Advice for entering the S&S ISA world

shicky

Hi everyone,

I've been researching what I need to know in order to make the right fund choices and platform choices for a few weeks now. Unfortunately some family health issues and work trips came up so although I feel well read on the matter, I've made zero actual decisions.

So first up I have no debts other than my student loan which is the old version. I have an emergency fund. I am enrolled in my employer pension scheme for the maximum matched amount. I have bought and read Tim Hale's Smarter Investing as well as a few others on the same topic. I have no plans to buy a house. The purpose of the investment is for my retirement, so long long term.

Given the looming deadline, I'm considering dumping the full NISA amount into a cash ISA to allow more decision making time but I feel I've put this off far too long already.

I'm 27 and my take home is £1900 per month, I save at least £1000, usually more. I wish to dump the full allowance for this year in a lump sum. I'm then likely to transfer £12k in cash ISAs to S&S, I also wish to continue investing as time goes on, lump sums or drip feeding will depend on platform I guess.

The above means I'll nearly be at 32k quite quickly which seems to be the threshold for going flat fee versus percentage based. I'm leaning more towards iWeb due to this, however the fees do concern me given I'm a beginner. It's basically £5 to do anything? i.e. add more money to an existing fund? Or purchase shares in a new fund?

In terms of allocation I'm going to go 100% equity. I know this is probably frowned upon but given the long time-frame I'm looking at, I don't see the need for defensive assets. Over time I will decrease my equity exposure so a market crash wouldn't have such dire consequences for me. From Tim Hale's book, his diversification seems like it will involve purchasing at least 6 funds. This seems like it will cost me a fair amount through iWeb. Is cavendish/charles stanley a better option because of this? I know which type of funds I want to purchase based on Hale's recommendations, however how do I decide which is the best fund in that field in terms of the global developed market for example? Just go for lowest cost/past performance trade off? Morningstar and my platform the best for information?

I'm also curious how to balance this with fund choices for my company pension. Do I follow the same strategy as above?

Thanks for any help you can provide, I feel lost and my head is fried!

Archi_Bald

With £32K in hand already, you should get going before April 6, so you can stick £15K in this FY, and £15,240 on April 6th. I would put the rest into interest paying current accounts and then put the remaining/ongoing money into the ISA as soon as possible.


Tim Hale is good to explain the theory but I think Monevator is way better for the practice. They have some great suggestions for constructing and maintaining a balanced portfolio. http://monevator.com/category/investing/passive-investing-investing/

You can model the best platform for your requirements on http://www.comparefundplatforms.com/

I would personally not bother with 6 funds, Id' just go straight for a single Vanguard Lifestrategy 100% ACC for the next 10-15 years, and I'd probably do it with iWeb. But I am not you.......

AlanP_2

I'd agree with ArchBald, get the cash into a Cash ISA as a minimum before end of tax year if you haven't settled on fund choice.

The VLS100 offers 100% equity with a global spread so could be a sensible starting point whilst you continue to research and learn.

noggin1980

It might take a few days to open an account too before you can deposit, so don't leave it till April.

I was in your position and went with charles stanley direct and have been really happy with them, I've e-mailed a couple of times with questions and got a reply within 5 mins and used their website message service to ask them a question twice and got an answer in a few hours both times.

I kept putting off and putting it off best just to get started, pick your fund platform today and open an account, then at least you've gotten started and it will be ready to deposit in when you've sorted your fund and asset allocation choice.

I think we can spend too long trying to make sure we have made a perfect plan without that being possible and miss out in the process.

shicky

Archi_Bald wrote: »

With £32K in hand already, you should get going before April 6, so you can stick £15K in this FY, and £15,240 on April 6th. I would put the rest into interest paying current accounts and then put the remaining/ongoing money into the ISA as soon as possible.


Tim Hale is good to explain the theory but I think Monevator is way better for the practice. They have some great suggestions for constructing and maintaining a balanced portfolio. http://monevator.com/category/investing/passive-investing-investing/

You can model the best platform for your requirements on http://www.comparefundplatforms.com/

I would personally not bother with 6 funds, Id' just go straight for a single Vanguard Lifestrategy 100% ACC for the next 10-15 years, and I'd probably do it with iWeb. But I am not you.......

Thank you for the response Archi Bald, I think you're spot on regarding the indecision, I'm going to lump the money in a cash ISA now to avoid any problems with missing my years allocation.

Regarding Tim Hale and Monevator, I'd be very inclined to agree, I've devoured the website and read Tim Hale's book twice now. It's just so easy to get lost between the theory of 'I know what I should do' and the practical of 'I put £5k in a blackrock UK small companies fund'

I'd come across Monevator's allocation advice before but I've never seen a mention of his allocation advice in comparison to Tim Hale.

Thank you for the fund comparison link, I don't think I've come across it before.

May I ask if that's what you've done with your money?

shicky

noggin1980 wrote: »

It might take a few days to open an account too before you can deposit, so don't leave it till April.

I was in your position and went with charles stanley direct and have been really happy with them, I've e-mailed a couple of times with questions and got a reply within 5 mins and used their website message service to ask them a question twice and got an answer in a few hours both times.

I kept putting off and putting it off best just to get started, pick your fund platform today and open an account, then at least you've gotten started and it will be ready to deposit in when you've sorted your fund and asset allocation choice.

I think we can spend too long trying to make sure we have made a perfect plan without that being possible and miss out in the process.

Thank you noggin1980, first hand reports are invaluable, it's good to hear your experiences with Charles Stanley have been very positive. May I ask how much you have invested at this point?

I totally agree on the perfect plan point, I'm usually not bad for it in any situation but I guess the opportunity cost mixed with digging myself out of a hole I could potentially create is playing with my mind

noggin1980

shicky wrote: »

Thank you noggin1980, first hand reports are invaluable, it's good to hear your experiences with Charles Stanley have been very positive. May I ask how much you have invested at this point?

I totally agree on the perfect plan point, I'm usually not bad for it in any situation but I guess the opportunity cost mixed with digging myself out of a hole I could potentially create is playing with my mind

only £15k at the moment and it will increase by £1270 each month from April. I wont be moving to a fixed fee at 30k, I'll seriously consider it at 100k though once i can make 4 trades a month on fixed fee and still be cheaper than charles stanley, even then though the fact im so happy with the service (assuming I still am at that point) may tempt me to stay over something I have no experience with.

I have my money in
vanguard ftse allshare
vanguard developed ex uk
vanguard emerging markets
vanguard global small cap

Im thinking of adding a property fund,and at some point Ill add 2 or 3 bond funds

Totton

Well done on being in such a good financial position so early, that bodes very well for the future. Personally I would be looking at Investment Trusts for long term investing. Often the comparable IT has been a better performer than an OEIC but that may have changed with the intro. of RDR, we'll have to see the effect on the longer term but imho IT's are more transparent and you gain the right to be heard at an AGM.

The charges for holding your IT's are usually very low, eg. with Hargreaves Lansdown the charge is zero in a Fund & Share a/c whilst £45 per year for an ISA. Others are even cheaper or you could use the Savings accounts operated by the IT's themselves for no charge.

If you don't like IT's then ETF's carry the same level of fee.

As well as work pensions, it may be useful to consider a SIPP as an alternative, personally the pension route worked out well for me but then SIPP's weren't around :-)

Best of luck with it,
Mickey

BLB53

Sound like you have read quite a lot - you appear to have the basics of a good plan - I agree with 100% equity in the early years for the best returns - its now just a case of backing your intuition and putting the plan into action!

Charles Stanley would be a good platform to start off as their fees are only 0.25% compared to Hargreaves 0.45%. AJ Bell are cheaper at 0.20% but they charge £4.95 to buy funds so this will not work so well if you are drip-feeding.

Go for the low cost, diversified equity funds - Vanguard (VEVE) charges 0.15%, Legal & General is even cheaper - their LS100 is a bit more expensive.

Monevator is great for passive investing guidance/articles so I do not think you would go far wrong. Also check out the diy investor uk article on advice to his 21 yr old self - covers a lot of what you are planning to do. Also the Retirement Investing Today site is worth a look if you have not done so already.

Good luck, keep it simple and don't over analyse!

shicky

noggin1980 wrote: »

only £15k at the moment and it will increase by £1270 each month from April. I wont be moving to a fixed fee at 30k, I'll seriously consider it at 100k though once i can make 4 trades a month on fixed fee and still be cheaper than charles stanley, even then though the fact im so happy with the service (assuming I still am at that point) may tempt me to stay over something I have no experience with.

I have my money in
vanguard ftse allshare
vanguard developed ex uk
vanguard emerging markets
vanguard global small cap

Im thinking of adding a property fund,and at some point Ill add 2 or 3 bond funds

thank you very much for the response, it's certainly food for thought. I'd considered going vanguard but from what I picked up in Hale's book it seemed you could get an additional 1-2% from 'better' picks. This of course comes with the added risk though

shicky

Totton wrote: »

Well done on being in such a good financial position so early, that bodes very well for the future. Personally I would be looking at Investment Trusts for long term investing. Often the comparable IT has been a better performer than an OEIC but that may have changed with the intro. of RDR, we'll have to see the effect on the longer term but imho IT's are more transparent and you gain the right to be heard at an AGM.

The charges for holding your IT's are usually very low, eg. with Hargreaves Lansdown the charge is zero in a Fund & Share a/c whilst £45 per year for an ISA. Others are even cheaper or you could use the Savings accounts operated by the IT's themselves for no charge.

If you don't like IT's then ETF's carry the same level of fee.

As well as work pensions, it may be useful to consider a SIPP as an alternative, personally the pension route worked out well for me but then SIPP's weren't around :-)

Best of luck with it,
Mickey

Thanks for the reply and the compliments Mickey! I was always a bit of a saver from the age of 19 onwards so had good habits. I then went into the finance sector where it would have been very easy to earn astronomical wages and still is but unfortunately my girlfriend became ill and her health has declined. I guess this has forced me to grow up fast and prepare myself for the worst, though obviously I hope it'll never come to that.

I must admit I'm not too familiar with EFTs and even less so with investment trusts. This may be something I look to in future but right now I feel it best to stick with what I know best.

I definitely will open a SIPP to siphon off money from bonuses and when I hit higher rate tax brackets