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Low-cost tracker - how best to buy?
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- Lemon Quarter
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Low-cost tracker - how best to buy?
I'm looking to put some money into a cheap tracker, and wondering how best to buy.
Is it worth putting in within an ISA or not - amount is £20k, so I don't expect capital gains tax to be an issue, which as far as I understand is the only advantage of Share ISAs nowadays.
Is it worth putting in within an ISA or not - amount is £20k, so I don't expect capital gains tax to be an issue, which as far as I understand is the only advantage of Share ISAs nowadays.
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- Lemon Half
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Re: Low-cost tracker - how best to buy?
zico wrote:
I'm looking to put some money into a cheap tracker, and wondering how best to buy.
Is it worth putting in within an ISA or not - amount is £20k, so I don't expect capital gains tax to be an issue, which as far as I understand is the only advantage of Share ISAs nowadays.
On the specific point about an ISA, if you've got the free allowance for this tax year still, and the option to use it, then I'd still suggest taking the opportunity to get that level of cash inside a tax-wrapper if you can...
The availability of the allowance for this tax year will be lost in April, and wrapping this amount of cash within a tax-free wrapper should still be something you should very seriously consider.
Whilst you might think that CGT is unlikely to be an issue now, that situation might change in the future.
The use of this cash might change too, and if you want to take advantage of dividends in the future, then there is a relatively low ceiling of £2000 per year at the moment, over which you'll be expected to pay tax.
I'd always urge people to get what they can inside tax-wrappers as soon as they can. It's unlikely to materially alter the actual use of the investment cash, as it's an investment account like any other, but once the tax-year rolls over, any unused, or under-used allowance simply disappears....
If you're thinking about building an investment pot over many years, then one thing I will say is that you'll be surprised how quickly a substantial amount can be built up, and if that comes to pass then I think missing out on potential allowance-taking opportunities might well be a source of potential regret at some future point in time.
Of course you will want to check any applicable account charges etc., but I expect that would be the same even with a non-ISA account, so no difference there either, really.
I can't really comment on the tracker side of things - is it the FTSE that you're wanting to track?
Cheers,
Itsallaguess
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- Lemon Quarter
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Re: Low-cost tracker - how best to buy?
If you open an account with iWeb there is no annual fee for holding an ISA, so you might as well as it is difficult to predict what will happen to tax allowances in future. Another advantage of an ISA is the lack of admin in that you don't have to declare anything to HMRC.
There is currently a £25 account opening fee with iWeb and it costs £5 to buy and sell. If you bought an accumulating fund though, you would not incur dividend reinvestment cost, so for a one off £30 fee you could invest and leave indefinitely with no ongoing costs other than the fund management charges.
HSBC have a FTSE World index tracker that might be of interest. It covers all markets, including emerging markets, with an ongoing charge of 0.16%.
There is currently a £25 account opening fee with iWeb and it costs £5 to buy and sell. If you bought an accumulating fund though, you would not incur dividend reinvestment cost, so for a one off £30 fee you could invest and leave indefinitely with no ongoing costs other than the fund management charges.
HSBC have a FTSE World index tracker that might be of interest. It covers all markets, including emerging markets, with an ongoing charge of 0.16%.
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- Lemon Quarter
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Re: Low-cost tracker - how best to buy?
@zico trackers get dividends. Either they pay them out (INC units) or they merge them back into the unit price (ACC). Either way you have to declare the dividends on a tax return (and pay tax if over £2k)
INC is easier outside an ISA, as it can be hard to work it out for ACC.
ACC is easier for an ISA, no fiddly sums to reinvest.
As you can hold ISA ETFs for free in Iweb, there is no reason not to have an ISA, and not worry about dividends at all. As others have said, the allowance is use it or lose it, and there is a political risk of it getting smaller again.
INC is easier outside an ISA, as it can be hard to work it out for ACC.
ACC is easier for an ISA, no fiddly sums to reinvest.
As you can hold ISA ETFs for free in Iweb, there is no reason not to have an ISA, and not worry about dividends at all. As others have said, the allowance is use it or lose it, and there is a political risk of it getting smaller again.
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- Lemon Quarter
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Re: Low-cost tracker - how best to buy?
Thanks for the advice, I've used my AJ Bell YouInvest SIPP and have just bought
Vanguard FTSE 100 ETF, Vanguard FTSE All-World ETF GBP, with a 40/60 split between the two.
Vanguard FTSE 100 ETF, Vanguard FTSE All-World ETF GBP, with a 40/60 split between the two.
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- Lemon Slice
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- The full Lemon
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:Invest directly and skip the platform fees.
Zico chose ETFs so there would be no platform fee anyway. To my knowledge they only exist for open-ended funds, and not for ETFs, ITs or shares.
Investing directly might be OK if you only use one provider, such as Vanguard. But if you are building a portfolio across several fund families then investing directly in each of them will be a bigger headache to manage, especially if taxable.
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
Lootman wrote:OhNoNotimAgain wrote:Invest directly and skip the platform fees.
Zico chose ETFs so there would be no platform fee anyway. To my knowledge they only exist for open-ended funds, and not for ETFs, ITs or shares.
Investing directly might be OK if you only use one provider, such as Vanguard. But if you are building a portfolio across several fund families then investing directly in each of them will be a bigger headache to manage, especially if taxable.
You need a broker to buy an ETF, that means commission and probably an annual fee. You can buy an OEIC with no commission, no platform fee and, in some cases, no stamp duty.
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- The full Lemon
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:Lootman wrote:OhNoNotimAgain wrote:Invest directly and skip the platform fees.
Zico chose ETFs so there would be no platform fee anyway. To my knowledge they only exist for open-ended funds, and not for ETFs, ITs or shares.
Investing directly might be OK if you only use one provider, such as Vanguard. But if you are building a portfolio across several fund families then investing directly in each of them will be a bigger headache to manage, especially if taxable.
You need a broker to buy an ETF, that means commission and probably an annual fee. You can buy an OEIC with no commission, no platform fee and, in some cases, no stamp duty.
Most platforms are also brokers, so the distinction is mostly moot. And I'm not aware of any "annual fee" for holding ETFs or, for that matter, ITs or shares either. My broker, for instance, only charges an annual fee for OEICs, which makes them a more expensive choice even before the higher annual expenses of OEICs generally.
There are commissions but they are trivial for decent sized positions.
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
Lootman wrote:OhNoNotimAgain wrote:Lootman wrote:Zico chose ETFs so there would be no platform fee anyway. To my knowledge they only exist for open-ended funds, and not for ETFs, ITs or shares.
Investing directly might be OK if you only use one provider, such as Vanguard. But if you are building a portfolio across several fund families then investing directly in each of them will be a bigger headache to manage, especially if taxable.
You need a broker to buy an ETF, that means commission and probably an annual fee. You can buy an OEIC with no commission, no platform fee and, in some cases, no stamp duty.
Most platforms are also brokers, so the distinction is mostly moot. And I'm not aware of any "annual fee" for holding ETFs or, for that matter, ITs or shares either. My broker, for instance, only charges an annual fee for OEICs, which makes them a more expensive choice even before the higher annual expenses of OEICs generally.
There are commissions but they are trivial for decent sized positions.
Some brokers charge an "inaction fee" if you don't trade often.
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- Lemon Half
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:Lootman wrote:OhNoNotimAgain wrote:You need a broker to buy an ETF, that means commission and probably an annual fee. You can buy an OEIC with no commission, no platform fee and, in some cases, no stamp duty.
Most platforms are also brokers, so the distinction is mostly moot. And I'm not aware of any "annual fee" for holding ETFs or, for that matter, ITs or shares either. My broker, for instance, only charges an annual fee for OEICs, which makes them a more expensive choice even before the higher annual expenses of OEICs generally.
There are commissions but they are trivial for decent sized positions.
Some brokers charge an "inaction fee" if you don't trade often.
There is no inaction fee at ii.
I am struggling to understand why the default is not simply to buy vanguard index trackers using ii as a broker. What could be cheaper!?
Dspp
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:You can buy an OEIC with no commission, no platform fee and, in some cases, no stamp duty.
Where can I find this? I'd like to look into it fully.
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- Lemon Quarter
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Re: Low-cost tracker - how best to buy?
dspp wrote:There is no inaction fee at ii.
I am struggling to understand why the default is not simply to buy vanguard index trackers using ii as a broker. What could be cheaper!?
iWeb.
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
nmdhqbc wrote:OhNoNotimAgain wrote:You can buy an OEIC with no commission, no platform fee and, in some cases, no stamp duty.
Where can I find this? I'd like to look into it fully.
Just look on the fund providers' web site for an application form for individuals.
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- Lemon Half
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:Just look on the fund providers' web site for an application form for individuals.
Aren't the cheaper classes of units in terms of management fee usually reserved for platforms? I don't think the absence of a buy/sell spread could be guaranteed either.
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:nmdhqbc wrote:OhNoNotimAgain wrote:You can buy an OEIC with no commission, no platform fee and, in some cases, no stamp duty.
Where can I find this? I'd like to look into it fully.
Just look on the fund providers' web site for an application form for individuals.
Vanguard:
Account fee 0.15%
Our annual account fee is 0.15% on amounts of up to £250,000 and free thereafter, so on larger investments your annual account fee is capped at £375.
HSBC:
What does it cost?
There’s no set-up fee involved, we just charge an annual account fee of 0.25% payable monthly. It’s calculated using the average daily value of the assets held within your account in the previous month.
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:Just look on the fund providers' web site for an application form for individuals.
You need to tell us which fund providers offer these services for free. I know a couple as already posted that do charge. Finding those that don't is a complete shot in the dark.
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
nmdhqbc wrote:OhNoNotimAgain wrote:Just look on the fund providers' web site for an application form for individuals.
You need to tell us which fund providers offer these services for free. I know a couple as already posted that do charge. Finding those that don't is a complete shot in the dark.
There aren't that many providers
https://www.hl.co.uk/funds/index-tracke ... cker-funds
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- Lemon Slice
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Re: Low-cost tracker - how best to buy?
OhNoNotimAgain wrote:nmdhqbc wrote:OhNoNotimAgain wrote:Just look on the fund providers' web site for an application form for individuals.
You need to tell us which fund providers offer these services for free. I know a couple as already posted that do charge. Finding those that don't is a complete shot in the dark.
There aren't that many providers
https://www.hl.co.uk/funds/index-tracke ... cker-funds
OK, I can only presume this provider does not exist. Wild goose chase aborted.
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- Lemon Quarter
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Re: Low-cost tracker - how best to buy?
hiriskpaul wrote:If you open an account with iWeb there is no annual fee for holding an ISA, so you might as well as it is difficult to predict what will happen to tax allowances in future. Another advantage of an ISA is the lack of admin in that you don't have to declare anything to HMRC.
There is currently a £25 account opening fee with iWeb and it costs £5 to buy and sell. If you bought an accumulating fund though, you would not incur dividend reinvestment cost, so for a one off £30 fee you could invest and leave indefinitely with no ongoing costs other than the fund management charges.
HSBC have a FTSE World index tracker that might be of interest. It covers all markets, including emerging markets, with an ongoing charge of 0.16%.
Necro-bumping ... I believe HSBC's World tracker is now down to 0.13% charges. Vanguards accumulation FT All Share is down to 0.06%. In a iWeb account after initial loading, no ongoing fees/costs https://www.markets.iweb-sharedealing.c ... 00B3X7QG63
When I look at historic FT All Share versus World total returns, I see reasonable similarities, but where World in effect lags by around withholding taxes applied to dividends (15% average withholding tax perhaps applied to 4% average dividends = 0.6% type lag). Many of the large stocks in the FT All Share are global businesses.
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