Sanity Check

JohnRo

My intention is to end up with around twelve broad index funds or ETFs covering most of the significant regions and markets around the globe.

It's just difficult to find any cheap alternatives to the Vanguard offerings at the moment. The problem I'm seeing with ETFs is when calculating the dealing costs which are, at best, two and a half times what it costs to buy Vanguards most expensive (to buy) fund and five times higher to sell using £1000 chunks as the measure. For the smaller regular amounts the difference is extreme and completely rules out even the cheapest ETFs.

I'm also working on the principle that the BestInvest custody charge for holding non commission paying funds will become the standard platform charge at some point as RDR tightens it's grip, the amount may also change so I haven't factored that fee into any costs in these calculations at this stage.

cloud_dog

hi JohnRo

For me i'm not a fan of broad range investment vehicles. For the UK I might be more tempted to go with the FTSE 100 fund but then you would probably need to re-assess their global impact.

You seem to be very focussed on the TER, which some people are. It's all down to personal choice and if the portfolio make up is going to be static over the longer term.

As I said my only comment is the number of 'broad range' of funds but, as you have stated this is by design and if you do not intend to actively monitor your portfolio then this not necessarily a wrong option. It's all down to personal choice.

JamesU

JohnRo wrote: »

It's just difficult to find any cheap alternatives to the Vanguard offerings at the moment. The problem I'm seeing with ETFs is when calculating the dealing costs.....

Really nice thread, and lots of interesting varied opinion too. Not trying to be over-critical, but some intial views. I am not a big fan of these Vanguard UTs myself, but understand why they appeal to a lot of OPs.

However, you chose BestInvest from the beginning and that decision seems to be the bottleneck leading to this dealing cost dilemma, and the resulting bias towards Vanguard UTs over etfs. That problem was created at the start.

I do not think the conclusion that it is difficult to find any cheap alternatives to the Vanguard offerings is the correct conclusion. If you wanted to make a balanced assessment between UT trackers and etfs for certain asset allocations in the portfolio, it would have been necessary to look at whatever providers still allow low cost trading and holding of etfs at the same time.

You mention that final selections depend on Trustnet performance plots. I am not sure if Vanguard UTs can be selected on this basis, as they have not been around long enough for their relative performance to be meaningful?

Anyway some alternative views on Vanguard UTs from my side just to add some more balance into the mix.

Couple of errors:
Pacific ex Jp index is developed equity, not EM; bump to other section?
HMEF = 0.6%

JamesU

JohnRo

cloud_dog wrote: »

hi JohnRo

For me i'm not a fan of broad range investment vehicles. For the UK I might be more tempted to go with the FTSE 100 fund but then you would probably need to re-assess their global impact.

You seem to be very focussed on the TER, which some people are. It's all down to personal choice and if the portfolio make up is going to be static over the longer term.

As I said my only comment is the number of 'broad range' of funds but, as you have stated this is by design and if you do not intend to actively monitor your portfolio then this not necessarily a wrong option. It's all down to personal choice.

I will definitely add flavour at some point, bearing in mind I already have an offshore bond which is IFA managed.

I just want to get what I feel is a solid low cost underlying foundation built up that tracks the market very cheaply and then perhaps start to take a few punts in specialist areas with relatively small amounts.

The funds I'll be investing are all income generating which allows flexibility with allocation of that income and all the funds in the portfolio will be LTBH using only new money to rebalance or expand quarterly.

What I intend to do, whether it actually happens remains to be seen, is to hold back a monthly contribution if prices are looking particularly high and double up on a monthly contribution if prices are looking especially low. Before anyone starts jumping up and down on me I know market timing is a mugs game but there is enough information to gauge in very broad terms those sort of decisions and at the least time entries so that the average cost is reduced. I'm not talking about moving all in and all out, just about trying to optimise - slightly - the entry point of regular contributions.

JamesU wrote: »

I do not think the conclusion that it is difficult to find any cheap alternatives to the Vanguard offerings is the correct conclusion. If you wanted to make a balanced assessment between UT trackers and etfs for certain asset allocations in the portfolio, it would have been necessary to look at whatever providers still allow low cost trading and holding of etfs at the same time.

True, I chose BestInvest as the "current best fit" for everything I want from the investment without having to span multiple platforms. I also don't want to be locked in to a rigid monthly low cost investment plan. There may well come a time when I consider making a total switch from a vanguard fund to an alternative ETF if the price, dealing cost and lower TER justifies it - Either on BI or elsewhere. I think there are still probably a few seismic shifts to come in the platform universe before the RDR dust begins to settle.

JamesU wrote: »

You mention that final selections depend on Trustnet performance plots. I am not sure if Vanguard UTs can be selected on this basis, as they have not been around long enough for their relative performance to be meaningful?

I perhaps gave the impression I'm leaning on those results more than I am - it was just to see that there was nothing catastrophic happening with Vanguard trackers when compared with their rivals. There are some discrepacies also like having to use the acc version instead of inc for the japan tracker but as said it isn't something i'm leaning heavily on.

JamesU wrote: »

Anyway some alternative views on Vanguard UTs from my side just to add some more balance into the mix.

...and very welcome it is. Fixed the entries you pointed out ty.

JamesU

The 0.5% charge on the Vanguard UK index fund (and whatever, if any, bid/offer spread) looks expensive. There is no stamp duty (SDRT) on etfs. Think VUKE at %ter = 0.1% and with a spread that is usually around 0.12% is also worth considering with a provider.

Never used BestInvest. What annual costs need to be paid for the platform, and any other charges (obviously excluding % ters) if you hold say 5 of these Vanguard OEIC funds at £2K each within an ISA?

JamesU

JohnRo

JamesU wrote: »

The 0.5% charge on the Vanguard UK index fund (and whatever, if any, bid/offer spread) looks expensive. There is no stamp duty (SDRT) on etfs. Think VUKE at %ter = 0.1% and with a spread that is usually around 0.12% is also worth considering with a provider.

Never used BestInvest. What annual costs need to be paid for the platform, and any other charges (obviously excluding % ters) if you hold say 5 of these Vanguard OEIC funds at £2K each within an ISA?

JamesU

BestInvest select service currently levies a £12.50 (plus VAT) custody charge each quarter for any account holding funds that do not pay them commission, effectively a [STRIKE]£70[/STRIKE] £60 p.a. platform charge. I'm assuming this is going to become their RDR compliant standard platform charge at some point.

Their flat rate dealing charge is also £12.50 (no mention of VAT on top) which drops to £7.50 if the account or linked accounts exceed a total value of £50K.

https://select.bestinvest.co.uk/media/16102/keyfacts-services-fees.pdf

edit: I have decided to invest the transfer monthly into all the funds I eventually choose over time, rather than dividing it up and purchasing all on day one - so for that one UK equity fund the maximum I will pay to purchase is the 0.5% you identified. Most of the others are 0%

I estimate the monthly contributions for any one fund to be around the £100 mark monthly give or take for allocation percentage. What I will probably end up doing is holding cash for a month or two if prices are high so it's possible there may be a month where a particular fund gets a full quarters worth of investment money purchased in one go - around about the £300 purchase level.

Given those sort of levels of investment the 0.5% purchase fee is not going to exceed more than around £1.50 even if I hold off a monthly investment for a whole quarter.

There is of course the additional platform charge of [STRIKE]£70[/STRIKE] £60 p.a. to factor into costs but I'm ignoring that as it is pretty much a universal thing and certainly will be post RDR, the only potential spanner in the works is if BI decide to charge a much higher platform fee in future but if that does prove the case I'll have to cost up the alternatives and decide whether the service others offer is worth the saving.

JamesU

JohnRo wrote: »

BestInvest select service currently levies a £12.50 (plus VAT) custody charge each quarter for any account holding funds that do not pay them commission. I'm assuming this is going to become their RDR compliant standard platform charge at some point.

So £60/yr for the platform to hold as many Vanguard oeic funds as you want without any further custody charges? If so, that's pretty good really given the reduced/minimal dealing costs on top of this.

I still think it is a fine line here though. For example, although I do not use them myself, TDdirect does seem to do low cost monthly drip/cost-averaged etf purchases without any additional platform fees. So far more flexibility can be introduced designing the asset allocation relative to the more limited range of oeic index funds. And for anybody using etfs in amounts greater than say £1.5K, the savings and flexibility of dealing in real time and/or using contingent orders make using etfs more benefical than using the oceic index funds. Personal choices according to individual preferences and needs I guess.

BTW on you next Vanguard choice, the global small cap fund is also developed equity and not EM?

JamesU

JohnRo

JamesU wrote: »

So £60/yr for the platform to hold as many Vanguard oeic funds as you want without any further custody charges? If so, that's pretty good really given the reduced/minimal dealing costs on top of this.

Yes, £60p.a. not 70 as I said above, no idea where that came from...
The charge is per account so yes, as many non commission paying funds as I need or want are included in that charge, as you say pretty good. It just remains to be seen what they will do with these charges to become RDR compliant.

JamesU wrote: »

I still think it is a fine line here though. For example, although I do not use them myself, TDdirect does seem to do low cost monthly drip/cost-averaged etf purchases without any additional platform fees. So far more flexibility can be introduced designing the asset allocation relative to the more limited range of oeic index funds. And for anybody using etfs in amounts greater than say £1.5K, the savings and flexibility of dealing in real time and/or using contingent orders make using etfs more benefical than using the oceic index funds. Personal choices according to individual preferences and needs I guess.

I did phone and ask them specifically if the custody charge is applied to funds and also additionally to ETFs and they assured me it is only charged once per account regardless of holdings. That is on top of the actual dealing fees obviously.

JamesU wrote: »

BTW on you next Vanguard choice, the global small cap fund is also developed equity and not EM?

JamesU

Good call, hadn't got round to this section yet and after a quick look it shows a lot of overlap with the other funds I selected - may still include it though and reduce the other index fund allocation sizes accordingly.

JamesU

That sounds fine for the overall platform costs at present then. Likely to be a bit toppy at around 70% US/UK on that small cap fund though, easier to reassess when you have a better picture on your overall equity prefs I guess. Some small cap EM would be nice? Global fixed interest too? Will be interested to hear views on the global EM selection and alternative preferences (passive ones that is). Worth thinking about why Pacific ex Japan index is there too....65% Australia, heavy on financial sector, usually around 10% BLT diggger.....awkward and strange index really.

JamesU

TCA

JohnRo, I'm looking at doing something similar to you. My existing investments are UK heavy, so looking at even up the geographic balance. Given the existing proportions, Vanguard FTSE Developed World ex-UK Index Fund, Vanguard All-World ETF and Vanguard Life Strategy 100% all work better for me than Vanguard FTSE US Equity Index fund in this respect and will also bring up the Asia Pacific, Japan and European exposure. Emerging Markets as well for two of them. Not sure which to choose though and I admit it lends itself less to rebalancing but I can maybe buy additional funds at a later date if need be.

Vanguard Global Small-Cap Index Fund will also be used for small caps and its geographic spread but also considering something like Aberdeen Asian Smaller Companies Trust for some coverage there. Plus maybe Henderson Far East Income.

As you I like Emerging Markets and hold First State Global Emerging Market Leaders within my pension but would like more investment in this area. Just not sure whether I should go active or passive. Quite like the look of Templeton's EM Investment Trust but I'm tending to favour the passive angle (seeing as I have the First State fund) and prefer Vanguard's EM ETF over the Stock Index fund, because it has a bit more Latin American and African bias. I should have enough Asia from elsewhere. ETF's don't bother me because I won't be frequently topping up like you.

What makes me nervous now is making large lump sum investments in all these areas but that's what I'll have coming over the next while, so it's either lump sums or drip feed from a bank account. The latter seeming pointless given current rates.

Interesting thread.