Advice on stocks & shares ISAs?

schiff

I am pleased that the topic of Investment Trusts has come up on here. Oddly enough I had just started another thread on Zero Dividend Preference Shares but it may be even better on here. It's a thread that people seem to be enjoying and there seems to be a nice mix of professionals, amateurs and novices to keep it ticking over!

My experience of ZDPs goes back some way. Back in the early 1990s they were touted as the safest thing outside bank accounts etc, ideal for future school fees and the like. The newspapers, reliant on IFAs input as always, were full of it. I was drawn in - unadvised (as is my wont!) - and did quite well out of several investments. Solid, unspectacular but a nice above average yield.

Then I got caught up in the so-called "Scandal" of the last part of the 1990s. I had two holdings in which, not only did I not get the expected payout, but I lost a substantial part of my original investment into the bargain. With one of them I am due to be offered some compensation whenever the SFA gets its act together to finally do the necessary (promised by last month and still dragging on). Whatever I get, at least I get something.

But its the other one that gets my blood boiling! By nature I am a placid person but this makes me incensed. My holding in BFS Income & Growth left me not only short of the anticipated payout of £3580 but I was eventually paid out £502 against my original investment of £2146. A loss of £1644.

The compensation package arranged by the SFA was funded more or less voluntarily by the investment trust companies at fault. Good for them. But BFS said they didn't fancy doing that, so they contributed a big fat nothing.
So the poor holders of BFS ZDP shares lost out - completely. Yet BFS continues to trade to this day in other investment trusts which presumably bring them a nice income. I can't help but hate them - placid though I am!
I have tried - unsuccessfully - to get newspapers to take up the cudgels on our behalf (on the basis of name and shame) but it's not worked. There seems to be no way forward and I've almost given up.

I wonder if any of our professionals on this thread know any more? I know the SFA is 'pursuing its enquiries' but they won't say anything to me - on the grounds I think that it's sub judice.

I have not fallen out with ZDPs however. In fact my last maturity was of Jupiter's Dividend and Growth which comfortably made its target value. The yield of almost 11% pa from my purchase date was eminently satisfactory.
Having identified a worthwhile risk situation in this share 18 months before maturity, I actually made additional investments which yielded me over 15% pa - so it's not all bad.

Sorry to have wittered on. I just hope some of the pros on board can add something to my limited knowledge of the BFS situation. If not, I am no worse off!

cloud_dog

I thought BFS had gone bust (pretty sure its them), probably why they didn't pay into the compenarion scheme - not defending them btw.

cloud_dog

jamesebaker

The original question was asking about investing in stocks and shares and making use of the £4,000 tax free ISA wrapper.

Investment trusts are one way of doing it but there are a few reasons why I personally wouldn't use them.

1. Using an ISA is a great way to avoid charges (taxes) imposed by the government which is great, and then you go and undo all that good work by paying fees to an independent financial advisor.

2. Over the long term, more than 90% of actively managed funds fail to match the performance of the FTSE.

3. An independent financial adviser can never be completely independent as he/she has his/her own interests at heart as well as your own (you hope), so even very well intentioned IFA's still have to make their commission which will inevitably impact on your profit.

The simplest way to invest in stocks and shares is through a FTSE index tracker fund. Find the one with the lowest charges, with a low tracking error rate and make sure it has been established for a minimum of 5 years.

Fidelity's FTSE 250 tracker is the lowest charging tracker in that index, and Liontrust's Top 100 tracker is the lowest charging FTSE 100 tracker. If you are a complete novice to the FTSE, FTSE 100 is the 100 biggest companies listed on the London Stock Exchange and FTSE 250 is the 250 biggest. There are other less known ones such as the FT30, which is rarely used but at one point was the most important index.

Hope that helps.

dunstonh

3. An independent financial adviser can never be completely independent as he/she has his/her own interests at heart as well as your own (you hope), so even very well intentioned IFA's still have to make their commission which will inevitably impact on your profit.

Pay a fee instead if you are that paranoid about it. In reality the fund supermarkets pay the same commissions regardless of what funds are chosen. So, with most fund supermarkets running at least 750-1000 funds, there shouldnt be any concerns about bias.

Fidelity's FTSE 250 tracker is the lowest charging tracker in that index, and Liontrust's Top 100 tracker is the lowest charging FTSE 100 tracker. If you are a complete novice to the FTSE, FTSE 100 is the 100 biggest companies listed on the London Stock Exchange and FTSE 250 is the 250 biggest. There are other less known ones such as the FT30, which is rarely used but at one point was the most important index.

And the 100 index is a rubbish sector to follow. So, that leaves the 250, thats one fund to put £1000 in. What about the other £3000, what sectors/funds for that?

cloud_dog

I'll reiterate my concern regarding trackers, i.e. they will track an index down. Thats my concern and reason for not using them. You need to remember that in the recent past the index's have had a pretty good run.

Having said that you are quite correct re a large number of funds not beating an index - so the choice is yours (or rather the OP).

cloud_dog

dunstonh

I'll reiterate my concern regarding trackers, i.e. they will track an index down. Thats my concern and reason for not using them. You need to remember that in the recent past the index's have had a pretty good run.

Im with you on that. Good when going up, poor when going down. Many FTSE trackers have yet to return to surplus for those that invested prior to the crash. The lack of downside protection really hampers them.

I dont rule out trackers. I just wouldnt put all/much of the money in one.

schiff

cloud dog - just googled them. They seem to have moved some funds to an outfit called Premier. Whilst on their website I noticed them patting themselves on the back for the following (taken direct from their website):

BFS US Special Opportunities wins Bloomberg Money Investment Excellence Awards 2004 for Best Split Capital Investment Trust

Zero Preference Growth Trust comes runner up, and awarded Highly Commended in the Bloomberg Money Investment Excellence Awards 2004 for Best Split Capital Investment Trust

Can you imagine how that sticks in my craw!!

Deemy

Just some friendly advice to ensure people don't go overboard and commit too much to the stock markets, thats IT, individual shares AND unit trusts.

At this point in the stock market cycle try not to commit more than 20% of your portfolio, and if your starting from scratch not more than 15% into stocks.

And stick to the emerging markets / commodity related funds for the bulk of that investment.

Me ?

I used to be about 25% in stocks but have now got it down to about 11%.

Paul_Herring

Deemy wrote:

Me ?

I used to be about 25% in stocks but have now got it down to about 11%.

So how would you go about moving 50% of a S&S ISA (specifically in my case a tracker) out of S&S without removing the ISA wrapper?

flashf

dunstonh wrote:

None of the banks operate a funds supermarket. They only sell their own range and you will pay full charges for it. The main fund supermarkets are Fidelity FundsNetwork, Cofunds, Selestia and Skandia.

Smile has a funds supermarket which "provides access to Fidelity Funds Network" . They also have a useful investment "school" for newcomers like me, which I've read now and that's helping me to understand some of the jargon that's talked on this forum. In particular, it's helped to assess what category of risk portfolio I should aim for ... medium in my case, so that's the direction I'm heading in now. Thanks again to all for contributions...