Moneyspider

cheerfulcat

purplefirth wrote:

Decided not to go there too. Everything is in the European fund blinko (whatever that means). Its all a mystery to me. I thought I was making a sound investment but instead of getting interest its lost money. Not sure what deemy and cheerfulcat mean. I find it all a bit mind boggling. Still if the isa does eventually get back to where it started 5 years ago I shall grab it and stick it all in something much safer like ernie bonds or something.

Cheers for your help xxx

Hi there, purplefirth,

What I meant was that it's not a loss until you sell the investment. Say you buy £7000 worth of shares in year one. In year two, the price of the shares halves; your investment - on paper, ie, *if* you were to sell now, is worth only £3500. If you sold, you would be crystallising, that is, making real, a loss which so far has only been potential (does that make sense?).

If you hold on ( perhaps because you still think it's a good investment ) and in year three the shares are trading at twice their initial price, you have made, again on paper, £7000 - you have doubled your initial investment! But *only* if you sell, thus crystallising the gain.

This is why you can hear that someone like Bill Gates is suddenly worth $x million more or less because of a fall in share prices. It only matters if he's going to sell the shares - he's not, so it doesn't.

HTH

Cheerfulcat

Edit - this is why anyone investing money in the stockmarket is advised only as much as they can afford to lose; not because you're likely to lose it, but because you could find yourself having to sell shares to raise money at a time when the prices are depressed.

dunstonh

purplefirth wrote:

Decided not to go there too. Everything is in the European fund blinko (whatever that means). Its all a mystery to me. I thought I was making a sound investment but instead of getting interest its lost money. Not sure what deemy and cheerfulcat mean. I find it all a bit mind boggling. Still if the isa does eventually get back to where it started 5 years ago I shall grab it and stick it all in something much safer like ernie bonds or something.

Cheers for your help xxx

I fear you misunderstand what an equity ISA is and how they work.

First of all you do not get interest. You get a number of units which invest in a certain investment area (multiple funds over various areas is usually best). The price of those units will fluctuate subject to demand of the shares held by that fund. There may be dividend payments which are, by default, paid back into the ISA to buy more units.

European Stockmarket funds are medium/high risk. They are higher risk than UK funds as you have 2 considerations. 1 - European stockmarket 2 - currency fluctuation.

You can invest in lower risk funds with the ISA and perhaps that is where you should have been in the first place.

KD

Reaper wrote:

Make sure you understand what you are agreeing to. From their FAQ:

So whoever arranged your ISA will lose their commission and Moneyspider gets it instead. Not a problem if you took out the policy direct but expect an upset IFA if you did it through them, and if you went via a discount broker that was refunding your renewal commission (eg Hargreaves Landsdown) then you will lose the money.

Can you explain the renewal commission refund - I've got time now to take a lot more interest in my own investments and am interested in looking at new equity ISA that I'll arrange myself rather than via a third party.

dunstonh

IFAs get paid monthly renewals. Some of the larger discount IFAs will refund those renewals once a year. I guess they make enough on the interest they earn having the money sit there for 12 months before paying it back.

KD

Ta for quick response. 3 quick questions-:

1. Does this also work for lump sum payment as I am thinking about going £7k April 2005/6?

2. Can anyone 'deal' with discount brokers or just IFA's? If anyone can use - where to get info about discounters (assuming that hargreaves you mentioned earlier is an example?)

3. Do any discounters/providers reward long term loyalty, ie investors who stay with them year on year?

Reaper

KD, at the risk of stating the obvious you should appreciate that the discount brokers who refund much of their commission to you offer no advice. You just tell them what to buy and they do it, even if they think it's a bad buy. So no chance of any compensation in the future if you get it wrong.

I use them, but be aware they are only suitable for those with a clear idea what to invest in.

blinko

so basically you will lose you renewal comission which is roughly 0.125%, if you sign up to money spider assuming you are with a discount broker that pays renewal comission and yeah im with hargreaves lansdown and would have to say they are defiantely one of the cheapest companies out there

dunstonh

HL are IFAs. The term broker is not really correct when all they are doing is execution only business.

HL are almost certainly the cheapest. Many IFAs will take no initial commission. Although most do not have the turnover to refund the renewal commissions like HL can. Some IFAs will sit back and take the renewals and do nothing. Others will issue reports and information and provide ongoing advice.

An individual can therefore choose the level of service they want and pay for it accordingly.

KD

thanks folks - sounds like I need to learn quite a bit more before moving into the HL route. Back to morningstar!

purplefirth

cheerfulcat wrote:

Hi there, purplefirth,

What I meant was that it's not a loss until you sell the investment. Say you buy £7000 worth of shares in year one. In year two, the price of the shares halves; your investment - on paper, ie, *if* you were to sell now, is worth only £3500. If you sold, you would be crystallising, that is, making real, a loss which so far has only been potential (does that make sense?).

If you hold on ( perhaps because you still think it's a good investment ) and in year three the shares are trading at twice their initial price, you have made, again on paper, £7000 - you have doubled your initial investment! But *only* if you sell, thus crystallising the gain.

This is why you can hear that someone like Bill Gates is suddenly worth $x million more or less because of a fall in share prices. It only matters if he's going to sell the shares - he's not, so it doesn't.

HTH

Cheerfulcat

Edit - this is why anyone investing money in the stockmarket is advised only as much as they can afford to lose; not because you're likely to lose it, but because you could find yourself having to sell shares to raise money at a time when the prices are depressed.

Thanks Cheerfulcat

I understand the principals just none of the lingo so that helps to 'crystalize' that a bit ha ha.