Buying investment trusts directly

Empor

I have some money to invest, and a bit of research tells me investment trusts seem to be the best thing in my situation.

Many of these companies allow investment directly via their websites. It seems to me this would be a better (i.e. cheaper) option than going via a funds platform such as Hargreaves Lansdowne. Is this correct or am I missing something here?

dunstonh

Is this correct or am I missing something here?

With investment trusts (and shares typically) that is usually the case. However, it depends on the services of the broker. For example, HL is positioning itself as a wrap platform from originally being a fund supermarket. There are brokers out there that are not wrap platforms or fund supermarkets but will do some of the functionality for shares and other direct investments with lower charges. If you dont need or want a wrap platform then it is often cheaper to not use one but focus on a provider that does what you want. Sometimes, that may mean going direct to company.

jimjames

Empor wrote: »

I have some money to invest, and a bit of research tells me investment trusts seem to be the best thing in my situation.

Many of these companies allow investment directly via their websites. It seems to me this would be a better (i.e. cheaper) option than going via a funds platform such as Hargreaves Lansdowne. Is this correct or am I missing something here?

With many yes it is currently correct.

I've got various investment trusts with Fidelity and Aberdeen and buying/holding via their savings scheme is the cheapest way to do so. F&C have some additional charges but I think are still cheaper for many people than using a broker.

kidmugsy

Looking at p44 of the link shows what stunning value they can be.
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats31Dec2013.pdf

Just taking the top one on the list:
Initial Admin: Nil. Annual: Nil. Purchase: Nil. Sale: £10. Transfer Out: £35. Switch: £10. Presumably if purchase costs nowt, you can reinvest your dividends free too.

I suspect that for many investors this would be a cheap and sensible way to buy collective investments. Perhaps it might even be more sensible, at least in the short term, than buying "funds" in ISAs. My only hesitation would be because ITs currently have rather low discounts (presumably because markets have been booming) and I prefer to buy when discounts are large. Still, many people would disparage that notion as "market timing", which they deplore.

jimjames

With Aberdeen all you pay is stamp duty for purchases but as they are shares that would be payable wherever you buy them.

On dividend reinvestment for one trust the stamp duty was the only fee for reinvesting and that came to 8p.

Others such as Templeton have higher charges at around £1.50 per purchase but still good value.

westy22

I have a number of direct accounts with IT providers and, in the main, they are inexpensive, but there are a few points that I would make.

Firstly, even though the likes of Aberdeen and F&C have a number of different ITs available through them you are nevertheless tied into a 'house' brand and therefore probably need a number of accounts with different providers to get true diversification. As an example, almost all Aberdeen ITs have had a dire time in the past 12 months or so due to their 'house' style and preferences.

Secondly, almost all of my accounts receive my DD money at least 8-10 days before they invest it. There can be quite a change in unit price over that period (sometimes to your benefit and sometimes not).

Finally, I am sure it cannot be just coincidence but my purchase almost always is made at the high price point of the day. I always check the day's price movements and I can honestly say that it is very rare for a purchase to have been made at a low or mid-point price.

Of course, if you are investing £50 or £100 each month then it is still cheaper to use such plans than paying a broker. If however, you are investing £1,000 or more then the likelihood is that a broker real-time trade made at the right time, on the right day, will be better value.

kidmugsy

westy22 wrote: »

Finally, I am sure it cannot be just coincidence but my purchase almost always is made at the high price point of the day. I always check the day's price movements and I can honestly say that it is very rare for a purchase to have been made at a low or mid-point price.

The share plans work by adding together all the customers orders and buying in one lump. It would not be too surprising if that led to a little bump up in the price.


Anyway, why do you suspect the managers of malarkey? What do they care about the share price at which you deal?

Empor

I'm looking to invest a lump sum in maybe half a dozen or so then hold for the long(ish) term, so I think this is the way forward. It is a bit of a shame about the current discount situation though. And thanks for the link kidmugsy some good information there!

Glen_Clark

If you want investment trusts (and its not a bad idea) the last place to go for them is Hargreaves Lansdown. X-O, for example, charge half as much to buy them and nothing to hold them - unlike HL who charge 0.45%
If X-O did start charging you can withdraw them as certificates for £15 + Vat wheras HL charge £25.
I know of no Investment Trusts who charge less to trade their shares than X-O Those that do are probably best avoided because they will be subsidising the share trading service from the fund - which all investors will pay for.

Rollinghome

Glen_Clark wrote: »

If X-O did start charging you can withdraw them as certificates for £15 + Vat wheras HL charge £25.

Plus the new HL account closure fee - £30 for closing each sub-account you hold with them. That's £30 for your trading account, £30 for your ISA account etc. Effectively a back-end charge you incur as soon as you open any account with them. They will automatically close your accounts if the value goes below £50 and take the closure fee.

kidmugsy

Glen_Clark wrote: »

I know of no Investment Trusts who charge less to trade their shares than X-O

Then you can't have looked at the link I provided.