Hargreaves and Lansdown S&S ISA

fimonkey

I really appreciate your patience in answering my dumb questions - thank you!

When I compared the HSBC and L&G tracker some time ago (on these very boards) L&G had the better performance even taking into account the TER.

I have been looking at interactive investor as this seems to be the cheapest way to buy shares through their portfolio builder. I see that you can also open an S&S ISA with these guys AND you can also hold funds there too. The price per trade is £1.50 and no inactivity or admin fees. .. Sounds to good to be true so what am I missing? Is it that the price for buying uk stocks and investment trusts is £10 per deal. Is this the same price for a passive tracker too then? (Is a tracker the same?). Also how can it be £1.50 per trade with portfolio builder but £10 per uk stocks? Confused! I also see that there is a 1% dividend re-investment charge so if my funds were accumulators then they would be charged extra? - seems in that case I would be better getting my dividends from shares paid to me (rather than re-invested) and also choosing income funds where divs are paid rather than reinvested?

I am really tempted to buy £500 worth of LLoyds shares and was going to do this through ii - if I can hold this in an ISA and buy the funds I want (FTSE tracker and Emerging markets tracker) but the charges are confusing me. For instance the charge for the the L&G emerging markets is 0% http://www.iii.co.uk/isas/fundfilter?task=show_fund_search&o=1&searchtype=advanced&submitted=submitted&l=50&FS__FSM__id=37&FS__FSS__id=22&FS__fn=&FS__ia=&FS__y_gt=&FS__rr= but what would I really be paying to ii if I opened an ISA with them?

My other option is a H&L vantage ISA for the funds and ii for the shares through the portfolio builder but not in an ISA (obviously). CAn I just double check that this option means the TER for the L&G ISA is .55% and there are NO MORE charges??

Thanks hugely for helping my financial education.

soulsaver

2. If one month I decide to buy shares with this £150 within the ISA wrapper - would this be worth it given the charges of H&L?-
- to answer my own question, £150 would buy £139.34 worth of shares?(£150 - £9.95 charge - 0.5% stamp duty). This means I would need my shares to rise by 7.11% to getback to £150. Am I right??

Someone said your calcs are right & they are as far as you've gone: But actually for you to realise a gain you'd have to sell the shares... and then you'd incur another £9.95 charge:( so c14% growth required to break even at small numbers.

If you want to trade shares in small amounts then best go to one of the consolidators like 'motley fool' who I believe have a service where small investors on a limited range of shares can buy on a specified day each month for £1.50 (?) a trade.

Or if you've got friends with similar desires, form a club pooling funds to trade with?

gadgetmind

I like the HL platform, but I wouldn't use them for holding shares (or ITs or ETFs) in an ISA. I hold funds in my HL ISA and shares in a HL share account, which is in my wife's name to ease the tax burden. I understand that other ISA providers are much better for shares in an ISA, and I intend to look at this in the future, but am sticking with HL for now.

fimonkey

Hmm soulsaver, that makes so much sense - obvious when its pointed it out to you!

Can anyone comment on my thoughts about ii for buying shares/trackers and whether they should be in my S7S 2011/12 ISA please?

dtsazza

fimonkey wrote: »

When I compared the HSBC and L&G tracker some time ago (on these very boards) L&G had the better performance even taking into account the TER.

Trackers should have exactly the same performance as the underlying index that they track. Of course, no tracker is perfect, and the deviation from the index is known as "tracking error".

In that respect, I don't know if it's accurate to say that L&G "outperformed" HSBC, since this wasn't down to specific decisions on either fund's part. The difference will merely have been down to how the timing of purchases etc. created a deviation from the true FTSE price. And in that light, I'd be very dubious about picking one tracker over another based on their previous returns. Picking them based on tracking error, possibly, but there is absolutely no reason to assume better returns last year means better returns this year. More likely than not, it just means that L&G lagged behind in a falling market, or HSBC lagged behind in a rising market, and gives no indication of which one will have the greatest return this year.

If you want a FTSE tracker, than all things considered the best choice is the one with the lowest tracking error (yes, even if this caused it to have worse results in the past, when the FTSE did badly!). That said, so long as the tracking errors are "reasonable" (whatever that means to you), I'd be more tempted to go with the one with lowest TER.

fimonkey wrote: »

I have been looking at interactive investor as this seems to be the cheapest way to buy shares through their portfolio builder. I see that you can also open an S&S ISA with these guys AND you can also hold funds there too. The price per trade is £1.50 and no inactivity or admin fees. .. Sounds to good to be true so what am I missing? Is it that the price for buying uk stocks and investment trusts is £10 per deal. Is this the same price for a passive tracker too then? (Is a tracker the same?). Also how can it be £1.50 per trade with portfolio builder but £10 per uk stocks? Confused! I also see that there is a 1% dividend re-investment charge so if my funds were accumulators then they would be charged extra? - seems in that case I would be better getting my dividends from shares paid to me (rather than re-invested) and also choosing income funds where divs are paid rather than reinvested?

The £1.50 Portfolio Builder system is a regular payments plan - you sign up to buy e.g. £50 of Lloyds shares every month, and at a certain time on a certain day this is actioned for you at a cost of £1.50. It is this cheap because you have to give your instructions some time in advance (I'd guess "a few" days but I don't know for sure), so III can batch up all of the transactions into one large one for everyone who regularly invests in Lloyds. This massively reduces their own dealing costs, hence it's a lot cheaper to the retail customer too.

The £10-per-deal charge applies to ad-hoc share dealing.

As for dividends - it may be cheaper for you to collect these yourself and then reinvest them manually, but in general I'd be surprised if this is the case. The reinvestment fee is 1% of the dividends, so unless you were receiving £150 or more in dividends you couldn't trade these cheaper yourself even with the Portfolio Builder. The divi reinvestment fee is capped at £10 too, so they would only ever be cheaper via Portfolio Builder.

That said, if you wanted to collect dividends from multiple investments, and then manually reinvest them into a single holding, this likely would come out ahead, as you'd be making one transaction instead of multiple automatic ones. This is more likely to be true with very large holdings - if each reinvestment would hit the £10 limit separately, you could make a single transaction with all dividends for the same price. (That said, I think it might be a while before you're getting dividend payouts of >£1000 from a single holding!)

fimonkey

dtsazza, you're right, I think it was the difference in tracking error which meant I chose L&G over HSBC. Sorry for my novice use of terminology.

Thanks for the explanation of reinvested divi's too. Looking at the ii platform you don't have to commit to buy shares every month, but yes they do group purchases. I think they purchase upto 4 days a month (or is that something else I've misunderstood)?

So my plan now is to decide whether to open my 2011/12 S&S ISA with H&L, contribute to the funds I intend to buy monthly and buy shares seperately through ii in the portfolio builder, or to hold my ISA with ii and buy the shares within that as well as the funds I intend to contribute to. ...

.. I'm still a bit confused so if anyone has any other input on my two options I'd very much like to hear them. Otherwise I might just toss a coin and choose heads.

Thanks again

pressuredrop_2

HL are cheap for funds. II are cheap for shares.

Where's the confusion?

jimjames

Unless you have more than the annual ISA allowance to invest I would fill that first with funds and only worry about shares outside that once you've done the £10200 in ISAs.

fimonkey

I've been going through my old threads to see where it was the HSBC tracker was compared with the L&G one. I can't find it - but I have re-educated myself and realised that I really didn't understand the lingo back then so didn't fully understand teh replies to my many questions. .. Re-reading has been a great exercise however as I understood the answers much better. I also understood something more about me - I'm a "talker" rather than a "do-er"! I want to make money (don't we all), I ask a million questions, then go and choose something on a 'whim' instead! .. Well thats enough of that.

My decision is H&L S&S ISA, HSBC all shares tracker with £75pm drip fed (I think the UK markets are not likely to grow in the short term, it seems that they are bumbling along hence my decision to feed in £75pm instead of £100). In my L&G EM tracker I will place the other £75, - I have faith in EM's based on info from citywire etc.

I will then buy £300 worth of Lloyds shares through ii, IF I can muster up the courage. (I know I'm pathetic) - its a slow learning process for me and I hugely appreciate everyone's input on this thread and my many others!

twitwoo

fimonkey wrote: »

I have been looking at interactive investor as this seems to be the cheapest way to buy shares through their portfolio builder. I see that you can also open an S&S ISA with these guys AND you can also hold funds there too. The price per trade is £1.50 and no inactivity or admin fees. .............

Been using Interactive Investor ISA portfolio builder service to trade shares for around 1.5 years, it's a very good service, I recently opened non-ISA a/c with III to trade AIM shares (trading AIM shares is NOT recommended unless you understand risks of trading in smaller cos and know what you're doing).

fimonkey wrote: »

My other option is a H&L vantage ISA for the funds and ii for the shares through the portfolio builder but not in an ISA (obviously). CAn I just double check that this option means the TER for the L&G ISA is .55% and there are NO MORE charges??

Have you considered doing both - e.g. open a 2010/11 ISA with III and a 2011/12 ISA with H&L? This depends of course on having a lump sum to put into the 2010/11 ISA before 5th April. Both III & H&L will let you park a cash sum in your ISA and choose your investments later. As far as I understand it, this would allow you to trade using both the 2010/11 ISA and 2011/12 ISA, as long as you don't put any new money into the 2010/11 ISA in 2011/12.

Of course you would be very lucky to make capital gains of over £10k in your first year of trading, so could also go for the simple option of opening a non-ISA trading account with III.

All the best,
TT