New Investor - Allshare ISA

newinvestor_2

Good morning

In light of the recent drop in the stock market and my opinion (which appears to be just as valid as those 'clever investors' that didn't see the market being hit this hard), that the market will now begin its restoration, I am looking to dip my toe for the first time.

No doubt in future I will go for a fund of funds and then my own investments, but for the time being I want something easy to deal with so I can get involved.

I have £500 to invest and between £50 and £100 a month to begin with and have been reading about Allshare Tracker ISA's. This seems like a sensible option to me.

Perhaps some of you have a different opinion as to what to do with the above small sum of money and if you do, please let me know your thoughts. Indeed, if you can recommend a decent tracker in terms of fees (I know that, by the nature of the beast, they all do pretty much the same thing) that would be great.

Thanks in anticipation.

dunstonh

The FTSE all share tracker is fine. It is medium/high risk. That is higher than the typical UK consumer. So, first thing is to make sure you accept that high risk profile. If you do, fine. It will never be a top performer but it will never be bottom. By its nature it will be consistent mid table in it's sector. It will be cheap though. For £50pm that is fine but for £100 you should perhaps look to split it 2x50 or 4x£25 to diversify.

newinvestor_2

Hi

Thanks for your opinion. I am going to be investing when I've seen the market rise three clear days in a row and then try to catch it on the way up. As you say, it's always a risk.

The reason I am looking for something with a medium/high risk is that anything below that will probably yield less than that of a normal cash ISA or comparable bank account. I have yet to research yields and will do so on where, with my limited experience I believe the Allshare will be in a year's time and then compare to other banks and so forth.

Presumably this sort of medium/high risk investment is still a more sensible way of getting into the market than a fund of fund manager option, given that for my small amounts he won't be interested in how my money does really, or indeed it's questionable whether in a hopeful market upturn, he will perform better with my money than the Allshare?

dunstonh

A fund of funds is more expensive and I am not a big fan. Although they do have their place. Where they can benefit is giving a spread of funds across different areas for people with small investment amounts that cannot do that themselves.

A balanced managed fund of funds would be lower risk than the FTSE all share for example. In the last 12 months it would have dropped less. However, it will also not perform as well on the way up. That doesnt make it better or worse as it really depends on how comfortable you are when you get losses. Medium/high risk has 50-60% potential loss capability.

Events like these occur on averange once every 7 years (been 8 since 1956). So, in the early years of paying monthly, its a good time to buy. However its later on where you will find a single fund solution is not a good idea as you will have all your eggs in one basket. If you intend to keep it reviewed and switch as the value grows then thats fine. If not, then a fund of funds could be better.

newinvestor_2

Great, thank you.

Well I've been spending a reasonable amount of time on fool.co.uk recently and found that these things are 5-8 year cycles, so if I can catch the market on the way up and stick a few quid away each month for the next few years into a tracker (whatever kind that may be - I suspect an Allshare) then so much the better.

If I lost out, well, I could afford to miss £50 a month and just wouldn't take it out of the system, so that loss wouldn't crystallise. On that basis, it doesn't seem a great risk to me.

I think by the time the next couple of years have passed, I'll be wanting to have a flutter at the market myself and so some of the money I've saved will be moved around by me, hopefully anyway.

newinvestor_2

Given that the Allshare has reacted well today and, I hope, will continue to grow reasonably well (certainly outperforming the banks at 6% p/a interest), any suggestions as to which tracker provider to opt for?

I have been looking at Legal and General, for example.

Wondering, other than fees which will be nominal, what other factors I should look at when deciding on which Allshare ISA Tracker to follow?

Thanks.