Trading Charges for monthly investment

Silian

Hi,

I'm going to start to invest a tiny bit of money (£30 per month) to learn the basics of how it works. I've never invested before so I apologise in advance for what is a very basic question.

I'm going to do passive trading. For now everything in the ftse 250 (I am aware that is not diverse. I'll fix that when I start investing bigger amounts).

I created an account with A bell. They charge 4.95 each time you buy or sell funds. Does this mean that if I do my £30 monthly investment £4.95 will go to them, or do I only pay this on my initial investment?

redux

That would probably be for each transaction, but note that some places have a lower charge for preset regular monthly transactions, maybe £1.50 or £2 a go, so check if they have an option like that.

I'd suggest also looking at investment trust savings schemes, as most of these have little or no transaction charge (bar the 0.5% stamp duty tax), and some start from £20 or £30 a month.

Silian

Thanks Redox. In that case I will do a small lump sum with them and do a regular scheme with Cavendish (as they do not charge for buying funds).

I do also have a small investment trust - currently at 1.5% that is OK for the small amounts that I am doing now but will hurt when I'm investing larger amounts. I'll see if I can find a cheaper one.

bowlhead99

Silian wrote: »

I'm going to do passive trading. For now everything in the ftse 250 (I am aware that is not diverse. I'll fix that when I start investing bigger amounts).

I created an account with A bell. They charge 4.95 each time you buy or sell funds. Does this mean that if I do my £30 monthly investment £4.95 will go to them, or do I only pay this on my initial investment?

1) they do charge 4.95 when you buy or sell funds. They also charge 9.95 when you buy or sell individual shares, ETFs our investment trusts which are traded real time on a market. When you say "for now, everything in the 250", not sure if you mean you'll invest in a fund which tracks the overall performance of the 250, and has 250 underlying holdings, or if you'll self-select individual shares from within the 250 to buy each month. The first way is the cheaper way to get coverage.

2) AJ Bell do have a regular investing program with £1.50 transaction fees to buy, so basically you just set up your purchase in advance, and around the 10th of the month it will execute the purchase order if you have sufficient cleared funds for the amount you asked to purchase. So, if you did that every single month buying one fund or share it would cost you £18 for the year, whether buying funds or individual shares. When you want to sell, you pay the standard charges as they don't have a discounted "regular selling" program.

However, be aware that although they'll probably let you buy £30 of shares in an individual company as long as you pay the fee, funds often have minimums so it might be that you have to put £50 minimum into some/most funds - maybe just buy every other month if that's the case.

As you can imagine, paying £1.50 to buy and £5-10 to sell is going to eat into your returns quite badly if you are "trading" in and out with only £30 chunks. You should really just keep buying and buying and buying, and not sell until you have a decent sized investment with decent profits.