Delay in buying funds

snowqueen555

1) Hi all, just opened a S&S ISA, is it normal to have to wait several days for a purchase to go through? If I am trying to take advantage of a drop in the market will I be paying at the price I originally but the purchase in, or at the price later on when it is purchased? E.g. there was a dip on Friday and I tried to buy on Saturday, am I going to get the Friday prices?

2) Leading onto this, if I choose to sell, will the price be the price when it is completed, or when I first make the offer. I am guessing there could be a big gap between those times.

3)Am I then assuming buying stocks/shares is instantaneous to buy an sell?

Thank you all.

Sam_J12

I think you will be likely to get the price at the next pricing point for the funds - which will be 12 noon on Monday for most funds in your case. It depends on the platform you are using, so you will need to read the small print about dealings.

Similarly for selling funds you will get the price at the next pricing point (usually 12 noon on the following day, or same day if you initiate the deal early enough)

For shares (and ETFs - the above advice was for mutual funds) you will need to read the dealing terms on the particular platform you are using.

Linton

Shares are effectively sold and bought in a few seconds at the then current price. Though you wont get the cash to transfer out for 3 days. The reason is that shares operate on a T+3 basis - ie the money changes hands 3 days after the share does. If you are selling and then buying the platform will generally cover you for the 3 days so you can buy again without delay.

Funds can take several days depending on the fund, the platform and when in the day you place the order. Unit trusts arre priced once a day or sometimes less frequently. Your transaction is placed after the next pricing point and you wont know the price until after the event. I believe unit trusts also operate on a T+3 basis - if you sell you wont get your money for at least 3 days.

So if you really want you can trade shares, but trading funds over the very short term is not sensible/practical.

snowqueen555

I have one fund bought Dec 14th and it is already down, I thought calculations were done daily?

Aretnap

For OEICs ("funds" in common parlance) prices will generally be published once per day and there will generally be set dealing points (maybe one per day, maybe one every few days, depending on the platform and the fund). When you buy you're agreeing to buy at the next dealing point - at whatever price that turns out to be. So they're not a good way to try to take advantage of short term dips/rises in the market.

If you could buy at an earlier price there would be easy money to be made. For example if you saw that the FTSE had gone up over the last few hours you could buy a FTSE tracker at yesterday's price and get an instant guaranteed profit. Eventually you could end up like this bloke (if he wins his court case). Of course that profit wouldn't come out of thin air - it would ultimately be paid for by other investors in the fund who were sitting quietly and holding their units in the long term. So really, paying the price at the next dealing point is really the only way OEICs can work.

If your platform allows dealing in individual shares, or in types of funds which are traded like shares (Investment Trusts or Exchange Traded Funds) then generally you can buy and sell them more or less instantaneously - you click "buy, the current price is displayed, and you have a few seconds to accept or reject it.

snowqueen555

Sam_J12 wrote: »

I think you will be likely to get the price at the next pricing point for the funds - which will be 12 noon on Monday for most funds in your case. It depends on the platform you are using, so you will need to read the small print about dealings.

Similarly for selling funds you will get the price at the next pricing point (usually 12 noon on the following day, or same day if you initiate the deal early enough)

For shares (and ETFs - the above advice was for mutual funds) you will need to read the dealing terms on the particular platform you are using.

http://imgur.com/DovUk59

So the purchase just went through less than an hour ago so how did it go down, I am super confused, I'm guessing I bought it at todays price

Linton

snowqueen555 wrote: »

http://imgur.com/DovUk59

So the purchase just went through less than an hour ago so how did it go down, I am super confused, I'm guessing I bought it at todays price

Do you mean the -4.94%? If so that is because your fund has a bid-offer spread of about 5%. ie the selling price is 5% less than the buying price.

The reason for the spread is that the fund invests in actual property - ie commercial buildings. The fund clearly cant build a bit of property when you place your order and sell a bit when you come to sell. Therefore it must have significant cash resereves. So anyone buying into the fund causes quite high costs to be incurred. In most funds these costs are small and incorporated into the fund charges. For real property funds it seems fairer to charge the person buying the fund and so reduce the charges paid by everyone else.

If you keep the fund for a long time then you gain because you arent paying the setup costs for every newer investor. Also it encourages long term investors, which is very sensible for a fund investing in actual property which cant be readily bought and sold.

Sam_J12

snowqueen555 wrote: »

http://imgur.com/DovUk59

So the purchase just went through less than an hour ago so how did it go down, I am super confused, I'm guessing I bought it at todays price

Linton above is correct. If you look at the top right you can see the buy and sell prices. You bought each unit at 77.66p but can only sell them 73.85p. Linton explained why.

dunstonh

snowqueen555 wrote: »

http://imgur.com/DovUk59

So the purchase just went through less than an hour ago so how did it go down, I am super confused, I'm guessing I bought it at todays price

Whilst most property funds have little or no bid/offer spread, the L&G fund has a large one. It is a cheaper fund on an annual basis but expensive for initial buys. There are some excellent replies above that explain it. However, you need to think of it as a way to deter short term traders. Its a long term buy and hold rather than a regularly traded fund (so expect to hold that one for 15+ years).

You need to decide if you are investing or trading. In the scheme of things, you dont buy L&G property on the basis of 1 days movement.

snowqueen555

Hi these are all long term investments. Thank you for your reply, I was thinking of drip feeding every month all my funds, so will it be detrimental to buy a little bit every month with this fund and put in a alrger amount and hold?

dunstonh

snowqueen555 wrote: »

Hi these are all long term investments. Thank you for your reply, I was thinking of drip feeding every month all my funds, so will it be detrimental to buy a little bit every month with this fund and put in a alrger amount and hold?

If you are buying monthly then only one payment is going to go the full term. Each one you make after that has a shorter time than the one before.

For regular contributions, 15 years is about the minimum period and not considered long term. So, how long is your likely investment term?