How do I find a unit trust?

lizzyl1

A long time reader of the site there's a lot of helpful people here. Can someone point an investment newbie in the right direction?

I say newbie. I've been trying to read some of Monevator but TBH it makes little sense to me.

Here's the thing
44, happy with pension & savings. Got some money doing nothing so thought I'd try investing it. Don't understand (or want to) the markets. Ultimate goal is to retire earlier. If the investment fail then I work until 65.
Obviously I don't want them to, but if the worst happened I'd be no worse off than I am now.

If I put the extra in my pension it wouldn't work as I could only take 25%. Also if circumstances change I want to be able to use the money

I read somewhere (read a lot of money sites, can't remember which one) that a unit trust could be good to invest in for someone like me, and it linked to a page on Fidelity as the charges were low. The page did not exist though. I tried searching the site for unit trust but it only found 4 results.

The only thing I can find that I think may be suitable for me on Fidelity is
fidelity.co.uk /investor/getting-started/the-basics/help-choosing-funds/pathfinder-funds.page

then pick one, probably with the lowest fees.

I thought unit trusts were a popular investment. 'a good choice for new investors'. How come it's so hard to find them?

westy22

There are still Unit Trusts (UTs) around but the majority of investment funds are now Open-ended Investment Companies (OEICs). Together they are more commonly known as 'Funds' today.

There are some 3,000 funds generally available, covering almost every country, sector, market and focus. The difficult part is narrowing that 3,000 down to one or two that meet your needs.

Many beginners find that a simple tracker fund that tracks the UK FTSE All Share Index offers reasonable future growth coupled with low charges.

A good starting read would be to go the the Monevator site http://monevator.com/category/investing/passive-investing-investing/

If you want to have a look at a place to buy and hold your investments then take a look at Hargreaves Lansdown http://www.hl.co.uk/. They are not the cheapest but for someone starting out they provide lots of information and a very good web interface.

To see some popular tracker funds on the HL site go to http://www.hl.co.uk/funds/index-tracker-funds

Archi_Bald

lizzyl1 wrote: »

I've been trying to read some of Monevator but TBH it makes little sense to me.

This should alarm you. If you don't understand what you read on Monevator, you should read it again until you do understand it. If you don't, you probably shouldn't invest because Monevator are on of the more easy to understand, and generally quite up to date, pieces about investing. There is a list of other resources: https://forums.moneysavingexpert.com/discussion/4752194

One of the most useful bits on Monevator is their model portfolios for what they call the lazy investor: http://monevator.com/9-lazy-portfolios-for-uk-passive-investors-2010/

Totton

Try the following for lots of information on funds although if I were you I would be looking at Investment Trusts.

http://www.trustnet.com
http://www.morningstar.co.uk/uk/
http://www.citywire.co.uk

and dare I mention the information at http://www.hl.co.uk, now that one will upset a few around here :-)

lizzyl1

Thanks but I really don't want to be picking & choosing. I'd be constantly worrying about it. I phoned the bank to open an investment account as they don't do them in branch any more but all they did was transfer me to HL who sent out an application form.

My limited research suggested Fidelity had lower charges and would probably be more cost effective. Looks like it's back to HL & either their master portfolios or multi manager fund.

Archi_Bald

You sounds like the archetypal passive investor (I am one of them, too). Your very best chance would be to select one of the passive options on Monevator http://monevator.com/9-lazy-portfoli...nvestors-2010/

The very simplest is Vanguard Lifestrategy. Only thing you have to decide then is how much exposure to the stock market you want - 100%, 80%, 60% or 40%. Probably go for a lower number than 100% if you are older.

Once you have chosen your fund(s), you then need a platform. Again, Monevator has got the beginner's guide: http://monevator.com/compare-uk-cheapest-online-brokers/

Oh, and you were extremely lucky that your bank sent you away (though not necessarily with the right suggestion - HL are just one of many options, and perhaps not the best). Taking out an S&S ISA with a bank could be the most expensive option you can find, and their choice of investments is probably rather limited.

Also, don't fall for HL's "wealth 150" or other investment recommendations. They are likely to want you to invest on something that pays them the most. They are not impartial.

Rollinghome

lizzyl1 wrote: »

Thanks but I really don't want to be picking & choosing. I'd be constantly worrying about it. I phoned the bank to open an investment account as they don't do them in branch any more but all they did was transfer me to HL who sent out an application form.

My limited research suggested Fidelity had lower charges and would probably be more cost effective. Looks like it's back to HL & either their master portfolios or multi manager fund.

You haven't said how much you intend to invest and that makes a lot of difference to how you go about it. If it's a small sum you can afford to lose then you might want to jump straight in and learn from your mistakes. If it's a larger sum then you really do need to do plenty of reading so that you at least understand the risks - otherwise you could make an expensive mistake.

If you don't want to spend a lot of time eliminating poorly performing actively managed funds then passive, index tracking funds are likely to be your best choice. Passive funds are likely to do better than the average managed fund though not as well as the best - if you can know in advance which those will be. Multi manager funds can do badly due to their high costs and need to be chosen with care.

Costs can have a big effect especially over the longer term so selecting the right platform is important. Hargreaves Landown are one of the most expensive made worse by a plethora of extra charges not made by less expensive competitors. Fidelity are slightly cheaper with good support and the benefit of very few additional charges. You could also look at Charles Stanley Direct who are cheaper still and compare prices for the best known providers by downloading the brilliant spreadsheet by MSE member SnowMan from https://docs.google.com/file/d/0BxA6Przq6KI1Q1hhLTZwSDhxNTg/edit?pli=1

For tracker funds you could start by looking for those by HSBC. Details on the websites of the various platforms and at http://www.assetmanagement.hsbc.com/uk/individuals/funds-in-focus/index_tracking.html . But please do your research first. Good luck.

lizzyl1

Vanguard Lifestrategy looks like something I could use thanks. Found a long thread on the subject which may hopefully have something interesting in it.

Carpi09 wrote: »

..

If I do I think I'd use HL as Fidelity don't do Vanguard according to the chart.

As for being lucky with the bank all I did was phone them & got put straight though to HL. They may be the the most expensive but they made me more money than any savings account would have done a few years ago. None of this trying to choose the right funds. Just gave them the money and collected the profits. It was possibly miss-sold to me at the time as I was only after a short term investment, but in the few years I had it it did okay.

As for the amount. I was going to start with the minimum investment, either £500 or £1000 depending on the platform, then hopefully another £100 a month. Then next year once I've got my confidence, and finished spending money on the house, maybe £3000 - £5000 a year, investing monthly.

Totton

Hi,
You are starting to get into muddy waters for what you want but we're all just trying to help a little. Be careful of general comments such as

Hargreaves Landown are one of the most expensive made worse by a plethora of extra charges not made by less expensive competitors.

Fund platforms are of variable cost usually dependant on how much you are investing how frequently you trade etc. A decent table guide is at http://langcatfinancial.co.uk/blog/

You will see that HL are one of the cheapest until you get to around £10,000 but expensive above that and very expensive around 50k and above. You can avoid all of this though by opting for Investment Trusts which in the HL Fund & Share a/c you will only pay dealing costs and stamp duty whereas others will charge you more.

I'm with HL myself and am happy to stay, the service is A1 and having tried many others I am happy where I am. My own view for what it is worth is that prices will be a merry-go-round in the short term anyway. I would though like to see the FCA do something about exit fees which are not fully justified imho.

As you are hoping to keep things simple, the opting for something like the Vanguard funds as suggested is a great idea but also take a look at the new range of trackers coming in March on HL, these are looking like they will be cheaper than Vanguard.

Personally I would give serious thought to opting for a monthly plan buying into an Investment Trust or two, something like Law Debenture despite its high premium is a class act, others to look at as a start may include, RIT Capital Partners, Caledonia, Scottish Mortgage, these can be bought on HL or other platforms on a monthly basis, the cost at HL is the one that I know and that is £1.50p a month to deal plus the 0.5% stamp duty for the Govt. If you hold IT's in the HL ISA then that will be a small charge of £45 a year, much cheaper than funds!

Be wary of fund of funds such as the HL one and others such as Jupiter Merlin Growth, they are very expensive and often hit 3-4% charges, having said that I would buy Jupiter Merlin Growth fund of fund if I was looking for a long term fund of funds.

Good luck, you are doing the right thing and keeping things simple.

Rollinghome

Totton wrote: »

You will see that HL are one of the cheapest until you get to around £10,000 but expensive above that and very expensive around 50k and above. You can avoid all of this though by opting for Investment Trusts which in the HL Fund & Share a/c you will only pay dealing costs and stamp duty whereas others will charge you more.

The waters do seem to be getting a touch muddy.

The Lang Cat chart uses various assumptions and generalisations and isn't intended to calculate the charges for individuals. For that you need to use something like Snowman's spreadsheet or do the sums yourself.

Anyone investing a small sum would obviously be best advised to look for ad valorium (percentage based) charges rather than fixed rate plus trading fees. The only company that comes to mind charging a higher rate than Hargreaves Lansdown's 0.45% is Axa who'll charge 0.50% but as fees will be waived for a year even they will only have cost more after several years.

Of the others, as I recall, BestInvest will charge 0.40%, Fidelity 0.35%, Cavendish and Charles Stanley both 0.25%. None of them have all the additional charges of Hargreaves Lansdown.

The OP said she didn't "want to be picking & choosing" and so I really don't think that considering ITs would be very sensible. While ITs are not as difficult as sometimes suggested, at the very least there needs to an understanding of the effects of gearing and of discounts/premiums, particularly when premiums in many cases have recently been pushed higher than they've ever been before and the discounts many offered have now vanished.

I've encouraged people to consider investing in ITs for a very long time, here and elsewhere, but I would never suggest them for anyone not able and willing to do a reasonable amount of research. Then they'd notice that while Scottish Mortgage has given excellent returns it also carries well above average risk and unlikely to be a sensible choice for the cautious first time investor. If we have a sharp correction then many people who have only recently discovered ITs, and have in some cases pushed them to silly premiums, could be surprised by the sting in the tail when discounts widen.

There's no need to pay any platform fees for ITs and the cheapest way to hold is likely to be with brokers such as X-O, SVS and others who currently charge nothing to hold them in an ISA and additionally have much lower regular dealing fees than Hargreaves Lansdown. Having dealing fees complicates buying ITs in small lots and though some people like savings schemes, choosing when to buy and knowing the price by paying £6 through a low-cost broker can be a better bet except for the very smallest sums.

Will be interesting to see the new trackers HL have made much of but after paying their 0.45% platform charge clearly won't match those available elsewhere with a cost already lower than 0.45% including platform charge. It's noticeable that they always refer to the AMC rather than the TER/OCF and won't give any details until after their new fees come into force next month.

I'd agree with you that there's likely to more positioning on charges for some while which is why it's important to avoid being locked in by high exit fees. Again, Hargreaves Lansdown's exit fees are among the very highest around with a new charge of £30 to close each sub-account from June plus a charge of £25 per fund or stock transferred and even a new £25 fee for transferring cash. Fidelity and Cavendish have no account closure or transfer fees so clients are free to leave if a better deal becomes available elsewhere.

I'd guess there's every chance that HL will be forced to review their prices for bigger portfolios and have already been reported as offering better deals behind closed doors on an ad hoc basis in an attempt to retain clients.

bloss0m

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