Is it possible to direct debit straight into indexes cutting out management fees?

conormacleod1987 · 20 July 2017 at 12:08PM

Hi,

I am wanting to set up my own portfolio, with my own reasoning behind each investment. I will do this mainly in indexes of various kinds to spread risk.

Unfortunately I do not have a total amount saved currently that I would be happy to invest but would rather do it incrementally at £100 - £250 a month.

Is there a platform where I am able to do this without the % fees to fund managers etc which I know dig deeply into your savings once you get going. I dont want to pay someone to do something that is simply not predictable.

Cheers

alewin · 20 July 2017 at 1:30PM

Yes, you could buy shares in all the companies that make up the particular index you want to invest in. Then manage it yourself.

AlanP_2 · 20 July 2017 at 2:49PM

conormacleod1987 wrote: »

Hi,

I am wanting to set up my own portfolio, with my own reasoning behind each investment. I will do this mainly in indexes of various kinds to spread risk.

Unfortunately I do not have a total amount saved currently that I would be happy to invest but would rather do it incrementally at £100 - £250 a month.

Is there a platform where I am able to do this without the % fees to fund managers etc which I know dig deeply into your savings once you get going. I dont want to pay someone to do something that is simply not predictable.

Cheers

Are you saying you don't want to pay for active fund management or that you don't want to pay a platform to buy/hold/sell your passive tracker investments?

Platforms like Cavendish / Fidelity / HL etc. charge ~0.2% to ~0.45% pa to hold your funds and they accept monthly DDs.

Then there are the fund fees per tracker fund which you will end up paying however you handle the investments, but these are implicit (built into quoted price) rather than explicit (pay real money) for the platform fees.

bostonerimus · 20 July 2017 at 3:10PM

Just open an account with Vanguard.co.uk and drip feed from your bank account into a selection of their index tracker funds each month.

AnotherJoe · 20 July 2017 at 3:29PM

Buy ETFs. No or low holding fees if you get the right platform.

A_T · 20 July 2017 at 5:40PM

AnotherJoe wrote: »

Buy ETFs. No or low holding fees if you get the right platform.

But with the amount the OP is looking to invest each month the dealing charge could end up more than a charge for managing funds.

AnotherJoe · 20 July 2017 at 9:37PM

A_T wrote: »

But with the amount the OP is looking to invest each month the dealing charge could end up more than a charge for managing funds.

Oops you are right. Stupid idea. Forget I said it. .

Eco_Miser · 20 July 2017 at 10:03PM

conormacleod1987 wrote: »

Is there a platform where I am able to do this without the % fees to fund managers etc which I know dig deeply into your savings once you get going.

With index funds, the management fees are normally low, since the only management is buying/selling shares in proportion to the index as subscribers buy/sell units, and selling the shares that drop out of the index, and buying the shares that enter the index when the index constituents change. All totally predictable, and automated.

As alewin said, you could do this yourself, but it would probably cost you a lot more in transaction fees.

Then there's the platform fee, see http://monevator.com/compare-uk-cheapest-online-brokers/ to find the cheapest for your circumstances. You'll probably want a percentage annual fee, no transaction fee platform.

cloud_dog · 20 July 2017 at 10:13PM

conormacleod1987 wrote: »

Hi,

I am wanting to set up my own portfolio, with my own reasoning behind each investment. I will do this mainly in indexes of various kinds to spread risk.

Unfortunately I do not have a total amount saved currently that I would be happy to invest but would rather do it incrementally at £100 - £250 a month.

Is there a platform where I am able to do this without the % fees to fund managers etc which I know dig deeply into your savings once you get going. I dont want to pay someone to do something that is simply not predictable.

Cheers

Hi.... There are numerous ways of doing what you are looking at. I am assuming you are just starting off in your investment life, so....

As you are starting out you don't neccessarily need an ISA account
As you are starting out, you don't neccessarily need a platform to invest via
Deciding on if you will hold OIECs (UTs) is a factor for platform considerations
BUT, see 2 above
There are ETFs, ITs, shares to invest in but, these would incur transaction charges
You could buy ETFs/ITs/shares via a platform for £1.50 per trade via a regular investment option

Have a play with Snowmans most excellent spreadsheet for calculating overall costs.

Either way, you could (depending on what you want to invest in; quite important), go directly to a fund manager and buy using a monthly investment plan. Regarding costs, it really depends on what you want to invest in.

You don't necessarily need to invest via an ISA account (these tend to have platform charges; but not always).

As mentioned you could invest directly, using a monthly investment plan and then when your investment is of an appropriate size you could move (sell / buy) back within an ISA, in an appropriate platform and continue form there.

This is exactly how I started. I used a couple/three monthly investment plans to commence and start growing my investment balance and then over time I migrated them in to my ISA account.

My own dealings accounts (inc. ISA) are with X-O. There's no platform fee to pay but I do have to pay for buys/sells (£5.95). Plus, with X-O they do not offer OIECs/UTs and there is no monthly investment option. The OH has accounts with TD Direct (who have been sold to II so, waiting for the dust to settle) but, we didn't pay a platform fee there and they do offer a regular investment option for £1.50 per monthly trade.

Platforms like iWeb tend to get thumbs up around here.

I can't see why anyone would start investing with a platform and incur fee's when there is plenty of headroom to start and build up a balance before investigating options.

AlanP_2 · 21 July 2017 at 12:54PM

cloud_dog wrote: »

Hi.... There are numerous ways of doing what you are looking at. I am assuming you are just starting off in your investment life, so....
As you are starting out you don't neccessarily need an ISA account

As you are starting out, you don't neccessarily need a platform to invest via

Deciding on if you will hold OIECs (UTs) is a factor for platform considerations

BUT, see 2 above

There are ETFs, ITs, shares to invest in but, these would incur transaction charges

You could buy ETFs/ITs/shares via a platform for £1.50 per trade via a regular investment option

Have a play with Snowmans most excellent spreadsheet for calculating overall costs.

Either way, you could (depending on what you want to invest in; quite important), go directly to a fund manager and buy using a monthly investment plan. Regarding costs, it really depends on what you want to invest in.

You don't necessarily need to invest via an ISA account (these tend to have platform charges; but not always).

As mentioned you could invest directly, using a monthly investment plan and then when your investment is of an appropriate size you could move (sell / buy) back within an ISA, in an appropriate platform and continue form there.

This is exactly how I started. I used a couple/three monthly investment plans to commence and start growing my investment balance and then over time I migrated them in to my ISA account.

My own dealings accounts (inc. ISA) are with X-O. There's no platform fee to pay but I do have to pay for buys/sells (£5.95). Plus, with X-O they do not offer OIECs/UTs and there is no monthly investment option. The OH has accounts with TD Direct (who have been sold to II so, waiting for the dust to settle) but, we didn't pay a platform fee there and they do offer a regular investment option for £1.50 per monthly trade.

Platforms like iWeb tend to get thumbs up around here.

I can't see why anyone would start investing with a platform and incur fee's when there is plenty of headroom to start and build up a balance before investigating options.

Sorry, but I don't see how your suggested approach reduces costs for a new investor looking to make a small monthly investment into index trackers of some kind.

Assuming one global tracker receiving £250 p/month over the first year so £3,000.

With Cavendish @ 0.25% p/a that would cost less than £7.50 in the first year as the money would be drip fed and increase to £3k slowly.

Based on your X-O and TD Direct costings above the charges would be £71.40 and £18.00 respectively in that first year.

Am I missing something? A genuine question because I have seen many references on here suggesting using a fee charging platform (normally using ETFs) and I can never work out how it is cheaper when used for a "small", monthly contribution.

cloud_dog · 21 July 2017 at 1:44PM

AlanP wrote: »

Sorry, but I don't see how your suggested approach reduces costs for a new investor looking to make a small monthly investment into index trackers of some kind.

........

Am I missing something?

Yes

Firstly, as the OP is 'just starting out', do they need to use a platform at all?

Could, for example they go directly to L&G and invest monthly in their Global Index Trust (or something similar or whatever they have a penchant for)?

If you are just starting out and with the sums mentioned, do you:

Have to use an ISA account, I would offer possibly not for the first few years
Do you really need to use a platform, again, possibly not

I don't believe at this stage the OP needs to have a platform to manage their investments. They could have three separate investments directly with different 'managers'. They could have an overview of their 'portfolio' by simply creating a 'dummy' portfolio and tracking their investments (a number of sites allow this).

At some point in the future the OP (everyone really) should:

Keep an eye on any potential CGT considerations
Make use of your ISA allowance (especially for investments)

So, as of today do they need a platform, I would offer not; save the costs.

Would/should the OP switch (eventually) to a commission / no / fixed fee platform, that can be considered then and who knows what investment philosophy the OP may have by then. I'm not offering the X-O or TD Direct as the way to go, simply providing evidence that there are the options out there but as per my numerous caveats (I thought) in my post it really depends on what you are investing in, your investment strategy and trading profile.

So, that's my reasoning.

Is it possible to direct debit straight into indexes cutting out management fees?

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