investment funds isa help please

gazzabboi

Evening all

Could somebody please help me with the costs involved in an investment funds isa. I'm new to the stock market so don't have a clue. My normal isa is only getting 2%, so I have decided I will stick a couple of grand in some funds for the next 3-5 years. (I am aware I would do better leaving the money for longer, but I will need the money back to buy a house when they finally drop to an affordable level).

What I plan do do is go through money supermarket using cofund and I have selected 3 funds which I will put £1000 each in, just to spread the risk a bit. They are- lion trust special situations, fidelity multi asset income and ecclesiastical amity sterling bond. Looking at past performance they seem to have done fairly well, seem a good call to me.

Are my calculations here correct?
0% initial charge
£1000 deposit
1.5% management fee= £15
Lest say the fund in year 1 makes 10% return
My total fund will be worth £1000- £15 management + £100 interest = £1085

Year 2-
£1085 in fund
1.5% management fee= £16.28
Let's say the fund makes 15% return
My total fund will be worth £1085- £16.28 management fee= £1068.72 + £162.85= £1231.47

Etc etc

Cheers for any help:beer:

Shaolin_Monkey

It's on the right lines but not quite there Taking the Liontrust fund, the charges accrue each business day and are taken on the last business day of the month. I believe there are normally 252 working days in a year, so each day they look at the unit value and calculate 1.5% divided by 252 to work out the management fee for that day. As the unit price goes up and down each day, the calculated fee will vary a little from day to day. At the end of the month, the fees calculated for each day of the last month are deducted.

So as an example:

Day 1 Unit Value £1000, Charge (1.5%/252) = 5.95p
Day 2 Unit Value £1014, Charge (1.5%/252) = 6.04p
Day 3 Unit Value £992, Charge (1.5%/252) = 5.90p
....................................
Day 21 (end of month) Unit Vale £1045, Charge (1.5%/252) = 6.22p
Total AMC for month to be deducted = total of previous 21 days charges.

There are other charges as well as the annual management charge, including transaction charges and other expenses. Always look at the Ongoing Charges Figure (OCF) or Total Expense Ratio (TER) which includes these extra expenses in addition to the management charge. The OCF for Liontrust Special Situations 'R' units is 1.88% currently. The documents you need to read before investing in a fund is the Key Investor Information Document (KIID) which gives a simplified explanation of charges, and if you want the full workings of how they are calculated then that will be in the funds Prospectus.

I wouldn't be too concerned with performance before charges - you won't get this information easily. Past performance figures are after charges.

You can get 'clean' share classes through some brokers which have lower charges. For example you can get the I class units of the Liontrust fund through Charles Stanley Direct which has an OCF of 0.89%. You do have to pay 0.25% a year to the broker though as these clean share classes do not pay commission. It's still cheaper than the retail class units though.

gazzabboi

Ah ok, I didn't realise it was at the daily rate.

To be honest im not overly concerned about the charges, my main issue is that my return will be more than the 2% I am getting in my cash ISA.

If they make 10% yeied per and the management charges come to 2%, Ill still get 8% back

ie on £1000 ill get back £80

westy22

gazzabboi wrote: »

Ah ok, I didn't realise it was at the daily rate.

To be honest im not overly concerned about the charges, my main issue is that my return will be more than the 2% I am getting in my cash ISA.

If they make 10% yeied per and the management charges come to 2%, Ill still get 8% back

ie on £1000 ill get back £80

You need to change all of those 'will's to 'may's. There is no guarantee of any sort - your investments may be valued at £1,080 at the end of 12 months but may equally be valued at only £880.

sharpe106

It is a risk if it was not nobody would be using normal bank accounts, you could well end up losing money or after charges only making a small amount.