Cheap drip fed tracker

GreenTricky

I am looking to open my first S&S ISA but don't have much money, maybe £3k to start and looking to add about another £200 a month. Reading Monevator they suggest having a single cheap index tracker until a sufficient pot has built up to make it worth holding a number of diverse trackers.

I had been looking at something like the Vanguard Lifestrategy funds but they mention these are expensive to hold and would be cheaper to get an ETF? Is something like these the best bet:
Vanguard FTSE All-World ETF (VWRL)
HSBC MSCI World ETF (HMWO)

TD Direct look the cheapest to do what I want I think but does anyone else have any recommendations?

Thanks

jimjames

Cavendish online are probably the cheapest for funds but don't do ETFs

cathybird

I have been puzzling my head over this same issue recently too. I went with Charles Stanley Direct and plan to drip-feed into index trackers to begin with, probably about £250 a month to begin with, though the plan is to top that up regularly as well. If you want to use ETFs TD Direct do seem to be the cheapest. Charles Stanley are about the cheapest for drip-feeding into index trackers up to a portfolio amount of about £20,000. I used Monevator as my guide: http://monevator.com/compare-uk-cheapest-online-brokers/ (you've probably seen this already). There is also a thread on here on this subject but for the life of me I can't find it at the moment. The problem is that due to recent changes in rules the charges do seem to be in a state of flux and will probably continue to shift.

I'm pretty new to this myself in some ways but those are my thoughts.

Rollinghome

jimjames wrote: »

Cavendish online are probably the cheapest for funds but don't do ETFs

Cavendishonline list at least 14 ETFs, mostly those of HSBC, so I assume you can buy them, but the TERs are generally higher than corresponding UT's and not clear how an order is processed.

GreenTricky

cathybird wrote: »

I have been puzzling my head over this same issue recently too. I went with Charles Stanley Direct and plan to drip-feed into index trackers to begin with, probably about £250 a month to begin with, though the plan is to top that up regularly as well. If you want to use ETFs TD Direct do seem to be the cheapest. Charles Stanley are about the cheapest for drip-feeding into index trackers up to a portfolio amount of about £20,000. I used Monevator as my guide: http://monevator.com/compare-uk-cheapest-online-brokers/ (you've probably seen this already). There is also a thread on here on this subject but for the life of me I can't find it at the moment. The problem is that due to recent changes in rules the charges do seem to be in a state of flux and will probably continue to shift.

I'm pretty new to this myself in some ways but those are my thoughts.

So have you gone for a fund rather than an ETF? Is the fund cheaper to hold?

cathybird

I haven't quite decided which funds to hold yet. Charles Stanley does offer ETFs, though CS charges a fee for all holdings, including ETFs, whereas TD Direct currently does not charge for ETFs. However, I did read (also on Monevator) that in the UK index trackers are cheaper than ETFs anyway. It was starting to do my head in trying to work out the variables and in any case, as I said before, charges seem to be shifting quite a lot at the moment anyway, so predicting which platform and combination of funds/ETFs would work out the cheapest in the long run seems to me to be too tricky.

Even though the amount I will initially be saving won't be huge, I still planned to split it between about five funds - there's no charge for dealing in funds at the moment on CS so it won't cost any more than putting it into one. I am trying to balance my Isa with my pension - I have a limited choice with what I can invest in in the pension and it tends to be UK-heavy, so I was thinking of using the Isa to invest outside the UK (so, the US, Europe ex UK, emerging markets). My idea was also to split both the pension and Isa across about 70% equities and 30% fixed income but I remain undecided how much of the Isa, if any, should be put towards bonds. (I'm using the Isa as well as the pension to save for my retirement btw.)

Monevator does suggest that when investors get started they should probably keep it simple and just put half of what they save each month into cash and half into a FTSE All-Share index fund, but I don't want to do that as I'd prefer to diversify right away (and am also trying to avoid the UK).

grey_gym_sock

a lifestrategy fund with charles stanley direct would be reasonable with those amounts to invest. since they're not charging a fixed fee (in £), just a percentage of the value of your fund (viz. 0.25%).

total cost would be c. 0.3% for lifestrategy (the exact figure depending on which 1 you pick) + 0.25% for CSD = c. 0.55%.

if you use ETFs instead, you can pick a broker/platform who doesn't charge you a percentage fee (which i think means not using charles stanley direct in this case), so what you pay is the ETF's TER (e.g. 0.25% for VWRL) + whatever dealing commissions your broker charges.

you could pick a broker who will do monthly purchases for c. £1.50 (though it will cost more to sell), e.g. aj bell youinvest. then your costs could be (using VWRL) 0.25% + £18 per year. which is more than the lifestrategy/CSD option until you get up to £6000 invested.

so actually, there is not a lot in it - if you're prepared to use just 1 ETF. if you start using several ETFs, then lifestrategy becomes noticeably cheaper.

GreenTricky

Thanks for that, that makes sense