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  • FIRST POST
    • switch76
    • By switch76 15th Oct 16, 12:10 PM
    • 107Posts
    • 24Thanks
    switch76
    FTSE 100 and other trackers
    • #1
    • 15th Oct 16, 12:10 PM
    FTSE 100 and other trackers 15th Oct 16 at 12:10 PM
    I'm interested in buying a FTSE 100 tracker and wondered if you could recommend one. I'm looking to get a better return than locking away money in a bank.

    What are the differences between a fund and an ETF? I would like the dividends reinvested so do I need an accumulation fund? What other things should I look out for?

    Is putting the money in over several months the best idea?

    Is the FTSE 100 expensive or cheap at the moment compared to it's usual P/E?

    Do you have ideas for other trackers that might be useful? I was thinking about tracking things like the S&P100 but thought that it wouldn't be a good idea because of the exchange rate and the chance that the pound will eventually strengthen against the dollar.
Page 4
    • Jesisca
    • By Jesisca 6th Nov 16, 11:45 AM
    • 3 Posts
    • 0 Thanks
    Jesisca
    Stocks and Shares ISA
    Thanks to everyone for all of this fantastic information.

    My thought process was exactly along the lines of you Switch76 and my arguments would have been exactly the same.

    However, I have been swayed!

    Having said that, Im still a bit stuck.

    I have an account with Hargreaves Lansdown and want to set up a lower risk S&S ISA in an accumulation Unit Trust with a regular investment.

    There are so many and bar the charges and history, I dont know what Im looking at and so dont know how to compare them.

    Any ideas as to the companies and funds I should be looking at?

    Also, even though they might be worldwide trackers, Im assuming I would spread my investment between several different companies?

    I would be really grateful for your guidance.
    • badger09
    • By badger09 6th Nov 16, 4:08 PM
    • 4,266 Posts
    • 3,480 Thanks
    badger09
    Thanks to everyone for all of this fantastic information.

    My thought process was exactly along the lines of you Switch76 and my arguments would have been exactly the same.

    However, I have been swayed!

    Having said that, Im still a bit stuck.

    I have an account with Hargreaves Lansdown and want to set up a lower risk S&S ISA in an accumulation Unit Trust with a regular investment.

    There are so many and bar the charges and history, I dont know what Im looking at and so dont know how to compare them.

    Any ideas as to the companies and funds I should be looking at?

    Also, even though they might be worldwide trackers, Im assuming I would spread my investment between several different companies?

    I would be really grateful for your guidance.
    Originally posted by Jesisca
    I haven't reread the whole thread, so don't know if its been mentioned, but this isn't a bad place for a novice investor to start reading

    http://monevator.com/category/investing/passive-investing-investing/

    There is no such thing as a 'low risk S&S ISA' because an S&S ISA is just a tax wrapper. It's what is inside the wrapper that determines the level of risk.

    You might want to look at the Vanguard Lifestrategy, Blackrock Consensus or Legal & General Multi Index funds. These invest in a
    'basket of assets' across the world, which means you don't have to spend time thinking about whether to buy shares in Apple or Samsung, Asda or Tesco, Barclays or HSBC etc etc.

    Hargreaves Lansdown are one of the most expensive platforms on which to open your S&S ISA, BUT until you have several thousand invested, the difference isn't huge, and their website is user friendly.

    Have a read then come back if you have any specific questions
    • Jesisca
    • By Jesisca 6th Nov 16, 5:46 PM
    • 3 Posts
    • 0 Thanks
    Jesisca
    Thanks Badger09 thats great I really appreciate your help.

    Ive had a read of Monevator and whilst I was familiar with the facts that it states, its as if my head understands but my heart doesnt (probably otherwise known as fear!).

    Can I ask a few questions please:
    Im up to speed on the fact that the ISA is a wrapper but mentioned it as I read somewhere that not all S&S investments are tax free within the ISA wrapper. Is that correct and if so any idea what I should be avoiding? The low risk part of my statement; I'm guessing that the fact that the investments are widely spread are lower risk by nature (with a specific investment in one company being the higher risk)?

    My understanding was that if Im doing regular investments which I will be then a tracker fund is more economical than an ETF.
    HL seem to have no initial fees for these and various on-going fees, some of which are minimal, such as the Vanguard Lifestrategy at 0.24% - or is that a lot? Maybe its the cost of withdrawing in the future thats high? Who else might I be better to have a look at? I did check out all the platforms that I could find so wonder whether the fact that I found HL to be a good one, means Im checking the wrong thing!

    If Im understanding Monevator correctly, I need to be doing ETFs as well as Unit trusts.? If I have unit trusts (they feel safer to me and would appear to be more economical) with several different companies, is this not spreading the risk in the same way?

    The various investment details show as Class A, Class 1, Class D etc what do these refer to?

    When I read the detail of the investments, should I be going for 100% equities? What are the alternatives bonds and currencies? More risky?

    And to be clear Im understanding correctly, I should be doing x per month to (for example) Vanguard, Blackrock, and Legal & General as they will be a different mix of similar types of investment.

    One last one what about Gold? How do I go about that and can I hold it in an ISA?

    You are very kind and I do appreciate your time.

    Thanks!
    • dunstonh
    • By dunstonh 6th Nov 16, 6:08 PM
    • 85,071 Posts
    • 50,097 Thanks
    dunstonh
    Im up to speed on the fact that the ISA is a wrapper but mentioned it as I read somewhere that not all S&S investments are tax free within the ISA wrapper. Is that correct and if so any idea what I should be avoiding?
    ISAs do form part of your estate. So, they are subject to inheritance tax (above IHT allowance) on death. However, there is no liability to income tax or capital gains tax.

    In the past, fixed interest investments had a slight bias as they could claim the tax back within the ISA. Whereas in the days of the tax credit, equities did not. That is gone now.

    My understanding was that if Im doing regular investments which I will be then a tracker fund is more economical than an ETF.
    It isnt tracker vs ETF. It is UT/OEIC vs ETF. ETFs have dealing costs, no FSCS protection and are more complicated and you need to be aware of a few more things than UT/OEICs.

    HL seem to have no initial fees for these and various on-going fees, some of which are minimal, such as the Vanguard Lifestrategy at 0.24% - or is that a lot? Maybe its the cost of withdrawing in the future thats high? Who else might I be better to have a look at? I did check out all the platforms that I could find so wonder whether the fact that I found HL to be a good one, means Im checking the wrong thing!
    Since the retail distribution review (RDR), there are hardly any that have initial charges nowadays, irrespective of where you buy them from. However, you still need to look out for bid/offer spreads sometimes.

    If Im understanding Monevator correctly, I need to be doing ETFs as well as Unit trusts.? If I have unit trusts (they feel safer to me and would appear to be more economical) with several different companies, is this not spreading the risk in the same way?
    UT/OEIC is mainstream. ETF is niche/more specialist.

    The various investment details show as Class A, Class 1, Class D etc what do these refer to?
    Share class is pricing. Different share classes will have different charges. The letter is unique to the fund house. eg. company 1 UT A class could be unbundled but company 2 UT A class could be bundled.

    When I read the detail of the investments, should I be going for 100% equities? What are the alternatives bonds and currencies? More risky?
    You should invest within your risk tolerance, timescale, behaviour, knowledge and capacity for loss. If you think you can handle losing half your money in 12 months and it wont impact on your financial situation then 100% equities is fine.

    Alternatives are cash, fixed interest securities (which can be low risk through to high risk depending on the type you use) and property.

    And to be clear Im understanding correctly, I should be doing x per month to (for example) Vanguard, Blackrock, and Legal & General as they will be a different mix of similar types of investment.
    It is not the fund house that matters. It is the area you invest in that matters as the primary choice. In some cases, Vanguard may have the best option. On others L&G or Blackrock or one of the many others.

    One last one what about Gold? How do I go about that and can I hold it in an ISA?
    Why would you want to? However, if you do, then there are funds that hold physical gold (not to be mixed up with gold miners which are much higher risk).
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Jesisca
    • By Jesisca 6th Nov 16, 9:44 PM
    • 3 Posts
    • 0 Thanks
    Jesisca
    Unit Trust
    Oh dear I have so much to learn!

    Thank you so much for your help dunstonh.

    So (correct me if Im wrong on any of these):
    Tax tick. Not relevant until I pop off.

    Unit trust fund tick. Best for the beginner.

    Charges still not clear on this. Bid/offer spreads. Would this be something different to the on-going charge thats stated on the Hargreaves Lansdown site? I was assuming that if you chose to invest in whichever trust, it would be 0.24% (or whatever for the particular one that you chose) as an annual charge calculated daily on the balance. End of story. Are there more charges? What should I be looking for?

    Class of investment tick. The detail of the investment will be stated in the overview so I dont need to concern myself with the class.

    Risk tolerance being risk averse (but concerned about my savings going backwards with such low interest rates, hence the move to S&S), if Im understanding correctly, I will avoid those that say the main investment is equities. I want one that has more of a diverse range of investments.

    Fund house It still seems from what you say that I do want to spread between different ones. Not totally clear on this. Maybe one with more of a focus on equities and another with more of a mix?

    Gold I take it that I dont want to do this? I thought that was a safe as houses, keep-up-with-inflation-better-than-cash type investment. I appreciate it wont.appreciate like other investments but I was hoping to put a lump sum in there to safeguard it. Am I missing the point?

    Thank you so much for your time and for sharing your knowledge and experience.

    I really do appreciate your help.
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