable maybe the income (INC) units would be better. The income it pays could be bundled into the monthly contributions helping to reach the £100 a month minimum. Presuming of course it works that way. I'm not with Vanguard so I don't know if they £100 has to be "new" money into the account or not.

[tikunetih]

- I'll be 44 in September, so an investment that would mature between 10 and 20 years would be lovely in the unlikely event I get to retire early.

- I've got a pension I contribute to monthly through Parmenion. I don't remember the details of the fund, but it's a bland managed beastie. We've usually got a little bit of money in a normal savings account for emergencies.

- No investment experience here. I've spent too long being intimidated by the initial complexity of investment to have a go, which is why I'm here asking. The closest I've got is paying into a personal pension backed by a pretty low risk fund. I've never had an ISA. Given my intended investment duration, something riskier would probably be fine.

Given your present age and intended investment time horizon of 10-20 years, then on the face of it a pension wrapper looks obviously more appealing than an ISA wrapper for this planned investment (for the tax relief on contributions / 25% tax-free lump sum [PCLS]).

It may be that you want to ensure access to a portion of the money prior to you being able to access the pension, in which case an ISA wrap might be used for a portion of the money to be invested with the rest (the bulk?) going to a pension wrap.

Since you're taking an interest in investing and securing your future, you should take the opportunity now to take a close look at the personal pension you're currently contributing to, in order to ensure it's cost-effective (ie. is "comparably priced" to similar alternatives) and that the underlying investment fund(s) are suitable and perform in line with similar alternatives.

Don't treat this existing pension as a "black box" that you're afraid of taking a good close look at!

How did you end up investing in it? Was it via advice etc? If it's a good product then an obvious route would simply be to increase contributions to it. If it's a poor product then you should be looking at changing it.

What about other pension provision via employment, past or present? Is there any? If there is are you maximising any employer contributions?

As stated earlier, it's only sensible to consider your assets (savings and investments) holistically, so you need to have a good handle on any existing pension provision and how any defined contribution pensions are invested to ensure the new investment your considering complements that. The intention should be that your overall "portfolio" (emergency savings, other cash savings, existing pension(s), new investment that you're considering here, state pension, etc) makes sense as a "planned whole" as opposed to a bunch of disparate pieces randomly/tactically chosen.

Sounds to me like you're very much at the "taking stock" stage. The more you look at this stuff the easier it gets and the better you'll feel about taking an interest and taking some control of your affairs. Time spent here will be well rewarded later, whereas acting in haste will likely lead to repenting at leisure!

[ThreeLetterAcronym]

Thank you all for your comments. I've been reading up on this stuff and will continue to do so while also understanding of how my existing pension fund works and how much it costs in comparison to any new investments. In the meantime, we will be storing any extra savings we've got in a separate savings account so that once we have figured out what we can do with it we'll have a small pot to get us started.

Thanks again.