Advice for a bewildered newbie

Larry_M

Hi,

I’m an investment newbie and researching it is making my head spin so I’d be grateful for any advice anyone could give. My situation is that I’m nearly 50, ideally I’d be looking to retire at 55 but there’s a good chance I’ll be made redundant in a couple of years time. I’m in a decent defined benefits pension scheme and I’m currently paying as much as I can into my AVC to bump it up as much as possible. But I have approximately £20000 in a couple of cash ISAs and it’s this I need to sort out.

From what I’ve learned a stocks and shares ISA is the way to go so I was thinking of using £10000 from the cash ISAs for this. For this amount I had tentatively concluded that Charles Stanley would offer about as good a deal in terms of charges as anyone else. So far so good I think, though please tell me if you think I should do differently, especially in term of alternatives to Charles Stanley.

Where I start to get bewildered is what to do within the S&S ISA. I don’t feel a need to be particularly adventurous so I had (again tentatively) thought that I’d invest in index tracker funds. If so should I invest in, say, 10 funds x £1000, or 2 funds x £5000. Or would I be better investing (say) half in index tracker funds and half in active funds? Or something else? Any ideas gratefully received at this point.

Lastly, a question on the mechanics of how it works. If I was to set up a standing order of £50 per month into the S&S ISA can this then be automatically apportioned into whatever funds I want within the ISA or is that a manual task?

Atreyu107

Hi Larry_M,

I think you're absolutely right to move into a S&S ISA. Interest rates are so poor at present that there's really no justification in holding a Cash ISA (unless of course you believe cash is going to beat the market... who knows in these times of volatility).

But certainly, if you're investing long-term then investments are the way go. If you're not happy picking your on shares, you can go two ways (and mix and match how you choose)

1) Unit Trusts (funds) which invest in sectors you want exposure to. If you're unsure, nothing better than to give your money to a professional to invest it on your behalf, and it'll be a damn sight cheaper than getting an IFA to do it for you. If you're going to do it this way, find a broker who doesn't charge you a specific fee for holding funds and check the AMC's of the fund's you're considering.

2) Tracker funds/ETFs. If you're bullish on a specific index, you can invest to track it, usually at a very small annual cost (though the only upfront charge you'll see is the commission you pay to buy/sell shares in it). If you're going to do it this way, find a broker with a small dealing commission as this is the only thing you'll pay them. The AMC on ETF's are also usually much lower than actively-managed UT's.

If you are going to go the execution-only way, Charles Stanley are not the cheapest on the market by any stretch of the imagination as they charge you a platform charge for holding funds AND equities.

xylophone

http://monevator.com/transfer-cash-isa-into-a-stocks-and-shares-isa/

http://monevator.com/low-cost-index-trackers/

Hargreaves Lansdown are not the cheapest but their website and service are excellent and while your portfolio is modest, they might be a good place to start.

You might consider moving to a fixed charge platform when your portfolio has grown and you have more experience.

A regular investment service is also offered.

Larry_M

Thanks for that, do you have any suggestions for alternatives to Charles Stanley? Cavendish perhaps? Those were the two that seemed cheapest when I did a price comparison

justme111

I am not far away from you in knowledge and understanding, what i see is that there are no reasons to invest in 10 funds if one could do the job. So you look at fund , see what it invests into and pick on that basis. If there is no fund that invests into all the sectors you want then you chose a couple which would cover all that you want. From what you written you have no preferences re sectors and areas so why not to chose something broad like L&G or Vanguard ?

Larry_M

When I said Charles Stanley I meant to say Charles Stanley Direct

justme111

I am not far away from you in knowledge and understanding, what i see is that there are no reasons to invest in 10 funds if one could do the job. So you look at fund , see what it invests into and pick on that basis. If there is no fund that invests into all the sectors you want then you chose a couple which would cover all that you want. From what you written you have no preferences re sectors and areas so why not to chose something broad like L&G or Vanguard ?

BLB53

Where I start to get bewildered is what to do within the S&S ISA. I don’t feel a need to be particularly adventurous so I had (again tentatively) thought that I’d invest in index tracker funds.

I like the globally diversified Vanguard LifeStrategy funds - with your risk profile - maybe LS60 or even LS40.

Here's a recent article on Monevator which gives a good overview - http://monevator.com/using-vanguard-lifestrategy-funds-life/

If you decided this was the way to go, you could consider Halifax Share Dealing with a platform fee of just £12.50 p.a. which is cheaper than CSD for just a single one off fund. Check out the comparison table on Monevator.