Index Trackers

oceanblue_3

EdInvestor wrote:

You only pay these charges once, when you buy the shares. So if you hold them long term you don't pay any charges if there is no AMC. I believe Sippdeal does charge a minimal amount ( around 15 quid a year) to provide one of those useless but mandatory annual pension fund statements which tell you what your fund might be worth in 30 years time. But that's it.

It's entirely up to you what charges you pay.The key difference long term is that the charges are flat rate, not percentage based It's quite astonishing how much 1% mounts up to over 25 or 30 years. :eek: Check it out:

https://www.fsa.gov.uk/tables

Nevertheless, there are charges, aren't there? You said there were no charges, didn't you?

In addition, you seem to be underestimating the impact of the bid and offer spread: the companies you refer to are stockbrokers, and they offer purchasers the "mid-price" (in addition to a fee on purchase and a fee on disposal). The "mid-price" is, in effect, an initial charge and, consequently, it is in proportion to the value of the purchase.

EdInvestor

But what about Ishares?

BTW getting back on topic,some people think Ishares ( Exchange Traded Funds) are a preferable way of investing in trackers.

Two main reasons: the charges are cheaper (no stamp duty and some brokers have special deals on their dealing fees) and you trade the Ishare in the same way as an ordinary share,ie instantly, so there's no hanging around waiting, as with a fund.

What do others think?

oceanblue_3

EdInvestor wrote:

So I would go for one of those. But I would buy it through a discount broker so I didn't have to pay high charges.

After I'd done that for a while I'd consider buying the underlying shares directly and just holding them long term, so I don't pay any charges at all. Info on how to do that is also at the Motley Fool site on the "High Yield Portfolio" board.

You were talking about discount brokers, not SIPP providers. You said there were no charges at all; there are charges.

The quoted "mid-price" is always relevant to all shares since it represents a comparable price across all brokers. Therefore, the spread is always present, its size being a function of supply and demand, even for popular companies.

oceanblue_3

EdInvestor wrote:

But what about Ishares?

BTW getting back on topic,some people think Ishares ( Exchange Traded Funds) are a preferable way of investing in trackers.

Two main reasons: the charges are cheaper (no stamp duty and some brokers have special deals on their dealing fees) and you trade the Ishare in the same way as an ordinary share,ie instantly, so there's no hanging around waiting, as with a fund.

What do others think?

Now I know why you used to be called Editor! What happened to the original post?

hobbesandco

EdInvestor, I'm intrigued by ETFs. I'm considering them myself probably inveseting in Far East somewhere. They're the rage over in the States and whenever a trend starts there it's only a matter of time before they come over here. I'm going to check them out because like you said they're meant to be cheaper than index trackers and there's no stamp duty.

oceanblue_3

EdInvestor wrote:

But what about Ishares?

BTW getting back on topic,some people think Ishares ( Exchange Traded Funds) are a preferable way of investing in trackers.

Two main reasons: the charges are cheaper (no stamp duty and some brokers have special deals on their dealing fees) and you trade the Ishare in the same way as an ordinary share,ie instantly, so there's no hanging around waiting, as with a fund.

What do others think?

Hey Ed! What happened to your original post? What was it that you excised between 08:36 and 08:47? Did it have anything to do with bid and offer spreads, by any chance? Did you discover that, in fact, buying shares does cost more than they are worth?

oceanblue_3

oceanblue wrote:

Hey Ed! What happened to your original post? What was it that you excised between 08:36 and 08:47? Did it have anything to do with bid and offer spreads, by any chance? Did you discover that, in fact, buying shares does cost more than they are worth?

Ed, just in case you decide to buy shares through one of the discount brokers you have mentioned, here is an excerpt from the FAQ's page at Squaregain. As you can see, there is another charge besides the dealing charge........

"What is the 'Yellow Strip' price? This term refers to the 'best' bid / offer price available through the London Stock Exchange (LSE) trading system for a particular stock. The yellow strip is typically displayed on traders' screens and is used as a benchmark for best execution."

Please don't misconstrue me: I am all in favour of discount brokers. The real reason for this post is to help you understand a little more about how they operate.

Hope this helps.

EdInvestor

Re bid/ask prices, here's an example, for the BOC group. The share price currently is
11.61 (bid), 11.64 (ask), so a spread of 3p. Not significant in a long term buy and hold strategy.Squaregain will indeed get you a better price, and it's certainly worth finding a broker who will do this if you are trading large amounts and especially if you are doing so frequently.

Those who only have small amounts to invest might be better to sign up with Halifax Sharebuilder, where they will pay extremely low dealing charges.For small sums it's the dealing charges which are important, not the spread.

BTW do not think you escape paying this charge if you invest in funds - ie that it is included in the AMC (annual management charge).It is not.There are additional charges on most funds which cover dealing costs, research commissions etc, which amount to nearly 1% in many cases. The FSA does not require the fund managers to reveal these charges yet, though it's coming soon via the European regulations.

carnet

EdInvestor wrote:

BTW do not think you escape paying this charge if you invest in funds - ie that it is included in the AMC (annual management charge).It is not.There are additional charges on most funds which cover dealing costs, research commissions etc, which amount to nearly 1% in many cases. The FSA does not require the fund managers to reveal these charges yet, though it's coming soon via the European regulations.

We've been through all this before. It's called the TER and has, for some time, been freely available for each fund on the websites of brokers such as HL, Bestinvest etc.

Notice you haven't commented on my recent post on another thread showing that, over one year (which is my typical length of hold) buying funds works out cheaper than buying shares - and, although I included the TER in the fund costs, didn't even take account of the B/O spread on the share costs.

EdInvestor

Hi Carnet

Of course it's well known to people like you, but not I suspect to the general public.

Sorry, I missed your post, could you provide a link?