The Lemon Fool

Hello all,

After years of struggle I now have a regular monthly sum I'd like to invest, and from what little reading I've done so far a global tracker seems like a reasonable instrument as it has low fees and requires precious little effort on my part. I can bung in fifty quid a month to start with and hopefully get more out of it than I invested in 10 years time.

Following the well-trodden path of anyone with an internet connection, I used a search provider to look for global trackers only to be swamped with a deluge of information and with no clear way of determining how they compare.

Can any of you kind folks suggest how I can make sense of it all? I think I'd like a global tracker wrapped in an ISA that I can just forget about for ages (10 years+) while it accumulates lots of lovely lovely money, but I'm so out of my depth I don't know where to begin.

I would be grateful for any suggestions.

ThreeLetterAcronym wrote: Can any of you kind folks suggest how I can make sense of it all? I think I'd like a global tracker wrapped in an ISA that I can just forget about for ages (10 years+) while it accumulates lots of lovely lovely money, but I'm so out of my depth I don't know where to begin.

Your starting point is to seperate the ISA from what you do with the money in the ISA.

First step then is to start an ISA and there are a number of major players with varying charging structures. Second step is to decide what to invest in, once you have put surplus funds in an ISA. That's no more complicated (!) than deciding which fund or share to invest in and clicking it on a list of potentials with the amount you want to invest. I'm not sure how long the list of global trackers actually is, but ISA providers would normally provide lists of what they have in that category.

Various ISAs will offer schemes where they take money regularly from your bank account and automatically invest it for you.

Perhaps you could look at like food shopping. First select a supermarket and then decide what you want to eat.

Alaric wrote:Your starting point is to seperate the ISA from what you do with the money in the ISA.

First step then is to start an ISA and there are a number of major players with varying charging structures. Second step is to decide what to invest in...

I disagree with both the separation and that order. As you say, different ISA providers have different charging structures and are suitable/unsuitable for different types of investors. If you choose and open an ISA first and then afterwards decide what to invest in (and how) you could end up paying relatively enormous costs.

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

Alaric wrote:Perhaps you could look at like food shopping. First select a supermarket and then decide what you want to eat.

LOL! As it happens I did my big(ish) food shop today -- and as usual I went to three supermarkets to do it. First comes what I want to eat (and so what I need to stock up on) and from that comes where I go to (best) get it.

So, to help the OP, how about opening an account with Vanguard and drip feeding monthly sums into VWRL?

Is this a possibility?

More info here on VWRL

https://www.hl.co.uk/shares/shares-sear ... etf-usdgbp

monabri wrote:So, to help the OP, how about opening an account with Vanguard and drip feeding monthly sums into VWRL?

Is this a possibility?

Well, it would be a good choice except that the OP said they'll be putting in £50 a month and the Vanguard ISA requires a minimum of £100 a month. https://www.vanguardinvestor.co.uk/inve ... shares-isa

Further VWRL is an ETF and is currently selling for ~£65, which makes £50 investments problematic, unless the ISA platform allows fractional share purchases. Of course, the OP could manage both issues by stashing the £50/month externally and then making a £600 purchase annually.

monabri wrote:More info here on VWRL

https://www.hl.co.uk/shares/shares-sear ... etf-usdgbp

And from the horses mouth here https://www.vanguardinvestor.co.uk/inve ... stributing

Good points..how about a change of tack?

Don't HSDL ( Halifax) do a cheap dealing offer once a month ~(£3) . To make it economical, the buys would need to be perhaps every 6 months such that the dealing costs are ~1%.

As has been said, choice of provider is a issue.

The different charging structure makes some better than others for different people.
I'm not sure that I can recomend any that I use for the OP for this reason.

Pilling & co charge 0.5% of your pot each six months, but cap their custody charge at about £150. They charge a commission with minimum rather than flat rate on trades. Excelent service, but it could be expensive for the OP.
A J Bell would charge £30pa for an ISA. However they would also charge an additional 0.25% of the total value with no cap as the OP wants to use an index tracker rather than ETF*.
Selftrade might be an option at £70pa. They also charge an additional 0.3% with no cap for holding funds though.
Both A J Bell and Selftrade do cheap "regular investment" where you pay £1.5 for the trade.

*Jargon!
Ok many may know but given the title I thought to explain. Index trackers are usually "mutual" funds, in the UK unit trusts (or oecis). Many platforms/brokers charge extra for holding such investments though some do not (Pilling doesn't). Alternatives are individual shares, investment trusts and ETF's which are not singled out in that manner. Clearly the OP wishes to avoid company shares and investment trusts, seeking a passive route. That leaves the option of ETF's, "exchange traded funds". These are traded just like shares in individual companies, but in most cases could be thought of as like an index tracker. Vanguard (VWRL) is one such popular global ETF, HSBC does another (HMWO). Picking such could cut the cost significantly over time.

Why not get back to basics. Fundamentally no investor needs a 'provider' (by which I mean a 'platform' or custodian or whatever you like to call him,trying to avoid jargon) For many many years (basically before the internet) there was no such thing. Mind you dealing costs were very much higher then as well.

So I agree with others that the OP needs to decide what he wants to invest in and then decide how to buy and hold it. He could buy it directly from the manager (assuming we are talking about funds) or more likely via a platform because of the relative simplicity of buying and holding. The choice of platform depends to some extent on its charges but also on what it is he is going to buy and hold.

I have sympathy for the OP though because it is no longer as simple as it once was. But he needs to educate himself and there are presumably plenty of guides online for that.

Dod

Wow, that's amazing! Thank you all for your responses. It will take me a while to go through them properly but you have definitely given me food for thought. I'm not going to pretend to understand everything suggested and their counter arguments but I'll go through it all carefully with google's help for understanding the acronyms. It took me a moment to realise who this OP guy was.

Scanning the forum before posting here Vanguard's offering looked like a popular option but I didn't want to plough money into the first thing I saw without more consideration. I can try to dig a little deeper and pony up £100 a month to make use of because that sounds about right. I would also like to take a look at the other options too.

Thanks again.

monabri wrote:Good points..how about a change of tack?

Don't HSDL ( Halifax) do a cheap dealing offer once a month ~(£3) . To make it economical, the buys would need to be perhaps every 6 months such that the dealing costs are ~1%.

£2, and I think they allow fractional share purchases when using the cheap dealing offer (maybe someone with experience can confirm that). However, they do have a £12.50 annual ISA fee, so even if it's only one cheap trade a year that's £14.50pa. If the OP went for a tracker fund (OEIC) instead then even the Hargreaves Lansdown 0.45% holding fee would work out better up to over £3000, which at £50pm is for quite a few years.

TLA, a global tracker is indeed a reasonable choice (although there is an active vs passive debate that you may want to read up on, if you haven't already), and given that's the sort of instrument you want to go for there are basically two types you can go for, an ETF (Exchange Traded Fund) or a tracker "fund" (OEIC, Open Ended Investment Company). For global trackers there are a number of both.

Nearly all brokers will charge you per trade for buying ETFs (an exception is Vanguard for their own ones), although cheap dealing offerings can take that down to e.g. £2 per trade.

Some brokers will also charge you per trade for buying OEICs while others have no charges for doing so, but the latter almost always charge you a % fee to hold them, whereas most of the former just charge a £ fixed account fee (if at all). As a broad generalisation, the % holding fee ones work out cheaper for smaller amounts but it does depend on what you'll be buying and your trading pattern.

So, where I said earlier that you should decide first on the type, style and pattern of investment and then look for an ISA that facilitates that most cost efficiently, actually there will be some interaction between the two.

mc2fool wrote:

Alaric wrote:Your starting point is to seperate the ISA from what you do with the money in the ISA.

First step then is to start an ISA and there are a number of major players with varying charging structures. Second step is to decide what to invest in...

I disagree with both the separation and that order. As you say, different ISA providers have different charging structures and are suitable/unsuitable for different types of investors. If you choose and open an ISA first and then afterwards decide what to invest in (and how) you could end up paying relatively enormous costs.

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

I'm reluctant to suggest avoiding shielding your money from the tax man but would something like £1000 annually even justify the expense of holding an ISA for the first few years? Halifax only charge £2 to buy in a Sharebuilder with no annual fee nor opening fee. With AJ bell "There is no charge to set up or transfer a share dealing account to us and no charge to pay money into the account."

Once the OP has a 5 figure pot think about moving to an ISA as unless the rules on dividend tax or capital gains tax change significantly the annual allowances will mop up any gains for quite a while and there's no reason to the pay the admin fee for the wrapper.

kempiejon wrote:I'm reluctant to suggest avoiding shielding your money from the tax man but would something like £1000 annually even justify the expense of holding an ISA for the first few years?

At least some of the providers will charge the same for a taxed account as for an untaxed one. Having an ISA may also avoid the need to fill out a more detailed tax return.

mc2fool wrote:

monabri wrote:
Don't HSDL ( Halifax) do a cheap dealing offer once a month ~(£3) . To make it economical, the buys would need to be perhaps every 6 months such that the dealing costs are ~1%.

£2, and I think they allow fractional share purchases when using the cheap dealing offer (maybe someone with experience can confirm that).

I've got a Halifax account and can confirm that they will purchase fractional shares when using the cheap dealing offer. I use it to purchase irregular Vanguard Lifestyle 80/20 purchases, when I've got any spare investable cash that I can't decide a different home for....

I also agree with kempiejon above when he mentions that there may not be an immediate need for an ISA account, given the relatively low initial monthly purchases intended, so I think a normal Halifax account might be a useful option to consider, although it's not immediately obvious to me looking at the following account-options what the difference is between the Sharebuilder Account and the normal Share Dealing Account -

https://www.halifax.co.uk/sharedealing/our-accounts/

With that said, regarding the need for an ISA account, Alaric has raised a good point above regarding the removal of any tax-form implications with an ISA, which might be an important consideration for the OP.

I can certainly turn on or off any regular bank-transfer sum, and also use the cheap regular investment options when I want to with my Halifax Share Dealing Account, although I tend to only use it for single-hit purchases nowadays, to take advantage of the low-cost, rather than any actual 'regular' investment, so I'd perhaps ask what advantages or restrictions the Sharebuilder Account might have that might differentiate it from the Share Dealing Account, which is the one I've got.

I've been a Halifax Share Dealing Account holder for many years, and would highly recommend them.

Cheers,

Itsallaguess

Itsallaguess wrote:I've got a Halifax account and can confirm that they will purchase fractional shares when using the cheap dealing offer. I use it to purchase irregular Vanguard Lifestyle 80/20 purchases...

Vanguard Lifestyle 80/20 is an OEIC and one (except by luck) always gets fractional units, but I believe when using the cheap dealing offer Halifax also purchase fractional shares for regular companies, ITs and, relevant to this discussion, ETFs, yes?

mc2fool wrote:

Itsallaguess wrote:
I've got a Halifax account and can confirm that they will purchase fractional shares when using the cheap dealing offer. I use it to purchase irregular Vanguard Lifestyle 80/20 purchases...

Vanguard Lifestyle 80/20 is an OEIC and one (except by luck) always gets fractional units, but I believe when using the cheap dealing offer Halifax also purchase fractional shares for regular companies, ITs and, relevant to this discussion, ETFs, yes?

Ah - thanks for the clarification.

Cheers,

Itsallaguess

Itsallaguess wrote:

mc2fool wrote:

Itsallaguess wrote:
I've got a Halifax account and can confirm that they will purchase fractional shares when using the cheap dealing offer. I use it to purchase irregular Vanguard Lifestyle 80/20 purchases...

Vanguard Lifestyle 80/20 is an OEIC and one (except by luck) always gets fractional units, but I believe when using the cheap dealing offer Halifax also purchase fractional shares for regular companies, ITs and, relevant to this discussion, ETFs, yes?

Ah - thanks for the clarification.

Cheers,

Itsallaguess

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.

Halifax Share Dealing offer the cheap £2 deals for ISAs and non ISA Sharebuilder accounts, but with the former, your purchase is rounded down to the nearest whole number of shares, whereas in the non ISA account, every penny of your purchase amount is used to buy fractional shares down to about four or five decimal places.

Itsallaguess wrote:

... I can certainly turn on or off any regular bank-transfer sum, and also use the cheap regular investment options when I want to with my Halifax Share Dealing Account, although I tend to only use it for single-hit purchases nowadays, to take advantage of the low-cost, rather than any actual 'regular' investment, so I'd perhaps ask what advantages or restrictions the Sharebuilder Account might have that might differentiate it from the Share Dealing Account, which is the one I've got.

I've been a Halifax Share Dealing Account holder for many years, and would highly recommend them.

Cheers,

Itsallaguess

I've had all the accounts, Share Builder, Share Dealing and ISA. If you want to hold international shares you need the Share Dealing account. https://www.halifax.co.uk/sharedealing/ ... g-account/
No admin fees and cheap pooled £2 purchases with the Builder and Dealing accounts, the ISA'll cost you £12.50 pa.

mc2fool wrote:

Itsallaguess wrote:I've got a Halifax account and can confirm that they will purchase fractional shares when using the cheap dealing offer. I use it to purchase irregular Vanguard Lifestyle 80/20 purchases...

Vanguard Lifestyle 80/20 is an OEIC and one (except by luck) always gets fractional units, but I believe when using the cheap dealing offer Halifax also purchase fractional shares for regular companies, ITs and, relevant to this discussion, ETFs, yes?

Actually LifeStrategy ? Or do they do a LifeStyle as well? I know they do some target retirement date funds

AleisterCrowley wrote:

mc2fool wrote:

Itsallaguess wrote:I've got a Halifax account and can confirm that they will purchase fractional shares when using the cheap dealing offer. I use it to purchase irregular Vanguard Lifestyle 80/20 purchases...

Vanguard Lifestyle 80/20 is an OEIC and one (except by luck) always gets fractional units, but I believe when using the cheap dealing offer Halifax also purchase fractional shares for regular companies, ITs and, relevant to this discussion, ETFs, yes?

Actually LifeStrategy ? Or do they do a LifeStyle as well? I know they do some target retirement date funds

Well spotted. IAAG and I knew what we meant at least (There aren't any funds named "LifeStyle" on their website).

The target retirement funds are actually called "Target Retirement [date] Fund - Accumulation" - nice and clear !!