How do I buy 5 ETFs cheaply each month

silver_4444_uk

Ladies and Gents,

I wish to buy 5 ETFs each month as a way of building an investment portfolio and at the same time hopefully leave something to my children in the future.

Can anybody give me any advice as to how to do this cheaply ?

Any ideas will be gratefully received.

Thanks

Blah99

silver_4444_uk wrote: »

Ladies and Gents,

I wish to buy 5 ETFs each month as a way of building an investment portfolio and at the same time hopefully leave something to my children in the future.

Can anybody give me any advice as to how to do this cheaply ?

Any ideas will be gratefully received.

Thanks

How many ETFs do you intend to hold? There's only something like 170 ETFs listed on the LSE, many of them "duplicates" (eg: quite a few just track the FTSE100, Allshare etc) so you don't have a massive selection.

If you're looking to buy and hold just open a dealing account with any of the cheap execution brokers (III, Selftrade, Hoodless Brennan etc) and that's it. You'll have to pay your fees and stamp regardless, so you're just trying to save a few £ on the dealing fees. As you're buying and holding you probably won't qualify for an active trade account with reduced fees.

Also, consider whether ETFs are the right way to do what you want (investment for children).

silver_4444_uk

Thanks for the prompt reply Blah.I was looking at building an investment portfolio in additon to my future company pension. I don't wish to contribute any more each month to the pension because I would like to leave something to my kids.Do you have any alternative suggestions, where I could put £300 every month ?Thanks.

sabretoothtigger

How much do etf cost to buy, same as shares?

JackyF

sabretoothtigger wrote: »

How much do etf cost to buy, same as shares?

The commission is the same as for shares but there is no stamp duty on ETFs.

SeanW

You could use a share builder platform, such as Halifax, iii or fool which I believe are all provided by Halifax.

You pay £1.50 per purchase, with iii you pay £10 per sale.

If you are buying £300 into 5 funds a month that works out at a 2.5% charge on purchase alone though.

silver_4444_uk

Thanks Sean W for your answer. I am having to rethink my plans. I was initially attracted to ETFs because of their low annual charges. But it appears that they are not suitable for regular monthly investments because of the comparatively high initial commission charges.

Does anybody have any alternative ideas ???

ozzage

Am I missing something, or is this logic flawed?

If you pay 2.5% up-front, but only say 0.25% ongoing (TER) for an ETF, compared to paying 0% up-front, but say 1.2% TER (e.g. a common managed fund), then after four years you're still going to much better off with the ETF.

Even if you assume slightly better growth from the managed fund I would think that the lower TER will more than offset the up-front cost over time.

Opinions?

silver_4444_uk

If anybody has any opinions on the last post. I would be very grateful to hear them.
Thanks

Myrmidon_J

silver_4444_uk wrote: »

If anybody has any opinions on the last post. I would be very grateful to hear them.

If my understanding is right - and I am willing to stand corrected! - I think that the vast majority of collective funds (i.e. "common managed funds") charge up to 5% up front anyway, in the form of a bid/offer spread.

ETFs are (generally) significantly cheaper than actively managed funds and if you intend to invest for the long-term (10-15 years), the compound effect is drastic.

Although you do lose the 'benefits' of active management.

The initial charges - in terms of commission - are likely to be high in percentage terms, because of the relatively low investment amount. You could get around this by choosing fewer funds, or spreading out your investment across the year - i.e. £900 / quarter rather than £300 / month.

jon3001

Myrmidon_J wrote: »

If my understanding is right - and I am willing to stand corrected! - I think that the vast majority of collective funds (i.e. "common managed funds") charge up to 5% up front anyway, in the form of a bid/offer spread.

If you buy from a discount broker you won't pay a spread.

Myrmidon_J wrote: »

The initial charges - in terms of commission - are likely to be high in percentage terms, because of the relatively low investment amount. You could get around this by choosing fewer funds, or spreading out your investment across the year - i.e. £900 / quarter rather than £300 / month.

If you want passively managed funds then I'd use unit-linked index trackers to buy on a regular basis. When you've built up a decent sized sum you could consider moving it into ETFs later.

It depends on what these ETFs are and if there are equivalent investments available in unit-linked form.