Investing for dummy question

remorseless

I am good at saving but I have absolutely no idea about investing, however I am curious.
I understand there are risk and so on.

What I would like to do is to invest incremental small amounts like £300/500 a month. Is it possible? If so how would I do that?
Investing smaller amount like this, is it bad? Will fees eat most of it?

I had a look and most investment platform (Citibank, Vanguard, etc) have large initial commitments like min £25K~100K, etc.

Can someone be kind enough to point me to some investment company dealing with smaller amounts so I can get some ideas?

colsten

It is certainly possible to invest £300/500 etc a month. But you should be doing lots of reading before you commit any of your money.

Search the forum, there is a "Books on investing" thread somewhere with fabulous ideas on what to read.

You wouldn't wish to invest with any bank (with the exception of Halifax Sharedealing perhaps) as their charges are unnecessarily high, and many have very limited selections. You would also not normally want to invest with a fund house, as you get cheaper deals, for exactly the same products, through fund supermarkets. You would usually also wish to invest in some sort of a tax wrapper, such as an investment ISA.

ChopperST

http://monevator.com/category/investing/passive-investing-investing/
http://www.bogleheads.org/wiki/Video:Bogleheads®_investment_philosophy
Coffeehouse Investor by Bill Schultheis
Smarter Investing by Tim Hale

All you need to know.

puk999

remorseless wrote: »

What I would like to do is to invest incremental small amounts like £300/500 a month. Is it possible? If so how would I do that?
Investing smaller amount like this, is it bad? Will fees eat most of it?

A recent thread had tacked on the end a similar question about fees and drip feeding which prompted an excellent response. See post #28 from this thread and the subsequent response from bowlhead99.

I had a look and most investment platform (Citibank, Vanguard, etc) have large initial commitments like min £25K~100K, etc.

Those amounts are if you're investing directly with the fund manager. Vanguard isn't considered to be an investment platform (well, not a retail investment platform which the likes of you and me are interested in). Examples of platforms are Charles Stanley Direct, Hargreaves Lansdown, Fidelity, Interactive Investor (who incidentally are having issues right now so best to avoid), iWeb, Cavendish Online, BestInvest, and others.

These platforms will allow low lump sum investments and very low regular payments. Fidelity for example allow regular investment from £50/month. (BTW, they claim the minimum lump sum is £1,000 but I've invested less than £100 on numerous occasions but read the T&Cs of whatever platform you choose).

These platforms usually charge you a low annual fee based on a percentage of your assets. For instance, I pay 0.25% per annum which on £50k works out at £125/year. You also have to pay the fund manager's (i.e. Vanguard's) charge which is also based upon a very small fraction of your holdings.

EDIT: Another important function that most platforms provide is the ability to conduct your investments within an ISA wrapper. This is great as you are shielded from income tax, capital gains tax, and therefore don't need to keep paperwork for tax purposes.

jimjames

remorseless wrote: »

What I would like to do is to invest incremental small amounts like £300/500 a month. Is it possible? If so how would I do that?
Investing smaller amount like this, is it bad? Will fees eat most of it?

With most companies the fees are a percentage so it doesn't matter whether you invest £100 or £10000 you'll only be charged in proportion to your investment so fees will not eat into it any more for smaller amounts.

remorseless

Thank you puk999 - great list of trading platform for me to research...
do you know if there's a matrix somewhere about main/major platforms with pros/cons?
Thanks again!

puk999

I'm sure I've seen a thread on here. If I find it I'll edit this post.

EDIT: this is the thread: https://forums.moneysavingexpert.com/discussion/3153942

The Langcat site has a 64 page booklet which you might find useful. You'll probably want to skip over a lot of it though! You can find it on this page. Scroll down to the bit that says "THREE WAYS TO READ THE GUIDE" and click on the picture to load the booklet. On pages 26-27 you'll find tables which'll show how much the platform fees are depending on how much you're investing in an ISA. Pages 28-29 are for SIPP (Self Invested Personal Pension) which you may not be interested in right now.

Pages 38 onwards seem to go in-depth a bit more so there might be the pros/cons you're looking for there. A good strategy might be to narrow down the list of providers and do searches here for them.

The booklet appears to be correct as of July 2014 but I guess some providers might've tweaked things a little.

Do you have an idea of what fund(s) you wish to invest in? The normal order of doing things is to pick the funds first then find a platform. Different platforms have different offerings of funds. For example, I'm with Fidelity but can't access Vanguard LifeStrategy funds.

http://www.comparefundplatforms.com/ will ask you for some information about how you want to invest (lump sum and regular contributions) and will rank the providers by cost.

You could also look at Snowman's Spreadsheet which I've not used myself but can calculate costs over the main platforms.

remorseless

actually I have no idea!!!
I had a look at couple of platforms you mentioned (and couple more referenced on those sites as comparison).
My plan was (for now) to use the wizard (sad I know) on the site and based on questions get some suggestions.
For example Fidelity suggests "PathFinder Focused 4". I see however there're 3 options (and fees) so I need to read the differences.
I tend to learn more as I do... so ideally I'd like to see/try with small amounts to understand return before getting more serious about it.
I suppose unless the fund is high risk, beside not making a buck and some amount disappearing in fees not much else can happen, well unless there's a fund crash but then we'd be all doomed

hopefully my approach is not too reckless?

sooty&sweep

Hi
I'm also looking at investing some money. I've not got a fortune £5 - £10 k but its alot to me !
I accept there is a risk with investing but I'm not looking for high risk however I'm hoping to get a better return than the miserable interest rates available on savings / current accounts.
I've not yet decided on a platform but I am wondering about Hargreaves Lansdown. I know they are a more expensive option.

The thing I'm struggling with is how do you select the funds to put your money into ?

Frankly I don't have huge amounts of time to investigate the different funds & make an informed decision. I know Hargreaves Lansdown offer a number of managed portfolios which could do that for me.

So any advice ?
How do you choose your funds ? Do you spend large amounts of time considering different fund options ? Do the returns make it worth the risk ?

Jen

puk999

remorseless wrote: »

I tend to learn more as I do... so ideally I'd like to see/try with small amounts to understand return before getting more serious about it.
I suppose unless the fund is high risk, beside not making a buck and some amount disappearing in fees not much else can happen, well unless there's a fund crash but then we'd be all doomed

hopefully my approach is not too reckless?

I totally get what you mean about learning by doing. It's up to you. Doing the reading/research then purchasing is the better way of course. I have just read Tim Hale's book "Smarter Investing" which is accessible to the beginner and helped me to select the core of my portfolio. I feel like I've got quite a lot more to learn but that small piece of research gave me the confidence to select the funds. When I think about the funds I've chosen I do not experience doubt or anxiety. I feel happy that I understand the rationale behind the choices. I want to do some tweaking sometime but the core is pretty much there.

My previous fund selection was a bit of "just jump in". I was switching funds around a lot based upon hunches but because I was never happy with the core I probably switched a lot more than I should've done. Just a lack of strategy I guess and no idea about portfolio composition.

(I've edited my previous post to include the link to the thread I was thinking about).

puk999

sooty&sweep wrote: »

Hi
I'm also looking at investing some money. I've not got a fortune £5 - £10 k but its alot to me !
I accept there is a risk with investing but I'm not looking for high risk however I'm hoping to get a better return than the miserable interest rates available on savings / current accounts.
I've not yet decided on a platform but I am wondering about Hargreaves Lansdown. I know they are a more expensive option.

You have a £15k per annum ISA allowance so use that to protect your investments from tax.

HL are 0.45% but you can pay less with other providers. Charles Stanley Direct charge 0.25%. I'm with Fidelity (who are normally 0.35%) and changed my agency to Cavendish Online to bring it down to 0.25%. Far better to keep the money in your account than to give it away.

The typical order to do things in would be to decide what you want to invest in and then select a platform.

The thing I'm struggling with is how do you select the funds to put your money into ?

This is a question without an exact answer and will differ from person to person. I recently read Smarter Investing by Tim Hale which resonated with me. In a nutshell, he prefers tracker funds because his evaluation of the evidence is that expensive actively managed funds in the main do no better than trackers. There are exceptions but it's nigh on impossible to pick a fund manager who will consistently outperform the market. This is great news because tracker funds are very low cost.

Some trackers track the FTSE 100 but this doesn't give you a good spread of companies. Widening out there's the FTSE 250, the FTSE All Share. These have a UK bias. Widening out further you can track the MSCI World Index which comprises the developed markets but lacks the emerging markets. Click here for a recent thread that has more information about trackers. If you just bought one of these trackers then you'd have all the money in stocks and you then might want to consider diversifying into bonds/cash. The idea is that bonds are loosely correlated to equities so if global equities are low then the bonds should still be ok and your portfolio will not fall as much. Sort of like not keeping all your eggs in one basket.

Frankly I don't have huge amounts of time to investigate the different funds & make an informed decision. I know Hargreaves Lansdown offer a number of managed portfolios which could do that for me.

So any advice ?
How do you choose your funds ? Do you spend large amounts of time considering different fund options ? Do the returns make it worth the risk ?

If I were you I'd look at the Vanguard LifeStrategy range of funds for a fire-and-forget solution. These are low cost and come in a variety of equity/bond weightings to suit your risk appetite. For instance, The LifeStrategy 80 will place 80% of your contributions into equities and 20% into bonds/cash. They automatically rebalance meaning if equities steam ahead and the balance gets to 82% vs 18% it'll automatically correct back to 80% vs 20%.

Bear in mind I'm just some bloke on the internet learning this stuff too so do your own research and get other opinions, etc