ETFs and monthly investment

Santiago1_2

Is it correct to assume that ETFs isnot a good idea for someone who wishes to invest on a regular basis (monthly) and only a relatively small amount (£50-200/month)?

Many thanks

JamesU

Santiago1 wrote: »

Is it correct to assume that ETFs isnot a good idea for someone who wishes to invest on a regular basis (monthly) and only a relatively small amount (£50-200/month)?

Many thanks

Work it out: if you buy £50/mth of individual etfs, average approx buy of £10 per transaction, 20% of your initial investment is gone, maths similar for larger monthly investment but less of a start up fee. Maths, maths........And do not forget to do this with a provider other than HL or you will have to pay 0.5%/mth on top to the £200-250 annual cap holding etfs. Not like buying a fund in HL...........

JamesU

cloud_dog

JamesU wrote: »

Work it out: if you buy £50/mth of individual etfs, average approx buy of £10 per transaction, 20% of your initial investment is gone, maths similar for larger monthly investment but less of a start up fee.

There are a number of providers who use the Halifax platform (https://www.iii.co.uk, https://www.fool.co.uk, obviously Halifax) and allow scheduled monthly direct investment for £1.50 per transaction. Works out to be 3% for £50.

JamesU wrote: »

........And do not forget to do this with a provider other than HL or you will have to pay 0.5%/mth on top to the £200-250 annual cap holding etfs. Not like buying a fund in HL........

Eh? I don't understand what this says, are you referrring to AMC or Stamp Duty??? If it relates to the AMC, which is by default an annual charge, and can vary for 0.2% up to 1.5%, or more depeding on the fund. ETFs tend to have lower AMC due the the nature of passively tracking and index or basket etc. I don't believe ETFs are subject to Stamp Duty.

JamesU

cloud_dog wrote: »

There are a number of providers who use the Halifax platform (www.iii.co.uk, www.fool.co.uk, obviously Halifax) and allow scheduled monthly direct investment for £1.50 per transaction. Works out to be 3% for £50.

Eh? I don't understand what this says, are you referrring to AMC or Stamp Duty??? If it relates to the AMC, which is by default an annual charge, and can vary for 0.2% up to 1.5%, or more depeding on the fund. ETFs tend to have lower AMC due the the nature of passively tracking and index or basket etc. I don't believe ETFs are subject to Stamp Duty.

Yes too loose a comment on my side, apologies if this has confused. I was referring to the fact that if you have HL funds ISA (parallel thread by OP with discussion on TERs where funds were being discussed) adding etfs would not be optimal as there would be trading costs to purchase the etf monthly ("averaged at an £10", just to make the point) and then on top of this, with the etfs classified within the S+S funds ISA as shares, a 0.5% monthly fee to the annual cap. I will try to be more precise on the threads........

JamesU

turbobob

Think you'll find that it's an annual ISA management fee and not monthly (0.5% a month of the value of your ISA would be extortionate) but there are other companies who offer a better deal like the ones mentioned by cloud_dog

JamesU

turbobob wrote: »

Think you'll find that it's an annual ISA management fee and not monthly (0.5% a month of the value of your ISA would be extortionate) but there are other companies who offer a better deal like the ones mentioned by cloud_dog

As far as I remembered, purchasing and holding etfs in the HL funds ISA was not cost effective due to the minimum of £10/transaction for buying etfs (and for sure, no stamp duty when buying the etfs). Then a 0.5% annual charge (AMC) on the full value of the etfs held, this taken pro-rata on a monthly basis somehow, but capped to £200 ex VAT per annum (=£235). I should have explained this more precisely as mentioned. Double checked this earlier and the charging structure is still the same, link below from HL FAQs section.

Going back to the OP’s original question, typical range of TERs for etfs is 0.1% - 0.65% (see some examples in model portfolios in second link below). and they are cost effective provided the transaction fees for buying the etfs and AMC charges for holding the etfs within the ISA are minimised. As above and elsewhere, “iii” seems to fit the bill, although I have not tried this provider myself.

JamesU


http://www.h-l.co.uk/shares/exchange-traded-funds-etfs/how-to-buy-etfs

http://www.investorschronicle.co.uk/Tips/default/TipsOfTheWeek/article/20080418/e553b59a-0d30-11dd-9279-0015171400aa/Ten-lazy-portfolios.jsp

Santiago1_2

cloud_dog wrote: »

There are a number of providers who use the Halifax platform (www.iii.co.uk, www.fool.co.uk, obviously Halifax) and allow scheduled monthly direct investment for £1.50 per transaction. Works out to be 3% for £50.

Eh? I don't understand what this says, are you referrring to AMC or Stamp Duty??? If it relates to the AMC, which is by default an annual charge, and can vary for 0.2% up to 1.5%, or more depeding on the fund. ETFs tend to have lower AMC due the the nature of passively tracking and index or basket etc. I don't believe ETFs are subject to Stamp Duty.

Thanks for this. Are these 3 (iii, Halifax, fool) completely identical so choosing any of them would be OK? Also, do you know if they generally allow monthly small purchases for any ETF or perhaps only a few specific ETFs are eligible for monthly 'saving schemes'?

cloud_dog

Santiago1 wrote: »

Thanks for this. Are these 3 (iii, Halifax, fool) completely identical so choosing any of them would be OK?

They all run on the Halifax trading platform although the specifics and service may be differrent (affraid I cannot comment as I do not use any of hte 3). A lot of people here tend to use iii, if that helps.

Santiago1 wrote: »

Also, do you know if they generally allow monthly small purchases for any ETF or perhaps only a few specific ETFs are eligible for monthly 'saving schemes'?

The scheduled trading option (known as 'Interactive Investor Portfolio Builder' for iii) allows you to make regular (monthly) purchases of most stocks and shares including ETFs. To all intents and purposes ETFs trade like normal company stocks.

Santiago1_2

Thanks for this info. I have a S&S ISA with H-L in which I intend to contribute for the foreseeable future. Assuming that I build a separate portfolio of ETFs using the iii platform, will it generally be possible to 'move' these shares into the ISA in the future? Will there be a (significant) cost for doing that?

I assume that the value of the shares will need to fall within the ISA contribution limits that will apply at the time (and will have to take into account any other contributions that I will have made for the given tax year in the future). Is this correct?

EDIT. Also, another point to clarify: the per transaction cost of £1.50 is for the purchase of each individual type of share. So if I wish to invest every month £50 in Company X, £50 in ETF 1 and £100 in ETF 2, the total transaction cost would be 3 x £1.50 = £4.50. Correct?

Does anybody know whether this cost will be deducted from the money invested (in this example, £50+£50+£100 = £200) or will it form a separate charge?

cloud_dog

Santiago1 wrote: »

Thanks for this info. I have a S&S ISA with H-L in which I intend to contribute for the foreseeable future. Assuming that I build a separate portfolio of ETFs using the iii platform, will it generally be possible to 'move' these shares into the ISA in the future? Will there be a (significant) cost for doing that?

You cannot 'move' holdings in to a S&S ISA, you would have to sell them and re-buy them within the ISA. So, the costs would be whatever selling and buying costs are applicable.

Other option might be to consider transferring your S&S ISA across to iii. Obviously I don't know what you are holding and what you are investing in atm and whether there are benefits to leave it with HL.

Santiago1 wrote: »

I assume that the value of the shares will need to fall within the ISA contribution limits that will apply at the time (and will have to take into account any other contributions that I will have made for the given tax year in the future). Is this correct?

See above, you can only move cash in to an ISA.

Santiago1 wrote: »

EDIT. Also, another point to clarify: the per transaction cost of £1.50 is for the purchase of each individual type of share. So if I wish to invest every month £50 in Company X, £50 in ETF 1 and £100 in ETF 2, the total transaction cost would be 3 x £1.50 = £4.50. Correct?

Yes.

Santiago1 wrote: »

Does anybody know whether this cost will be deducted from the money invested (in this example, £50+£50+£100 = £200) or will it form a separate charge?

Affraid I don't know as I don't us the platform. Most brokers allow you to identify an amount to invest from which any costs are deducted (dealing charges, Stamp Duty (if applicale), et etc). As you will be investing monthly, £50 in to Company X, then this is the only money the broker can take their charges from so, yes, the £1.50 will be deducted from the £50 prior to investing.

ozzage

I use Halifax to hold my ETF portfolio (12 ETFs), and I can tell you for sure that not ALL ETFs are available to buy using the £1.50 sharebuilder option. I've managed to get some added just by asking, but others they won't add.

Further, some ETFs are in fact are not tradeable AT ALL through Halifax even at the full trading cost (and presumably iii and fool since they are all the same platform). IEMS (http://uk.ishares.com/en/rc/funds/IEMS) was the most recent one I had this trouble with... they said it doesn't have sufficient volumes so it's not feasible to support it.

If you have specific ones you are interested in post them here and I'll see if it'll accept them.