Regular, Small Tracker Investment?

tomato3000

I am currently looking at investing in some sort of index tracker investment vehicle. My research (mostly on fool.co.uk) has highlighted unit trusts/ OEICs, ETFs and Investment Trusts as the most suitable for a newbie.

However I am looking at investing £50 per month. This seems to rule out ETFs and Investment Trusts as, I believe, these work by the investor effectively buying equity in a 'company', this means high dealing costs for regular investment.

Next looking at Unit trusts/OEIC I've been looking for ones that invest in the FTSE100 and have a low TER. I thought this should result in a number of options (above 25), however looking on morningstar almost no OEICs seem to have a minimum investment below £500. trustnet doesn't even seem to list TER!

Considering this is supposed to be the simple option, it's certainly not *that* simple! Can anyone point me in the right direction?

Lokolo

There is no point looking at morningstar and trustnet for dealing costs or minimum investments as different fund supermarkets will have different rates and conditions. You should be looking at the fund managers to see, for example, Hargreaves Lansdown have a minimum contribution of £50 a month.

dunstonh

I thought this should result in a number of options (above 25), however looking on morningstar almost no OEICs seem to have a minimum investment below £500. trustnet doesn't even seem to list TER!

Trustnet lists the TER.

I doubt you have as many as 25 options available for the FTSE100. Its a very limited index and not that desirable compared to others. FTSE all share will probably have around 10-15.

Considering this is supposed to be the simple option, it's certainly not *that* simple! Can anyone point me in the right direction?

I have never seen it referred to as a simple option. Sure, going for mid table consistency for benchmark performance is easier in that you dont have to review as much but picking which benchmarks and which fund house still requires a little bit of work.

The min premium you are looking at refers to single premium and not regular. Most regulars are £50pm as a minimum (a small number drop lower if you go direct). It depends on the platform you intend to use to buy from. Which platform do you intend to use?

tomato3000

Thanks for the help so far.

By 'platform' I guess you mean 'website to actually do the transaction'? In that case I was looking at Hargreaves and Lansdown for OEIC. iii also seem to be recommended but that seemed to be for share trading.

I'll expand my search to FTSE All Share...I'm slowly making progress but getting the info seems to more difficult than I'd expected i.e. a list of funds investing in the sort of thing I want.

I have never seen it referred to as a simple option

Well to tell the truth neither have I, but I inferred it from the fact that it's the recommended entry point for beginners and that articles seem to say 'just go buy a fund to start investing', which makes it sound easy-peasy. It's a bit like telling someone to 'just buy a cheap, reliable 2nd hand car', there are many factors to consider and lots of research involved (and always some risk).

jamesd

For an easy to access tracker look at the HSBC tracker fund range at Hargeaves Lansdown. They accept a £50 regular monthly payment.

ruperts

The minimum investment for HSBC trackers at iii is £20. The TER is 0.27%. You can easily set up a regular investment where money is transferred from your bank monthly and then deposited into the fund.

As for other finding other similar trackers, there is no straightforward search option on iii for whatever reason (perhaps because there is no commission to be earned?).

The easiest way i've found is to go onto the funds section, do a search for 'all companies', 'all sectors' and then toggle the '% charge (Discount)' button (twice) until it lists 0% charges first.

The first couple of hundred results are then a mix of no-charge funds and index trackers of which quite a few track the UK index in some form.

Reaper

tomato3000 wrote: »

However I am looking at investing £50 per month. This seems to rule out ETFs and Investment Trusts as, I believe, these work by the investor effectively buying equity in a 'company', this means high dealing costs for regular investment.

In the case of Investment Trusts it does not if you go direct to the company involved. For example F&C (one I picked at random to check) accept £50pm and charge just a 0.2% dealing fee.

atush

Investment Trusts as, I believe, these work by the investor effectively buying equity in a 'company', this means high dealing costs for regular investment.

This is completely wrong. If you invest via a savings plan (from 20 Quid a month depending on the trust- most start at 50) direct with the Inv Trust, the costs for buying are very low indeed.

I started a series of these over 10 years ago starting off with 50 quid a month and it is now worth many thousands. It is a prime example of pound cost avergaing that smooths out the bumps pf investing as wehn prices drop, you jut buy more unit/shares and these will jump up strongly on any uplift in prices.

Ark_Welder

A few things to remember about the current FTSE100. A few sectors make up a large part of the index, ditto with the number of companies.

The Finance (includes banks) and Oil&Gas sectors are around 20% each
Basic Industries (includes mining) is around 15%

Around 40% of your cash is in 10 companies
Around 50% of your cash is in 15 companies

So a 100-index tracker does involve a certain concentration of risk.

The FTSE 100 forms around 80% of the All-Share index.

atush

Which is whya good general investment trust is a good place to start as they hold Fse100, 250 shares plus euro, NA, emerging markets shares, plus bonds and some even hold property. So they are low cost and spread risk worldwide over many asset classes.

tomato3000

ruperts wrote: »

The easiest way i've found is to go onto the funds section, do a search for 'all companies', 'all sectors' and then toggle the '% charge (Discount)' button (twice) until it lists 0% charges first.

The first couple of hundred results are then a mix of no-charge funds and index trackers of which quite a few track the UK index in some form.

Thanks for the practical tip! I found this article as well: monevator.com/2010/12/07/how-to-find-index-funds/

I also found the following sites useful:
investmentfunds.org.uk/investor-centre/fund-search
trustnet.com (does not allow sorting by TER)
morningstar.co.uk

Currently this is where I stand. I think I'll invest £50 p/m into the HSBC All Share Fund via the Hargreaves and Lansdown platform. I'm doing this because research has suggested the All Share Index has historically performed superior to the Top 100 AND, as pointed out, is more diversified. I've chosen the H-L platform as it is apparently good for fund investing and reputable.

My research also highlighted Fidelity Moneybuilder UK and F&C FTSE All Share as similar options.

I'll execute this sometime this week. If anyone thinks I'm making a horrible mistake please give reasoning and alternatives.