Investment Trusts held in an ISA

Crazy_Diamond

I would like to hold a few investment trusts within a stocks and shares ISA and am trying to work out the cheapest way of doing this.

I am currently looking at using either SIPPdeal or Alliance Trust but am a little confused over the charges. I anyone can help me with any of the following that would be appreciated. Am I correct in thinking:

a) That rebates only apply to funds not investment trusts so Alliance's offer of 100% rebate on commission is not applicable here.

b) That Alliance has an annual admin charge of £48 whereas there is not one for Sippdeal.

c) That the transaction fees of £12.50 for Alliance and £9.95 for Sippdeal apply to both purchase and sale.

d) That Alliance charges a cheaper £5 for dividend reinvestment whereas for Sippdeal it is £9.95. I am not sure what they mean by this - it I get a small dividend of say £20 would then then apply this fee or could I wait for dividends to build up first?

e) For monthly direct debit dealing the fee for each is £1.50. So I am correct in thinking that if I say invest £500 a month in 1 fund the charge will be £1.50 per month. If I split this with £250 in two funds the charge will be £3?

f) Would anyone recommend a provider other than Sippdeal or Alliance that would have lower fees. I have a cash ISA of around £35k to transfer and then I would be looking at investing around £500 per month.

Many thanks.

BLB53

I hold several ITs with sippdeal in both sipp (drawdown) and ISA. I have not used ATS.

To answer you points - a) b) & c) correct, d)+ e)I usually save up a few months dividends and add to the next purchase (could therefore be £1.50 for the lot with sippdeal) f) I can recommend sippdeal for inv. trusts and shares. (If you wanted some of the low cost trackers, there could be additional costs)

Here a link to a good article on RIT which may help http://www.retirementinvestingtoday.com/2013/01/investing-for-income-via-investment.html

Crazy_Diamond

Many thanks and a really useful article.

It does however raise the issue of timing with a lump sum. With a cash ISA to transfer do you know if I can transfer it in stages to reduce my risk? If not I presume I can leave it with Sippdeal as cash but I presume their interest rates will be very low. Any other options?

Also can I pick your brains on discounts vs. premiums? A lot of high performers are obviously trading at premiums. However I guess the trick is in picking those that are at lower premiums but have the potential to perform better in the future which is not easy to tell.
In view of this is it better to go for trusts that have been good performers but are at a bit of a premium or those slightly lower on the performance list that are trading at a discount?

BLB53

I'm not sure about transferring in stages - probably best to give them a call to clarify.

Assuming you will be holding long term, the discount/premium should not really be a factor - personally, I would always favour quality performers/managers - Murray International, Bankers, Temple Bar, City of London etc.

Crazy_Diamond

ok thanks. I have been looking at some of those you mention but I was wondering why some others have good performance but are still at a large discount e.g. Henderson Smaller Companies is at a discount of -15 despite outperforming the sector. Am I missing something here?
http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ITHSL&univ=T

BLB53

I think its common to many of the trusts in the smaller companies sector - I hold Aberforth which is on a discount of -15%, similar thing with Blackrock. Smaller companies will be good for total return over the longer periods but tend to be more volatile. You probably would not want to pile into SCs just for the discount but a good selection - 10% or so, would probably provide a decent return as part of the mix.

Crazy_Diamond

Ok that sounds sensible.

Sorry just one more question and thanks for all your advice. I was looking the instructions for regular investments on Sippdeal
http://www.sippdeal.co.uk/ISA/RegularInvestments/ and was wondering if there is anything to stop me setting up a regular investment and then changing the investment trust(s) it is invested in each month. For example I was wondering if I could use a drip feeding strategy of £500+£500 a month in two investment trusts and then switch to 2 different ones the following 4 months until I have built up a portfolio of around 10 different trusts. At £1000 a month I will have used up my cash in around 1.5 years and hopefully spread the risk a bit. Does that sound reasonable?

Also that way I think I would only be paying £1.50+£1.50 each month rather than the £9.95 dealing charge?

BLB53

No problem - just change the names of the trusts to be acquired as and when...

http://www.sippdeal.co.uk/Resources/Content/PDF/SD_UG_regular_investment_service.pdf