Best fund to invest in @ £50 a month?

EagerLearner

Hi everyone,

I have never invested before, but now that I have some savings behind me, I can afford to invest £50 a month comfortably, possibly £75 in a few months.

I have read about Investment Trusts and Unit Trusts (but still unsure in plan English what the difference means to me as a newbie investor), and that they are better than buying shares if you are new to investing as professionals manage the funds so your money is placed into various pots within the fund/trust.

I would like to pay that £50 into a fund or trust each month and be able to log on somewhere monthly to see if that money is performing well.

Can anyone tell me which companies allow you to invest such a small amount?

Thankyou for any advice :beer:

save-a-lot

Hi

I have the exact same question so I will join the thread to see what others recommend

SeanW

Hargreaves Lansdown will allow £50 pm per fund.

dunstonh

virtually all have a minimum of £50pm per fund. Some will go as low as £25.

If you are inexperienced and dont intend to monitor and research, then a fund of funds is probably the best option. The amount isnt going to really allow you much else as far as spreading it around goes.

nrsql

Suspect most places will give on-line access now.
I have Fidelity and Hargreaves-Lansdown which both have reasonable sites but I use https://www.iii.co.uk to monitor performance day to day and the holding sites for dividends.
Of the two I would go for H-L as it's cheaper.

Depends where you want to invest. Have a look at tracker funds (e.g. for the UK Fidelity Moneybuilder UK Index). Check whether what you go for tracks the all share, 100 or something else.
Anonether option is a managed fund - but most of them will lose out to the trackers so that's maybe not a good idea unless you want to monitor the fund and take notice of changes e.g. fidelity special sits was one of the best but the fund grew large and was split and now the manager is retiring so maybe it's not a good deal any more.

Decide where you want to invest - UK, Europe, world, sectors, ....
Have a look at H-L and fidelity for their research (H-L have a top 150 funds that they recommend) but the Fidelity site is probably easier to negotiate.

It's difficult to find min monthly payments on h-l but I'm pretty sure £50 will get you into most funds that you would consider.
I would go for a tracker for at least one - if you can find £25 min then maybe split between that and a managed fund (maybe europe or world).
I wouldn't go for a fund of funds due to the amount lost on charges.

Invest via a mini ISA. You have a cash ISA already I take it as you have savings.

moneyandmountains

nrsql wrote: »

I would go for a tracker for at least one - if you can find £25 min then maybe split between that and a managed fund (maybe europe or world).
I wouldn't go for a fund of funds due to the amount lost on charges.

For regular savings of £50, a tracker is likely to be high risk.
Much better to go for a balanced fund of funds. Yes, the charge may be higher, but this is going to be more than compensated by the reduction in risk.

As way of example, a tracker may have a typical Total Expense Ratio of 0.5% - 1%.
The Total Expense Ratio is a standardised way of comparing fund charges (includes effect of annual management charges).

A typical fund of funds may have a charge in the range 1.5%-2%.
The alternative is going for a balanced fund that already includes some diversification e.g. Midas Capital Balanced Growth.

So, lets for sake of argument say the fund of funds is costing (worst case) 1% more per year.
For that 1%, you will get a diversified portfolio across several different asset sectors.
So for each £50 you put in, that is 50p.

The alternative, akin to betting on one horse is to go for the 'cheaper' option. So which is less expensive, to risk your entire capital on one sector, or sacrifice 50p out of each months contribution.

Of course, after several years of investing you may have accumulated a reasonable sum. At that stage, many other options are available to construct a diversified portfolio, e.g. splitting the sum between several different funds.
Then would be the time to worry about charges and their impact on your investment.

nrsql

moneyandmountains wrote: »

For regular savings of £50, a tracker is likely to be high risk.
Much better to go for a balanced fund of funds. Yes, the charge may be higher, but this is going to be more than compensated by the reduction in risk.

I would disagree with this - the fund of funds carries risk due to the manager and due to the managers of the underlying funds. Don't be confused into thinking that as it's investing in a number of funds that necessarily reduces the risk. Of course they may do well but my opinion would be that they are not good value.

As to the beting example - you need to compare it with paying someone to bet for you (which is what you ae doing with the fund anyway so with the fund of funds you are paying someone to pay someone to bet for you).

I would still go for one tracker and one managed to start then review later - you can always stop the recurring investment and start another.

Some institution (can't remeber who) came out with a list of financial rip-offs and fund of funds were included in that - I would disagree wit hthat but I'm not alone in thinking they are generally not good value. Besides you don't seem the sort of person that would benefit from that much distance from your investments.

dunstonh

I would disagree with this - the fund of funds carries risk due to the manager and due to the manager of the underlying funds. Don't be confused into thinking that as it's investing in a number of funds that necessarily reduces the risk.

The fund of funds would be risk rated to suit risk. A balanced fund of funds would include non-equity holdings and would be classed as lower risk than a UK FTSE tracker. An aggressive fund of funds would be a closer match in risk to a FTSE tracker.

Of course they may do well but my opinion would be that they are not good value.

For a small amount and an inexperienced investor, a Fund of Funds would probably be a very good option and certainly more attractive from a potential growth and downside protection point of view.

Someone institution came out with a list of financial rip-offs and fund of funds were included in that

Are you sure it was fund of funds and not manager of manager funds they were talking about? manager of manager funds have recently been under hte spotlight as not being very good value but fund of funds havent been.

nrsql

>> Are you sure it was fund of funds and not manager of manager funds they were talking about?
Don't think so - by manager of manager funds I assume you mean funds managed by the same company? Edit - dang, you have me doubting my memory now. I included a comment about it in a reasearch doc, I'll have to see if I can find it again. I vaguely remember having to do a bit of digging to find what they were talking about.

Anyway it's all a matter of opinion.
(As to the risk - there are a lot of different types of risk and some people think that high risk is good over the long term as the up's will be larger in comparison to the down's. Just looking at risk ratings isn't very useful unless you understand how that risk is calculated or to what it refers)

nrsql

Just managed to find the h-l and fidelity monthly investment - says it's £50 min for both.
As that means you will only be able to invest in one fund it might change your decision.
Makes a fund of funds or managed fund a bit more attractive unless somewhere allows £25.

I would still tend to start off with a UK based investment and given that probably a tracker but that's tempered a bit with projections for the UK market at the moment. I think it's not an easy time to choose especially for a first investment - but then a monthly investment isn't going to be too wrong.

SeanW

Fidelity allow £20pm per fund if you have an online account and you print and post the form. But their discounts are much less.