Best broker for index investing with vanguard when starting with a small balance

deeppo0ckets

Just managed to become debt free for the first time in 5 years, feeling is empowering, but now I'm left wondering what to do with my surplus cash. I've buffed up on investing in shares and bonds and have opted to go down the passive index investment route and have settled on vanguard's lifestrategy 60% fund.

I have £5000 in cash for an emergency fund but not much of a lump sum to open an account with TD direct. I want to start investing at least £400 a month, with the option of topping up manually at the end of the month with any surplus from my current account.

I have looked into TD Direct who are oft quoted as one of the cheaper brokers but have just noticed they carry an admin charge on accounts with balances lower than £5,100. Should I suck it up and pay the fee? Or does anyone know of a cheaper broker to invest in this index fund?

Or should I keep my money in a cash ISA at least until I break the 5k barrier. At my rate of saving that would be 14 months or so, not counting any return on the savings.

Cheers!

tigerspill

Hi deeppo0ckets. Welcome to a great forum.

You might want to take a look at this link.
http://monevator.com/compare-uk-cheapest-online-brokers/
It gives a table with details of each platform and hints at what each is good for.
I am guessing with a small amount to invest, that one that charges a %age might be the way to go. The table is split in two - %age and fixed fees.
I went with Charles Stanley initially, but am thinking of changing as py portfolio grows to a fixed fee platform. I probably should have done better learning and planning in the first place.
Good Luck!

deeppo0ckets

I had seen monevator's table before a few month's back but didn't understand it properly at the time.

Now I understand the terminology it's clicked! Charles Stanley or Cavendish online look like the best bets for me. Does anyone have experience of both/any preferences?

0.25% pa fee's on deposits seems quite a lot to me, but I suppose you are getting much higher returns on a fund that you would with a cash ISA.

Cheers!

JohnRo

If you have the discipline one option is to save the monthly contributions in an interest bearing cash account and purchase the VLS60 annually with iWeb. The interest earned should help to soften any potential losses from the money being out of a rising market and boost the potential returns from money being out of a falling market.

That method will cost you a fixed grand total of £5 annually, discounting the £25 one off admin charge, to hold and contribute to the investment fund until iWeb decide to hike their prices.

enthusiasticsaver

I have just started a monthly investment plan into Vanguard LS 60 Acc fund through Cavendish and there are no charges except for the 0.10% Cavendish charges. I went on the monevator site and Charles Stanley direct and Cavendish came out the same. I plan to put in £250 per month and pay in additional amounts per month up to £750 by debit card which Cavendish have said I can do with no problem.

ColdIron

Charles Stanley Direct or Cavendish are usually good choices for sums less than £30k, or higher if you drip feed and 0.25% is as good as it gets for percentage based charging. I use CSD and they are fine

Plug your numbers into the site below to get a feel
http://www.comparefundplatforms.com/

PS how long will you be investing for? The 60% VLS may be too conservative if you are looking beyond 10 years

deeppo0ckets

I will initially be investing £400 a month, increasing that by another £4-600 by the middle 2015 once some short term savings goals have been met (wedding & home deposit). I plan to retire as early as possible and live off the return of my investments, hopefully within 10-15 years. I've worked out I need to save around ~£350,000 which is achievable and doesn't factor any increases in my income (or inflation). That's perhaps a simplistic approach, I'm still working on fine tuning the details.

I'm also on the NHS pension scheme, but don't really rate it given the governments ability to change pension policy whenever the mood strikes, so I'll keep contributing until I retire and defer any claim on it until I hit 65.

Perhaps you are right about the fund being too conservative, I had reservations about it too and was going to do a bit more reading on the long term risks of leaning towards 80-100% equities for a 15 year plan. I did consider changing the fund nearer retirement to a less risky fund.

deeppo0ckets

JohnRo wrote: »

If you have the discipline one option is to save the monthly contributions in an interest bearing cash account and purchase the VLS60 annually with iWeb. The interest earned should help to soften any potential losses from the money being out of a rising market and boost the potential returns from money being out of a falling market.

That method will cost you a fixed grand total of £5 annually, discounting the £25 one off admin charge, to hold and contribute to the investment fund until iWeb decide to hike their prices.

Interesting, I hadn't thought of that! I did read that drip feeding a portfolio is safer as it averages out any loses/gains in the market over a year. Maybe I'll revisit the topic this evening.

JohnRo

The thing is, beyond the first year or two and over a considerable timescale I doubt the monthly versus annual will make a vast difference, either way.

Also storing the annual contribution might give you a window of opportunity if there is a particularly severe market fall to capture a little more of that fall than would have been possible with a regular monthly contribution but that's all conjecture. Of course the reverse is true when markets rise.

deeppo0ckets

Any tips on timing the market then JohnRo?

Thanks, some sound advice.

JohnRo

deeppo0ckets wrote: »

Any tips on timing the market then JohnRo?

Erm, nope....