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  • FIRST POST
    • Richard8
    • By Richard8 19th Mar 17, 2:49 PM
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    Richard8
    Investment Advice
    • #1
    • 19th Mar 17, 2:49 PM
    Investment Advice 19th Mar 17 at 2:49 PM
    Being totally green when it comes to investment I have turned to this forum in the hope someone may be able to point me in the right direction.

    I've made a decision to dip my toe into the world of investment, after researching as much as possible on the internet I've come to the conclusion that the best course of action is to start off by taking a passive approach and purchasing an Index tracker fund, one that charges a low percentage broker fee, make an initial deposit and then drip feed money in monthly for possibly 5+ years.

    As always, there's a few things I'm unsure of though. While I'm sure that in the near future I won't be anywhere near having to pay any capital gains tax, is it worth wrapping my index tracker fund into an Isa to offer tax protection in the future ? Would the Isa and tracker fund have to be with the same company ? What would be the implications of doing this in terms of fees ? Would there be both fees for the Isa and the tracker ? As I previously stated, I'm pretty green but I guess you've got to start somewhere.

    Any feedback much appreciated, thanks.
Page 1
    • ColdIron
    • By ColdIron 19th Mar 17, 3:11 PM
    • 3,042 Posts
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    ColdIron
    • #2
    • 19th Mar 17, 3:11 PM
    • #2
    • 19th Mar 17, 3:11 PM
    possibly 5+ years.

    1) is it worth wrapping my index tracker fund into an Isa to offer tax protection in the future ?

    2) Would the Isa and tracker fund have to be with the same company ?

    3) What would be the implications of doing this in terms of fees ?

    4) Would there be both fees for the Isa and the tracker ?
    Originally posted by Richard8
    You probably want to firm up that 'possibly 5+ years' but briefly:

    1) Yes, it's a complete no brainer

    2) No, typically you would open an ISA account with a platform and buy funds from one or more of the many vendors

    3) Depends on the platform and fund, see 4)

    4) Probably. There will be fund manager fees on the fund(s) of your choice and most platforms will charge you something, although there are several charging structures. Some will be better or worse depending on what you invest in, how many transactions you make and the amount invested
    • badger09
    • By badger09 19th Mar 17, 4:21 PM
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    badger09
    • #3
    • 19th Mar 17, 4:21 PM
    • #3
    • 19th Mar 17, 4:21 PM
    OP

    You might find this website useful. It is biased towards passive investing and should answer most of your questions.

    http://monevator.com/
    • Richard8
    • By Richard8 19th Mar 17, 4:45 PM
    • 9 Posts
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    Richard8
    • #4
    • 19th Mar 17, 4:45 PM
    • #4
    • 19th Mar 17, 4:45 PM
    Okay thanks, I hear what you're saying with regards to firming up the time scale as I'm sure you have to play the long game to make it (hopefully) worth while.

    Is it advisable to use the same company for the Isa and the tracker ? Fidelity for example have a FTSE All Share Tracker where the ongoing fund charge is 0.06% and service fee of 0.35% (total cost 0.41% although if you hold less than £7500 they just charge you a flat rate of £45 a year) but their S&S Isa has ongoing fees of 0.9% and service fee of 0.35%, while the tracker sounds alright the Isa doesn't look so hot considering Moneyfarm 'currently' charge no annual fees if you have under £10k and fund fees are 0.25%.

    Considering that points of a % do make a difference over time, would people advise keeping things simple by not using multiple companies or am I misunderstanding the concepts of what's involved here ?
    • JohnRo
    • By JohnRo 19th Mar 17, 5:06 PM
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    JohnRo
    • #5
    • 19th Mar 17, 5:06 PM
    • #5
    • 19th Mar 17, 5:06 PM
    Start by focusing on and deciding what you deem a suitably risky investment vehicle given your circumstances and capacity for potential losses, once that's decided then start looking at providers and the various cost options.

    If looking for a relatively simple solution, at least initially, you could do a lot worse than looking into the various global multi asset trackers from the usual suspects rather than a single, country specific, index - albeit your home country.
    'We can't solve problems by using the same kind of thinking we used when we created them.' ― Albert Einstein
    'Facts do not cease to exist because they are ignored.' ― Aldous Huxley
    • Richard8
    • By Richard8 19th Mar 17, 5:18 PM
    • 9 Posts
    • 2 Thanks
    Richard8
    • #6
    • 19th Mar 17, 5:18 PM
    • #6
    • 19th Mar 17, 5:18 PM
    Monevator "Motivation for Armchair Investors" sounds spot on thanks, probably wiser to spend the rest of the day reading through the wealth of knowledge on the website you have recommended, as opposed to signing up to Plus500 with real money, sit there a bit tipsy randomly clicking on Buy, Short, Sell only to wake up the next morning to owe a pharmaceutical company $100,000.
    • dunstonh
    • By dunstonh 19th Mar 17, 5:20 PM
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    dunstonh
    • #7
    • 19th Mar 17, 5:20 PM
    • #7
    • 19th Mar 17, 5:20 PM
    make an initial deposit and then drip feed money in monthly for possibly 5+ years.
    And then leave it for at least another 5 years after you have made your final contribution....

    is it worth wrapping my index tracker fund into an Isa to offer tax protection in the future ?
    Until you get to around 10k, it doesnt really matter what you invest in. However, rather than use a single sector tracker, you should be looking to use a multi-asset fund.

    Fidelity for example have a FTSE All Share Tracker where the ongoing fund charge is 0.06% and service fee of 0.35%
    It isnt good investing to use just that but until you get to around £10k it doesnt really matter.
    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.
    • jimjames
    • By jimjames 19th Mar 17, 9:32 PM
    • 11,693 Posts
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    jimjames
    • #8
    • 19th Mar 17, 9:32 PM
    • #8
    • 19th Mar 17, 9:32 PM
    Is it advisable to use the same company for the Isa and the tracker ? Fidelity for example have a FTSE All Share Tracker where the ongoing fund charge is 0.06% and service fee of 0.35% (total cost 0.41% although if you hold less than £7500 they just charge you a flat rate of £45 a year) but their S&S Isa has ongoing fees of 0.9% and service fee of 0.35%, while the tracker sounds alright the Isa doesn't look so hot considering Moneyfarm 'currently' charge no annual fees if you have under £10k and fund fees are 0.25%. e ?
    Originally posted by Richard8
    I think you're confusing things here. An ISA is just wrapper that helps you avoid paying tax on the investments inside. You can have any investments inside that the platform allows you to buy.

    Fidelity offers an ISA wrapper and that has a platform charge of 0.35% although you can get it cheaper (0.25%) if you go via a different company called Cavendish. Within that ISA wrapper you could hold a UK tracker fund which will have fees of 0.06%. There is no such product as a S&S ISA with fees of 0.9% & 0.35%, I think you might be confusing a fund for an ISA.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Richard8
    • By Richard8 19th Mar 17, 10:22 PM
    • 9 Posts
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    Richard8
    • #9
    • 19th Mar 17, 10:22 PM
    • #9
    • 19th Mar 17, 10:22 PM
    Yeah, to a newbie the terminology can become somewhat confusing.

    When people refer to a 'platform' are they referring to the company you are dealing with, in this case (hypothetically) Fidelity or is the Isa itself being referred to as a platform ? Or does 'platform' mean the two combined ?

    I think it's slowly starting to sink in, I was finding it difficult to understand how all the fees work and struggling with differentiating platform fees, buying/selling fees and fund management fees. Am I right in thinking that platform fees and buying/selling fees are taken by the platform provider and the fund management fees will go to the fund company (lets say hypothetically Vanguard etc whoever's fund it may be)

    Maybe I should have studied Money Saving Expert's - supermarket (platform) and fund (loaf of bread) analogy more closely.

    Thanks for all the replies, I know it can be quite tedious for experienced forum members when faced with a steady stream of newbies posting dumb questions.
    • ColdIron
    • By ColdIron 19th Mar 17, 10:49 PM
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    ColdIron
    A platform is a company, typically via a website, that you open accounts with to buy and sell investments. The accounts could be an ISA, a SIPP for pensions or just a dealing account with no tax privileges. They charge for this as they are providing services such as trading on your behalf, paying out income and tax certificates etc. Some examples would be Hargreaves Lansdown, iWeb, Charles Stanley Direct etc

    I'd forget all about platforms and fees for the moment though as your main concern is what investments are most likely to satisfy your requirements
    • Richard8
    • By Richard8 19th Mar 17, 11:04 PM
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    Richard8
    My head is spinning with it all to be honest, I might be better off sticking to a cash Isa paying a measly 1%. Just to add another slant to what has been previously said, I stumbled across this earlier:

    "The catch with ISA fund investment is tax relief for higher rate taxpayers. Many people go for tax relief over growth. This is part of the mythology of equity fund investment. Tax relief makes it all worth while, but only alongside exemplary growth. The crew running the fund will always get paid from the commission and charges made from clients ! A mediocre fund team can make the tax relief poor compensation with lack of long term performance"

    And that was coming from someone with 50 years of investing.
    Last edited by Richard8; 19-03-2017 at 11:06 PM.
    • ColdIron
    • By ColdIron 19th Mar 17, 11:21 PM
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    ColdIron
    Sounds like complete rubbish to me, you can safely dismiss it. Was this from MoneyWeek?
    • JohnRo
    • By JohnRo 19th Mar 17, 11:33 PM
    • 2,251 Posts
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    JohnRo
    My head is spinning with it all to be honest
    Just give yourself a little time, stop trying to run before you can walk.

    There are a few basics you'll need to get acquainted with but beyond that it's only as complicated as you want to make it and there are no guarantees that complexity will automatically give a better return than a relatively simplistic solution will anyway.

    You've already said you're planning to dip your toe in and that you don't envisage paying capital gains tax any time soon, which implies you're not looking to pile a six figure sum into investments.

    I might be better off sticking to a cash Isa paying a measly 1%
    One thing for certain is that a cash ISA won't make you better off. At the very least consider unwrapped high interest current, saver and regular savers before going for a 1% cash ISA. At least until you reach the PSA (tax free personal saving allowance)

    Just give yourself a little time to absorb some of the basic information and get acclimatised to the language. What's that saying about Rome?

    The quote you've posted sounds like a pension or possibly VCT versus ISA dilemma for higher rate tax payers. It's just blather anyway.

    Is higher rate taxation and pension contribution relevant to you?
    'We can't solve problems by using the same kind of thinking we used when we created them.' ― Albert Einstein
    'Facts do not cease to exist because they are ignored.' ― Aldous Huxley
    • Richard8
    • By Richard8 19th Mar 17, 11:51 PM
    • 9 Posts
    • 2 Thanks
    Richard8
    Sound advice, thanks.

    Higher rate taxation and pension contribution isn't relevant to me as far as I know. The reference to the cash Isa was made because I already hold one and have maxed it out this year.

    The plan for the next tax year was to try and commence with some form of long term investment plan, not foolishly rushing in and ploughing everything I've worked hard for in to a risky venture but make an initial deposit of say £1k followed by monthly drip feeding of £100.

    You've hit the nail on the head perfectly with the Rome being built in a day analogy and I've bombarded myself with information over a short period of time and there is so much contradictory information out there and everyone has their opinion.
    • Anthorn
    • By Anthorn 19th Mar 17, 11:59 PM
    • 2,973 Posts
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    Anthorn
    My head is spinning with it all to be honest, I might be better off sticking to a cash Isa paying a measly 1%. Just to add another slant to what has been previously said, I stumbled across this earlier:
    Originally posted by Richard8
    Oh Emm Gee you've been reading Moneyweek. C'mon admit it. We all know you know!

    Seriously though, you don't need to understand it. That's why we pay fees and commissions to financial advisors and fund managers. I know there are those who have D.I.Y. portfolios and good luck to them but the way I see it they think they know more than the professionals. Cheaper maybe but better I doubt very much.

    But don't expect to make your first million: I have a cash ISA, an S&S ISA both fully invested and other funds and my projected gain over the next 12 - 24 months is 6.1%. Better than I could get elsewhere but not spectacular.
    Last edited by Anthorn; 20-03-2017 at 12:03 AM.
    I don't think and I know I don't think so therefore I am. At least I think so. But hold on I don't think ... er ...
    • Richard8
    • By Richard8 20th Mar 17, 12:18 AM
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    Richard8
    Nargh!!! Not Money Week, I think I extracted that particular piece of wisdom from the comments section underneath an article in the Telegraph (I'll leave it upto you to decide whether I'm joking or not)

    Hey I'd be over the moon with 6% interest and I'd be able to stomach the thought of my investment going up and down over a long period, I'm not some numpty with grandiose ideas of becoming the next Warren Buffet.
    • Richard8
    • By Richard8 20th Mar 17, 12:28 AM
    • 9 Posts
    • 2 Thanks
    Richard8
    *Buffett (cheese and pineapple on cocktail sticks and all that)
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