Index tracker advice

fothers365

I am just starting to get my head around investing and have been reading up a lot over the last few weeks, so please bear with me and grit your teeth!

I have a Versatile Investment Plan with Standard Life for 10 years that was set up by my IFA 13 years ago as collateral for a drawdown facitlity. The drawdown is paid off and the investment plan is now mine. It has 10k in it which we are going to put to OP'ing the mortgage.

I was paying £50 month into that plan. I did consider keeping £5k in the fund since it is doing well at the moment but would kick myself with that if the value suddenly dropped.

However, I am happy to risk money starting from scratch again, on a small scale. I have been doing as much research as I can over the last few weeks and think that an index tracker would be a good choice for me, porbably a Fidelity one from the info I can find. What I can't decide however is whether to do a FTSE all share one or a US tracker or a global tracker (I can't remember all their offical names off the top of my head). I would either just start paying a small monthly amount- possibly £50-60 and maybe an initial lump sum of £500.

I plan on this investment being left there for many years, it will be extra cash that I shouldn't need to try and access so is very much a long term thing.

Having read about ECFs I think as they charge a fee for every investment they wouldn't be suitable for monthly plans(have I got that right?).

The other thing is I am not sure whether this investment fund I plan to build should take place within an ISA or not?

The other thought I had- which may be completely ridiculous so feel free to set me straight- was that I could put £20 each a month into the uk, us and global tracker and spread it over the 3 of them?


Any advice on any of the above will be much appreciated (it took me a long time to pluck the courage to post in case I was shot down in flames and had people falling over laughing....)

dunstonh

What I can't decide however is whether to do a FTSE all share one or a US tracker or a global tracker (I can't remember all their offical names off the top of my head).

The UK and US trackers would ideally need to be held as part of a wider portfolio of single sector funds. The global tracker can be held by itself if you accept that level of investment risk.

Having read about ECFs I think as they charge a fee for every investment they wouldn't be suitable for monthly plans(have I got that right?).

Typically correct for ETFs

The other thing is I am not sure whether this investment fund I plan to build should take place within an ISA or not?

You should ideally use a wrapper if you have the ISA allowance available.

The other thought I had- which may be completely ridiculous so feel free to set me straight- was that I could put £20 each a month into the uk, us and global tracker and spread it over the 3 of them?

You could do but there is no logical reason as to why you would.

jamesd

A global tracker in the typical ex-UK (excluding UK) version will be about 55% in the US and about 10% in Japan so you wouldn't really need more US coverage than you already get with a global tracker.

While you could buy outside an ISA there's no reason to and it avoids both the potential for tax later and the need to track purchases and sales in case you have capital gains tax to report or pay once the amounts involved become significant enough for that.

For a total amount of £50-60 a month with minimum attention being paid a single global tracker fund is probably the best way to go. That's because £50 is a fairly low amount for such things. From time to time you could switch a bit into a UK fund of some sort to get some UK component.

Global tracker funds will probably track either the MSCI World or FTSE World index. MSCI seems to be a bit better than FTSE for this.

fothers365

Thank you both for your replies. I understand better now why spreading it across all 3 isn't ideal.

So, if I am going to go for a saving plan type global tracker within an ISA does the Fidelity one seem as good a bet as any? From what I have found out so far it seems to have low TER and be easy to set up for what I want. Are there any other firms I should consider instead? I see HSBC do some but need to go and do more research into which firm would actually be best to set up and go with.

grizzly1911

fothers365 wrote: »

Thank you both for your replies. I understand better now why spreading it across all 3 isn't ideal.

So, if I am going to go for a saving plan type global tracker within an ISA does the Fidelity one seem as good a bet as any? From what I have found out so far it seems to have low TER and be easy to set up for what I want. Are there any other firms I should consider instead? I see HSBC do some but need to go and do more research into which firm would actually be best to set up and go with.

Trackers broadly track.

Total cost of ownership will be the biggest issue once you have decide on which index. Also bear in mind if you wish to expand your portfolio in the future whcih platform offers best value. A monthly holding fee may make a sizeable dink in relatively small investments.

Have you looked at Monevator.com?

fothers365

I have just cashed in the existing plan and ear marked it for the mortgage and set up a small monthly ISA with Fidelity with their worldwide tracker.

They seemed to have the cheapest overall fees from what I could tell.

Roll on the plan clearing in my account in the next week or so before it is whisked away elsewhere.:cool: