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Is it worth it to buy ITs for £50 pm? (Long-term investment)
Comments
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So do I. Compared to UT investments or some other manager plans (TEMIT for example) their costs are minuscule.
I don't know what their quoted costs include?
Some funds are very good at hiding their costs http://www.guardian.co.uk/business/2011/dec/17/treasury-warned-over-traders-fees
Foreign & Colonial run a 'free' service where they manage your investment trust shares for you, sending you regular statements, low dealing charges, etc. But all this has to be paid for from the Trust and I don't know if its included in the charges they quote?
I can see how these schemes help the Trust managers by increasing the demand for trust shares, and reducing the discount to NAV which must be an embarrasement to them. For instance, if the assets in the Trust are worth £10bn, but the Trust is only worth £8bn, what does that say about the value of the managers running the Trust
It must also be more convenient to have thousands of small weak shareholders, instead of a few large powerful shareholders who are more likely to turn up at head office and ask awkward questions.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Just to clarify (just for my own sake if nothing else).........Glen_Clark wrote: »PS: One thing that has puzzled me about these Investment Trusts trading at about 30% discount to Net Asset Value.
The managers have to pretend to act in the best interests of the shareholders, rather than in their own interest.
So how can they pretend it is not in the best interests of the shareholders to liquidate the trust?
ITs will either trade at a discount or a premium to their net assets value (NAV). Although, yes, they could trade on par (be equal to) their NAV; very rare though.
If you are buying at a discount you are in effect buying the NAV more cheaply, i.e. 100p of NAV costs you 70p (30% discount).
If you are buying at a premium you are in effect paying more than the NAVs worth, i.e. 100p of NAV costs you 110p (10% premium).
Usually ITs with illiquid investments (property or where the investment is unlisted for example) will regularly trade at a fair discount.
ITs trading with a premium are usually due to demand, i.e. good track record, flavour of the month etc). ITs cannot add / cancel shares as UTs do so they trade very much like stocks/shares (demand / supply).
One investing (trading?) tactic some people use is to trade the discount, i.e. buy when the discount is historically high and then sell when the discount narrows. This is obviously less relevant if you are making long-term investment decisions.
Using the NAV discount can be a very useful tool to enhancing your investment return.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
Until now, ITs have been generally lower for charges however the main reason is that OEICS have added extra charges to cover commission to IFAs. But from next year this will not be allowed under RDR so it should create more of a level playing field between the two.
HL currently charge £11.95 to buy shares and ITs which is obviously not cost effective for small purchases. A better option would be iii who only charge £1.50 with their portfolio builder.
The other option would be to go direct to the IT provider like Aberdeen or Henderson and sign up for their monthly investment plan as there are no purchase costs.
Thanks for all the responses.
The only problem is that If I went direct to the provider, I wouldn't be able to put it in an ISA. Of course, CGT is not an issue at present but might be in future (if I'm lucky!).0 -
I think you are possibly over complicating things, for the right reason.Thanks for all the responses.
The only problem is that If I went direct to the provider, I wouldn't be able to put it in an ISA. Of course, CGT is not an issue at present but might be in future (if I'm lucky!).
You say that CGT is not an issue and we are talking a bout £50pm. The cheapest option is to go via the direct route. There is nothing stopping you from selling the investment at some point in the future and then move that cash in to a S&S ISA where you can re-purchase.
I know this may sound as if you incur additional costs when you may not need to but there are ways of doing it, i.e. say in 2 / 3 years time you £2k / £3k in a fund and you may want to re-balance and split that investment in to two, or the fund performance has been disappointing and you want to move it in to another; this would be the ideal opportunity to sell, move in to an ISA, and then re-balance / purchase your investment(s).Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
Glen_Clark wrote: »I don't know what their quoted costs include?
Some funds are very good at hiding their costs http://www.guardian.co.uk/business/2011/dec/17/treasury-warned-over-traders-fees
Foreign & Colonial run a 'free' service where they manage your investment trust shares for you, sending you regular statements, low dealing charges, etc. But all this has to be paid for from the Trust and I don't know if its included in the charges they quote?
F&C costs are 0.5% stamp duty which is payable regardless of the route taken to purchase as they are shares plus 0.2% purchase fee. Neither of these are subject to any minimum charge so for £50pm you will pay 25p stamp duty and 10p purchase fee. Any other costs will be covered by the trust as part of their marketing budget which is paid by all shareholders regardless of their purchase method.Remember the saying: if it looks too good to be true it almost certainly is.0 -
The only problem is that If I went direct to the provider, I wouldn't be able to put it in an ISA. Of course, CGT is not an issue at present but might be in future (if I'm lucky!).
If you have not yet made a purchase with HL in this new tax year, you could start a new S&S isa with ii or sippdeal and continue the monthly investments with them.0 -
If you have not yet made a purchase with HL in this new tax year, you could start a new S&S isa with ii or sippdeal and continue the monthly investments with them.
I have. I currently pay £50 pm into Aberdeen Emerging Markets. As the fund is now closed to new investors I don't want to move elsewhere and have to stop my investments before the total is considerably higher; there's only £450 in there at the moment.0 -
I don't think you should constrain what you want to do just because you already have some money in a HL S&S ISA.
You can, if you wish just leave it there or as we are talking relatively small amounts you could sell and start afresh.
It all depends on what you want to do?
Do you want to continue adding to the Aberdeen EM or choose something new (similar theme or completely different). If you absolutely want to continue adding to the existing fund and if it no longer accepts new investments then there is only one option available to you.
Sometimes when a fund closes its doors to new investments it still allows monthly savings schemes, i.e. new ones. You may want to check that out.
The direct route is still the best option but it depends on things you haven't confirmed yet here.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
I don't think you should constrain what you want to do just because you already have some money in a HL S&S ISA.
You can, if you wish just leave it there or as we are talking relatively small amounts you could sell and start afresh.
It all depends on what you want to do?
Do you want to continue adding to the Aberdeen EM or choose something new (similar theme or completely different). If you absolutely want to continue adding to the existing fund and if it no longer accepts new investments then there is only one option available to you.
Sometimes when a fund closes its doors to new investments it still allows monthly savings schemes, i.e. new ones. You may want to check that out.
The direct route is still the best option but it depends on things you haven't confirmed yet here.
I'd like to continue investing in the Aberdeen for now, rather than switching to a similar fund. I like it's investing style and the Aberdeen research teams.
It is possible that they will allow new monthly savings schemes, that is a good point.
What else would you like me to confirm?0 -
Ok, I'm ever so slightly confused.I'd like to continue investing in the Aberdeen for now, rather than switching to a similar fund. I like it's investing style and the Aberdeen research teams.
You started this thread wanting to know more about ITs and what to use £50pm for, and that was pretty much all you could afford for the moment. And, there's nothing wrong with this.
Above you clarify that you want to continue investing in the Aberdeen EM fund.
So my confusion is.......- Aberdeen don't offer a EM IT (only one they list is Lat Am).
- The fund you want to continue with is Aberdeen EM (OIEC)
- And you don't want to switch
Based on your clarification I'd say you just need to carry on using the HL S&S ISA you have and continue investing £50pm...... Unless I've missed something. :question:Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0
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