Online Platform to Invest in Stocks

bushido1

bowlhead99 wrote: »

1) you will want both. Set one up, then open the second one as an existing customer. Some firms will allow you to simply check two boxes on the application form rather than two application forms. See how it is when you try. Either of those methods will end up with both able to be viewed from one logon.

2) you can't buy direct from your bank. You give money to the stockbroker firm of your choice and they buy and hold the assets for you.

3) Neither of those firms runs foreign currency accounts, they simply take GBP from you and hold it as GBP and then charge you a conversion fee to buy any dollar or euro assets out of that available GBP. Legally an ISA cannot hold foreign currency cash as it is not a permitted investment type; such a restriction doesn't apply to normal taxable accounts, but many providers don't want to offer that service.

Thanks to both for the very detailed answers. I have everything more clear now!

It sucks that I have to pay a conversion fee everytime that I buy a US asset such as VWRL.

1/ Independient from AA. What do you guys think about a strategy of 80% VWRL, 20% VGOV? Is it well diversified?
What stocks do you guys recommend or would use yourself for a long term buy and hold indexing strategy?

2/ When I am going to do the bed and breakfast from VWRL to IWRD.
Do I have to loose money again from exchange conversion fee by becoming all (100kGBPs) from VWRL to IWRD?

3/ What is the difference (apart from the fees) between a Unit Trust or an ETF?
Is any of them safer in case of a world economy disaster or/and closing of Vanguard?

Cheers :beer:

bowlhead99

bushido1 wrote: »

It sucks that I have to pay a conversion fee everytime that I buy a US asset such as VWRL.

As mentioned, most UK brokers configure their accounts to what most of their customers are OK with. Most of HL and CSD's customers don't want to pay in foreign currency cash or buy things in foreign currencies, or don't find the fees big enough to move. HL were able to grow very big without needing to offer a multicurrency account.

One of the things I like about TD is that they do have a multicurrency account so if I get dividends or sales proceeds in USD or EUR or HKD or AUD they will sit in those currencies until I want to spend them. Although if I do flip between currencies the exchange fee is quite high (would be 1% on £50-100k, lower for bigger deals). Another broker is IG Group, the accounts are single currency but the exchange fee is only 0.3%, lower than most of the competition.

But if you want to go with HL because a lot of customers give them good reviews, that's up to you. A review from an average customer has limited value if you are not an average customer.

1/ Independient from AA. What do you guys think about a strategy of 80% VWRL, 20% VGOV? Is it well diversified?

In a sense it is diversified as VWRL holds stocks from all over the world and 20% of your money is in something that is not equities.

However, the world of investments is much more diverse than global largecap equities and domestic government bonds. Midcap and smallcap equities, overseas government bonds, all corporate bonds, real estate are just some examples of things that may not be well correlated with the things you have or may offer greater return potential.

Personally if I wanted to hold stocks with an indexing methodology I wouldn't use VWRL. I would prefer to have separate funds for region or industry sector and periodically rebalance between them.

For example as a UK-based investor I may have a natural preference to have more than 7% of my equities in the UK and less than 55% in North America. Or for example if I have the 55% in North America and then Apple, Exxon and Microsoft all double overnight while everything stands still, I will now have about an extra 4% exposure to North America (taking me to 59%) and I will have 3% extra exposure to computer hardware and software.

So, the index might say that 59% in North America is the right level, but it might not be a level I want, because I end up with a lot of my wealth concentrated to one economy. If I had multiple regional funds I could sell it down to 55 or 50% and use the 4% gains released from North America to buy more stocks everywhere. Apple would still be a bigger proportion of my US assets than it was before, because it has grown, but the US would not need to be a larger proportion of my global assets.

Being able to rebalance exposures not just between stocks and bonds, but between different regions or different sectors, is important to me, because although global developed equities are correleated with each other they move at different speeds (and sometimes different directions) at different times. So a single global tracker , and a uk gilt tracker,is too simplistic.

2/ When I am going to do the bed and breakfast from VWRL to IWRD.
Do I have to loose money again from exchange conversion fee by becoming all (100kGBPs) from VWRL to IWRD?

If you are using a broker that does not give you a multicurrency account then yes, you will receive all sale proceeds in GBP (having suffered a conversion cost on the sale of USD assets) and then if you were purchasing USD assets by spending those GBP, you would suffer another cost.

One thing to consider is that some ETFs with global exposure are available in versions priced in GBP. So for example, iShares IWRD is actually GBP priced and there would be no conversion cost with your broker because you are just buying a GBP asset. Any currency conversions necessary for acquisition or disposal of the underlying companies would be internal in the fund and not marked up at 'retail' price. Alternatively the same fund is available as IDWR, a USD priced version, which as a GBP investor you would not want to use.

3/ What is the difference (apart from the fees) between a Unit Trust or an ETF?
Is any of them safer in case of a world economy disaster or/and closing of Vanguard?

Probably a question for another day as it's getting late and there are a few factors. You will get the main ones from google. One obvious practical difference is that exchange traded funds can be traded on an exchange in real time during market hours while dealing in UTs or OEICs must be booked in advance to subscribe or redeem out at a future unknown price. As you said you are a buy and hold investor and not actively trading in and out to catch market moves, this is largely irrelevant.

If the ETF and unit trust are both 'physically replicating' the index rather than primarily using financial derivatives to mirror the index, the risk profile is pretty similar really.

Due to the fact that the manager has to approve every subscription and redemption in an open ended mutual fund like a UT, if there is a liquidity problem in meeting redemptions the manager could just freeze the ability of people to take their money out. By contrast, with an exchange traded fund you are always able to go and sell to someone on the market Although of course you can only sell to someone who wants to pay what you want to sell it for, and price could diverge from the real value of the assets during a period of market instability (as well as markets or individual instruments be suspended).

bushido1

Thanks for the very detailed answer. Really appreciate it!!

bowlhead99 wrote: »

One of the things I like about TD is that they do have a multicurrency account so if I get dividends or sales proceeds in USD or EUR or HKD or AUD they will sit in those currencies until I want to spend them. Although if I do flip between currencies the exchange fee is quite high (would be 1% on £50-100k, lower for bigger deals). Another broker is IG Group, the accounts are single currency but the exchange fee is only 0.3%, lower than most of the competition.

But if you want to go with HL because a lot of customers give them good reviews, that's up to you. A review from an average customer has limited value if you are not an average customer.

1/ If you I go with HL and for example invest 100kGBPs in VWRL. Do you know how much would they charge me more or less for the money conversion to put the money in?

Also, in TD can you withdraw your money in US$ to my bank account (located in the USA)?

bowlhead99 wrote: »

In a sense it is diversified as VWRL holds stocks from all over the world and 20% of your money is in something that is not equities.

However, the world of investments is much more diverse than global largecap equities and domestic government bonds. Midcap and smallcap equities, overseas government bonds, all corporate bonds, real estate are just some examples of things that may not be well correlated with the things you have or may offer greater return potential.

Being able to rebalance exposures not just between stocks and bonds, but between different regions or different sectors, is important to me, because although global developed equities are correleated with each other they move at different speeds (and sometimes different directions) at different times. So a single global tracker , and a uk gilt tracker,is too simplistic.

2/ I have being doing research and reading the book of Tim Hale’s during the whole day of today just to be able to give you an answer here. I hope I am not too terrible on this:

STOCKS (80%)
50% Global developed market (broad market): VWRL
17.5% Global developed market (smaller companies)
17.5% Global developed market (value companies)
15% Emerging market equities: VWRL

BONDS (20%)
50%: Short-dated high quality bonds
50%: Short-dated high quality, inflation-linked bonds

STOCKS (80%)

65% (broad + emerging) VWRL
http://www.hl.co.uk/shares/shares-search-results/v/vanguard-funds-ftse-all-world-etf-usdgbp

17.5% (value comp) http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F0GBR04ELA

17.5% (small comp) http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-global-small-cap-index-accumulation/charts

BONDS (20%)

50% http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-global-bond-index-accumulation

50% Short-dated high quality, inflation-linked bonds (I haven’t found any decent funds for this yet in HL, so I might just do 100% of the same Bonds)


I haven’t been able to find any decent Global developed market (value companies) funds in HL, any recommendations?
Any recommendations for Short-or-intermediate dated high quality, inflation-linked bonds (I haven't found any yet)?

What do you think about this strategy? Would take out any funds? Any new recommendations?
(I didn’t invest in REIT because I own a property in the UK)

bowlhead99 wrote: »

If you are using a broker that does not give you a multicurrency account then yes, you will receive all sale proceeds in GBP (having suffered a conversion cost on the sale of USD assets) and then if you were purchasing USD assets by spending those GBP, you would suffer another cost.

One thing to consider is that some ETFs with global exposure are available in versions priced in GBP. So for example, iShares IWRD is actually GBP priced and there would be no conversion cost with your broker because you are just buying a GBP asset. Any currency conversions necessary for acquisition or disposal of the underlying companies would be internal in the fund and not marked up at 'retail' price. Alternatively the same fund is available as IDWR, a USD priced version, which as a GBP investor you would not want to use.

3/ Where can you look to tell that you can pay IWRD in GBPs?
For me it looks exactly the same as the VWRL.

http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000I5AK IWRD

http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000WAHE VWRL

Do I loose money in this both from currency conversion from GBPs to US$?

bowlhead99

bushido1 wrote: »

1/ If you I go with HL and for example invest 100kGBPs in VWRL. Do you know how much would they charge me more or less for the money conversion to put the money in?

If you were investing GBP to buy something priced in USD you might be paying 0.5% at £99,999.99 or 0.25% (or maybe 0.35% I forget) for £100,000.01. As your sample portfolio below shows you only putting 65% into VWRL, that would only be £65,000 on the £100,000 portfolio ; it is the trade size that is important not the portfolio size.

Two caveats:
1) As I have mentioned several posts ago, "It is worth running your expected numbers against the fee scales published on the firms' respective websites." Instead you are coming to us and asking what those firms would charge us for a particular transaction. For example if the numbers I am quoting you are inaccurate because my memory has failed me, your research here is completely invalid. Alternatively I can check my numbers by going to the site, before telling you, but it is you who actually wants to make the investment not me. So check the sites.

2) As I mentioned, ETF products are available in different currencies: either different currencies on different stock exchanges, or different currencies on the same stock exchange with multiple tickers.

So if you are buying something priced in pounds and your broker HL or CSD or TD is only sending the pounds they are holding for you, there is no currency conversion charge by HL or CSD or TD because they are just spending £x per share instead of $y per share. It is the fund itself which will do an internal conversion at 'institutional' market spot rates using its £millions of buying power instead of you being charged an extra spread at a retail price. So maybe you could just plan to avoid conversion costs by simply buying a GBP priced version.

Also, in TD can you withdraw your money in US$ to my bank account (located in the USA)?

You can withdraw in USD to a USD account or EUR to a EUR account and so on. See "cash withdrawals from your account" at http://www.tddirectinvesting.co.uk/rates-and-charges/

However, you say "located in the USA". Is it located in the USA because you are a US citizen? Some brokers do not want to deal with US citizens because of the extra tax information reporting they would have to do to HMRC. TD's terms and conditions give them the ability to close out transactions if "by reason of payment method or any information that we obtain from any source, we have reason to believe that you are a US citizen, US resident or US person".

If you are not US resident and not US citizen (e.g. a UK resident born in Canada who just happens to have a US bank account) then there would not be an issue.

STOCKS (80%)
50% Global developed market (broad market): VWRL
17.5% Global developed market (smaller companies)
17.5% Global developed market (value companies)
15% Emerging market equities: VWRL

BONDS (20%)
50%: Short-dated high quality bonds
50%: Short-dated high quality, inflation-linked bonds

STOCKS (80%)

65% (broad + emerging) VWRL
http://www.hl.co.uk/shares/shares-search-results/v/vanguard-funds-ftse-all-world-etf-usdgbp

You are wrong about the asset mix of VWRL. It does not hold developed markets to emerging markets in the ratio of 50:15 (which would imply 77% developed markets). It is 92% developed markets. Which of your 65% allocation would give 60:5 not 50:15.

The US alone is over 52% while the main emerging markets included per the latest factsheet are China 2.3%, Taiwan 1.2%, India 1.1%, South Africa 0.7% ,Brazil 0.5%, Mexico 0.5%, Malaysia 0.4%, Russia 0.3%.... That puts emerging markets closer to 8% which is way below 15 of your 65.

For the reasons mentioned before I wouldn't use a single global tracker for the majority of my largecap equities exposure but there are others on here that do.

17.5% (value comp) http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F0GBR04ELA

17.5% (small comp) http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-global-small-cap-index-accumulation/charts

Two points here. Firstly, that first fund is really just a Global 100 fund. It is the 100 biggest companies. Its top five holdings of Apple, Microsoft, Exxon, GE, J&J are the same as they all world ETF. So basically all you are doing is doubling up on the top 100 holdings within the 3000 holdings you already have in your VWRL. Not sure of the logic of doing that unless you think that the smaller companies are inherently less useful because they are more tilted to growth, while the larger ones are more likely to be ex-growth and just sitting there paying out dividends.

Seems a strange assessment to make, given you are then going to go and buy a bunch of small companies in the next 17.5% of your portfolio.

Secondly, 1 note that both of these types of investments are classified as 'funds' rather than exchange traded entities like stocks and ETFs, in the comparison of platform charges made above. So with HL you are taking on a 0.45% charge by holding these (which would only be 0.3% with TD, 0.25% with CSD, 0.2% plus transaction fee with Youinvest, etc. etc.)

This is not to say that fees are the most important thing, because they are not - asset mix is the most important thing. I just thought it worth mentioning as this thread has had a lot of discussion on costs of different types of instruments with different providers.

BONDS (20%)

50% http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-global-bond-index-accumulation

50% Short-dated high quality, inflation-linked bonds (I haven’t found any decent funds for this yet in HL, so I might just do 100% of the same Bonds)

Personally I don't use a tracker approach for my bond exposure, preferring to use active strategic bond funds which will vary the mix of long dated, short dated, government, corporate, high yield, inflation linked etc.

I haven’t been able to find any decent Global developed market (value companies) funds in HL, any recommendations?

If you think tracker funds are a good way to take a value approach (not something I agree with, because imho, assessing value requires analysis not a robot) then there are some 'value factor' ETFs which you could use.

iShares MSCI World Value Factor UCITS ETF
http://www.ishares.com/uk/individual/en/products/270048/IWVL

Global Value Factor UCITS ETF (VVAL)
https://www.vanguard.co.uk/uk/portal/detail/etf/overview?portId=9397&assetCode=EQUITY##overview

The first is an iShares product following MSCI's index. The second, Vanguard describe as 'actively managed' but basically they use a rules based approach to come up with their own index of what to hold. So the two ETFs are basically trying to do the same thing. They have not been going long and I don't hold either of them but they are both big names in the world of ETFs.

3/ Where can you look to tell that you can pay IWRD in GBPs?
For me it looks exactly the same as the VWRL.

http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000I5AK IWRD

http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000WAHE VWRL

Well, both those links you have pointed us to are quoting prices in sterling. IWRD has a closing price of GBX 2249.0 which is 2,249 pence or £22.49. Similarly, the Vanguard one is £41.995.

Like I said in the earlier post, IWRD on the London Stock Exchange is a GBP-priced share. Meanwhile IDWR is the USD-priced share (which you don't want) of the same $5.5billion fund.

If you go to a different stock exchange you might see the same ticker being used for something else. For example, on the Amsterdam market, IWRD is used for their Euro class of shares.

So, it is important to understand what fund you are buying into on what market, at what price.

Do I loose money in this both from currency conversion from GBPs to US$?

If the share price of the dollar version is $33.735 and the sterling version is £22.49 with the underlying market rate of £1.50=£1...

When you buy 10 of the dollar shares it will cost you $337.35. The broker may use a dollar exchange rate of $1.48=£1. So the cost of your $337.35 purchase becomes £227.94.

However if the share price of the sterling version is £22.49 and you buy 10 shares it will cost you £224.90. That's it. You have avoided over 1% of FX charges. There will be implicit FX costs and differences inside the product itself but they will not amount to as much as 1% each transaction because they are dealing in large volumes.

When you decide to sell your GBP-priced share at some point down the line you will get the price in GBP that someone is willing to pay. Again there will be no FX fee if you are selling a GBP priced share, but there would be an FX fee if you are selling a USD priced share and receiving dollars into a pound account.

When the dividends get paid out every year they might be in dollars for both classes (I don't know as I am not an investor in IWRD, IDWR, VWRL etc) and you may suffer an FX fee on those as you receive them. But the dividends are only a percent of the invested amount so an FX cost of a percent of the percent, is not worth worrying about.

bushido1

bowlhead99 wrote: »

Well, both those links you have pointed us to are quoting prices in sterling. IWRD has a closing price of GBX 2249.0 which is 2,249 pence or £22.49. Similarly, the Vanguard one is £41.995.

Like I said in the earlier post, IWRD on the London Stock Exchange is a GBP-priced share. Meanwhile IDWR is the USD-priced share (which you don't want) of the same $5.5billion fund.

If you go to a different stock exchange you might see the same ticker being used for something else. For example, on the Amsterdam market, IWRD is used for their Euro class of shares.

So, it is important to understand what fund you are buying into on what market, at what price.

If the share price of the dollar version is $33.735 and the sterling version is £22.49 with the underlying market rate of £1.50=£1...

When you buy 10 of the dollar shares it will cost you $337.35. The broker may use a dollar exchange rate of $1.48=£1. So the cost of your $337.35 purchase becomes £227.94.

However if the share price of the sterling version is £22.49 and you buy 10 shares it will cost you £224.90. That's it. You have avoided over 1% of FX charges. There will be implicit FX costs and differences inside the product itself but they will not amount to as much as 1% each transaction because they are dealing in large volumes.

When you decide to sell your GBP-priced share at some point down the line you will get the price in GBP that someone is willing to pay. Again there will be no FX fee if you are selling a GBP priced share, but there would be an FX fee if you are selling a USD priced share and receiving dollars into a pound account.

When the dividends get paid out every year they might be in dollars for both classes (I don't know as I am not an investor in IWRD, IDWR, VWRL etc) and you may suffer an FX fee on those as you receive them. But the dividends are only a percent of the invested amount so an FX cost of a percent of the percent, is not worth worrying about.

Your answer clarified a lot of things, thanks again!!

I just have one doubt. I will put an example to make it easier to understand;

1/ Imagine I am investing through HL and all my money is in GBPs.
I put 100kGBPs in VWRL priced in pounds. At this moment GBP 1:2 Dollars.
The market stays stable/even for one year, but the currency changes to GBP 1:1 Dollar.
If I withdraw all my GBPs now, would I get 200kGBPs?

2/ In case of using a tracker approach for your bond exposure. Which 1-2 bonds would you choose to balance with my aggressive AA (80/20)?

3/ Going back to 2 posts ago;
What do you prefer when investing in a buy and hold long term strategy, OEIC or ETFs?
I have been reading different articles in Google and the only important different that I found when deciding to invest on any of them is that the fees from buying/holding/selling might vary (at least for buy-hold). Is there anything besides of this that is critical that I have in mind when deciding between investing in OEICs or ETFs?
Overall in relation with fees; if working with HL, it seems like ETFs are better because of the fee CAP, correct?

I also read that OEICs might be a little safer in case of a disaster. Is this true?

PD: Yes, with VWRL, IWRD, etc. when the dividends get paid out every year they are in dollars (I already checked that) and you loose from currency exchange. But as you said that’s not a big deal.

coyrls

I would emphasise what Bowlhead has already said: you have to research and understand this stuff yourself and not rely on answers (however accurate and helpful) from an Internet forum.

bowlhead99

bushido1 wrote: »

1/ Imagine I am investing through HL and all my money is in GBPs.
I put 100kGBPs in VWRL priced in pounds. At this moment GBP 1:2 Dollars.
The market stays stable/even for one year, but the currency changes to GBP 1:1 Dollar.
If I withdraw all my GBPs now, would I get 200kGBPs?

Basically, the price of a share in GBP or USD or EUR is just a function of what all the underlying assets are worth in their own local currency around the world, all converted to dollars at the current exchange rate for accounting purposes, and then converted again at the current exchange rate to the currency you would like to be told the price in. A little over half the value in VWRL is from companies listed in USA, but the rest of the value is in companies listed in UK or Europe or Asia or Africa. And regardless of where the company is listed or has a head office, many are international and have underlying revenues and profits coming in, in lots of different currencies.

Obviously you are talking about the market staying stable with no movements, but if the fund is worth $5.5 billion today and $0.5 billion is invested in UK denominated assets like Sainsburys and Marks & Spencer, then when Pounds become worth only half as many dollars, the $0.5 billion is only worth $0.25 billion and the fund might fall in value from $5.5 billion to $5.25 billion. But I guess improvements in other assets would be happening.

Anyway to make a long story short, if the price of VWRL in pounds today is £42 a share, representing an underlying asset value of $84 a share, then when the pound sterling devalues heavily against the dollar, but the dollar assets stay basically the same, people will have to pay £84 for a VWRL share (or $84).

So if you have spent £100k buying 2,381 shares at £42 and the market price is now £84, you can sell them for £200k.

Of course, when you want to go and renew your online subscription for Microsoft Office or buy a Samsung smartphone or some Nestle chocolate, you will find their prices have doubled because such goods are priced on a world stage and the pound has halved in value, depreciating in value against the US dollar and Korean Won and Swiss Franc.

2/ In case of using a tracker approach for your bond exposure. Which 1-2 bonds would you choose to balance with my aggressive AA (80/20)?

As mentioned I do not use a tracker approach for my bond or 'non equities' exposure. There are lots of funds out there to choose and my goals, attitudes and risk capacity / risk tolerance are not the same as yours. If you search the forum over the last few years you'll see some people talk about which ones they are using.

3/ Going back to 2 posts ago;
What do you prefer when investing in a buy and hold long term strategy, OEIC or ETFs?
I have been reading different articles in Google and the only important different that I found when deciding to invest on any of them is that the fees from buying/holding/selling might vary (at least for buy-hold). Is there anything besides of this that is critical that I have in mind when deciding between investing in OEICs or ETFs?
Overall in relation with fees; if working with HL, it seems like ETFs are better because of the fee CAP, correct?

I also read that OEICs might be a little safer in case of a disaster. Is this true?

I hold some OEICs and some ETFs and some listed investment trusts / investment companies. I tend to use whichever investment vehicle holds what I want.

ETFs can be good for cheap exposure to an index (although I would personally avoid the ones that use more 'indirect' replication using derivative financial instruments and swaps., like DB x-trackers, because although they can be cheap and efficient with a low tracking error, there is an extra level of 'counterparty risk' to go wrong).

If you are investing large enough amounts and holding for long enough, ETFs can be quite a lot cheaper than OEICs because they don't attract platform fees. But with HL the difference is exaggerated because their platform fee is the highest on the market. Most of my money is in Youinvest or TD; the Youinvest fee structure is 0.2% a year plus transaction fees which would massively undercut HL for OEICs.

There is no one perfect answer in investing. At some point you have to just decide for yourself what you want to hold and why, research all the costs and risks, and go forward. There are more costs and risks and investment ideas out there in the world than anyone is going to put into a forum post.

I've done a few thousand posts on this website over the last decade and if it was a book it would be hundreds of pages long. And it still wouldn't be a good enough book for you to know what to invest in or who to invest with, because that's personal. Enjoy your research and good luck in your investing.