Sharedealing where to begin with little amounts of money?

grey_gym_sock

buying shares directly isn't cost-effective with very small amounts. it's more cost-effective to start with funds, or perhaps investment trust savings plans.

there are plenty of options if you have at least £50 per month to invest. not so many options with smaller amounts, but you might find some from £25 per month or so.

these are monthly schemes, but you can switch them off and on whenever you like. so you could set up a "regular" £50 per month; then cancel it after the first payment; then start it again 3 months later; etc. ... fiddly, but it can be done.

some providers do have android apps.

grandplonker

MoneySavingKing: thanks for adopting my example. Therefore if my £20 funds increased 12% during a year like yours, and was then charged 1.5%, my portfolio is then £22.10.

I've made just enough to buy a large cappucino at my favourite coffee shop :-)

That should be feasible on £50/m in HL funds.

My issue with putting it all in one fund as MSK says is diversification. If that fund fails, I'm stuck.

The thing about putting all £20 in one fund is 'what if that one fund fails?' Does one fund have diversified contents?

JoeCrystal

grandplonker wrote: »

MoneySavingKing: thanks for adopting my example. Therefore if my £20 funds increased 12% during a year like yours, and was then charged 1.5%, my portfolio is then £22.10.

I've made just enough to buy a large cappucino at my favourite coffee shop :-)

That should be feasible on £50/m in HL funds.

My issue with putting it all in one fund as MSK says is diversification. If that fund fails, I'm stuck.

The thing about putting all £20 in one fund is 'what if that one fund fails?' Does one fund have diversified contents?

Yes, there are funds of funds...

grandplonker

I'll take this fund as an example.

It is diverse with 341 components. It began in 2004 at £0.48. 2013, it's £0.62. That's 29% up in nine years.

How do I read the numbers on the top left to find the fees if I buy £50 of the stuff?

bowlhead99

grandplonker wrote: »

I'll take this fund as an example.

It is diverse with 341 components. It began in 2004 at £0.48. 2013, it's £0.62. That's 29% up in nine years.

1) That's too simplistic to assess the performance. This fund invests in income-generating assets with the aim of paying a higher than average distribution to its owners each year. So if you had bought at 48p, what you have left is 29% higher than that purchase price but also you will have had a relatively high amount of dividends along the way. Your total return is significantly higher.

To illustrate the effect of this, if you go to the charts and performance tab, you can see it's up about 15% in the last 5 years. However if you flip the graph into "total return" mode instead of simple "price", you can see that the total return in that 5 year timescale including value growth and cash paid out to you for you to reinvest, is actually 50%.

How do I read the numbers on the top left to find the fees if I buy £50 of the stuff?

Fund manager's initial charge 5.00%
HL saving on initial charge 5.00%
HL Dealing charge Free
Net initial charge 0.00%

- so, the initial fund manager's charge to buy in is discounted to nil and there is no dealing fee from HL. Your £50 gets you £50 of investment units with nothing wasted. So, as of day one, the fund manager is deploying £50 of your cash into its underlying investments in shares and bonds (the current mix is shown on the Fund Analysis tab). These hopefully go up in value over time (although the bonds probably won't, but they pay interest which is collected by the fund manager along with the dividend income on shares and either reinvested or paid out to investors).

- Fund manager's annual charge 1.375%
HL Annual saving (loyalty bonus) 0.188% *
Net Annual charge 1.187%
Fund manager's other expenses 0.195%
Performance fee No
HL Platform charge Free

The fund manager Invesco takes a fee based on the value of the assets every so often, based on the asset value, which adds up to 1.375% a year. Your exposure to this charge will be 1.375% of your 50 quid or whatever that 50 quid is worth averaged over the course of the year. If your investment is worth 50 quid it's 69p. If the fund does very well so you have £100 of assets, it's £1.38. If the fund performs poorly so your assets are only worth 30 quid, the fee is only costing you 41p.

Although the headline fee is 1.375%, HL get a kickback from the fund manager Invesco and out of this they can pass a discount of 0.188% back to you as a "loyalty bonus". Other fund platforms may well pay more. The small print is that they are only going to give it to you if you have more than £1000 invested, because clearly if the total amount the fund manager gets off you is only a few pennies, their kickback is tiny and you are costing them more money to create and administer your account than they could get back from the fund manager, so no discount for you.

Aside from the headline management fee (net of loyalty discount if applicable), there are also other fund running costs, estimated as averaging out to 0.195% of asset value a year. This includes accounting and audit, investor reporting, legal costs, etc etc. These costs are nothing to do with HL and are paid out of fund assets so will ultimately reduce the return you get from the fund. The fund price you see on the price screens and performance charts have taken this into account so if it says it has delivered a total return of 50% in 5 years, that's after the management fees and running expenses were taken.

Finally it mentions performance fees as nil. With some funds the investment manager is incentivised with a fee based on the performance he delivers, in addition to the standard percentage management fee. There isn't one in this fund.

Overall the charges appear to be virtually nothing, but so is your investment. It's still 1.5% ish of your investment so whatever the fund manager buys will have to go up by 1.5% in a year for you to get any gains at all. Also, HL are making only pennies out of you for all the work they have to do to comply with regulatory rules, maintain your account, handle your cash, place your trades, produce periodic reports for you etc. At some point when the platform fees they get from fund managers inevitably reduce (a forthcoming industry change), they will have to bill you something. Perhaps a pound or two a month like they charge on other funds that don't give them kickbacks.

You'll notice on the key features tab of that page, the minimum one-off investment is £500. If you only want to buy £50 worth this month it will have to be part of a regular savings plan, as a £50 one-off investment for pennies per year is not going to keep them in business.

Money-Saving-King

grandplonker wrote: »

My issue with putting it all in one fund as MSK says is diversification. If that fund fails, I'm stuck.
[/LEFT]

Well you might want to try a cheap index tracker then. Most funds require a minimum investment of £500 anyway. You can do the monthly drip feed of £50 with many and index trackers. I'd personally but again just my opinion recommend this one

Type www. infront as I can't post links yet.

hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/legal-and-general-gbl-health-and-pharma-index-r-accumulation/charts

adewalton

"With shares it will be even worse if you move anything after the initial investment. Someone posted it's £5.95 a trade, I think with HL this is only if you make 20 trades a month otherwise it's nearer £11.
Someone above said with HL the first trade is very cheap."


My reply............
(Not sure how you do the quote option when reposting?).


The £5.75p per trade is with SVS Securities and they charge £1 per trade for the first 30 days is what I think I posted?
I also said that H & L are good but to expensive at £11.75p per trade for single equity trades.
Hope this clears up the misunderstanding?

bowlhead99

grandplonker wrote: »

My issue with putting it all in one fund as MSK says is diversification. If that fund fails, I'm stuck.

The thing about putting all £20 in one fund is 'what if that one fund fails?' Does one fund have diversified contents?

Yes as long as you are not getting one that invests in just one type of asset. There are portfolio funds which can invest broadly across different sectors and asset classes. The particular one you linked as an example does not cover a huge range, but it holds a mixture of shares and bonds from more than one country.

So, taking that fund you linked - when you look at the top ten holdings, sectors and countries, you can see that the shares it holds are heavily weighted to large UK-listed companies that pay high dividends. This is because the goal of this fund is to enable you to take high distributions out of it each year.

When you look at the whole investible universe, there is relatively less overseas exposure than you could find elsewhere, and in order to find high dividends (rather than for example, high growth) there is a high weighting to big pharma and tobacco and there will not be much in, say, technology - as Google, Apple, Samsung etc are not big dividend payers nor are they UK based.

Basically yes all funds have diversified contents to an extent because they hold multiple assets. But clearly there will be some which invest in a wide worldwide mix rather than putting a fifteenth of your money into Glaxo and AstraZeneca like the sample fund. Those companies are rivals but market sentiment will move their values in similar ways from time to time. More diversified funds exist, but still, the fund will not go bust even if a few companies it holds go bust.

Money-Saving-King wrote: »

Well you might want to try a cheap index tracker then. Most funds require a minimum investment of £500 anyway. You can do the monthly drip feed of £50 with many and index trackers.

A single index tracker is diversified in that it is tracking a basket of shares whose values are averaged in a particular way to create an index. The fund is more likely to have a high number of underlying holdings if its going to invest broadly enough to replicate the performance of an entire index. There are lots of different indexes out there. However, most indexes are set up to track one particular market (eg UK FTSE 100 shares, US S&P 500 shares) so in that sense you are not properly diversified unless you invest in several funds or you invest in one fund which invests across multiple indexes.

For example, if you are invested in just FTSE100 shares during a UK downturn, you will take more of a hit than if you were also invested in European, US, Japanese and emerging market shares which might not move in the same direction at the same time. But they are often correlated with each other. Further diversification would be to hold some fixed income bonds which generally move in the opposite direction as stocks, and some real estate, gold, etc etc etc.

This is not to put you off, but just recognise that it is very difficult to get complete diversification for 20 quid. To be honest when a 10% gain or loss is only enough to buy a cup of coffee, largely it doesn't matter. Just go with a global equities fund or hold it in cash until you have a decent amount to invest.

I'd personally but again just my opinion recommend this one
[posts a link to a healthcare/pharma index fund]

When someone is concerned (or just generally curious) about diversification if they only held one fund, it seems bizarre that you would recommend that they put it all into a fund that invests exclusively in equites and is focussed purely on the healthcare and pharmaceutical industry at the expense of every other type of company on the planet. The 'global' aspect of that fund is the only thing that is attractive to someone looking to diversify.

adewalton

Bowlhead99....
I am right in thinking the vanguard LS 60/40 has a slight exposure to fixed income bonds?
If not could you point a few out that have with H & L?
Looking to add to portfolio in April.
Got vanguard l/s 60/40
Adding a tech fund and an another soon?
Cheers!

grandplonker

Gee, thanks (doubly bowlhead). I should come here more often.

So yes, I can put £50/m in HL funds. And I understand how I'm charged. It's all supercomplex, but hey you gotta start somewhere.