S&S ISA - Good Plan and Platform in my Situation?

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oysteroyster
oysteroyster Posts: 54 Forumite
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edited 8 September 2016 at 12:58PM in Savings & investments
Hi all,

Until now I've kept all my savings in various interest-earning current accounts and regular savings accounts (bar a brief stint with a cash ISA), but now I've bought a house I believe it's time to look at more long-term investment options. I'm approaching 30 years old, self-employed, in the higher tax band, with about £50k in the bank. Besides promising myself I'll start a personal pension this year (most likely NEST?) for the tax relief that'll bring about, I'm also looking into venturing into the world of stocks and shares.

I'm very new to S&S and currently doing as much reading on the subject as I can. Fortunately my father-in-law is acting as a bit of a mentor but his situation is very different to my own and I always like to run my thoughts by my beloved MSE and its community.

My thoughts at this stage are to open a S&S ISA, pump in the full £15k annual allowance and then drip feed the bulk into a tracker fund (thoughts on Vanguard Lifestrategy 80% in my situation, anyone), then have a go at investing in five or six individual company shares, diversifying over several different industries. Does this sound like a potentially sensible way to go?

My father-in-law is fairly active in S&S and has agreed to help me in regards to picking and managing my individual shares, else I probably wouldn't be quite so bullish in going down this route, but I'll of course only invest what I'm prepared to lose. My other question is in relation to the investment platform to go with. He thinks I should go with Hargreaves Lansdown because that's what he uses (could simplify things between us perhaps) which I read is good for customer service and wealth of information. I will pay a small premium for good UX but I'm also a huge believer in not paying more than you need to (in true MSE style) and I hear HL can be a bit overwhelming for newcomers. So for that reason, would someone like Charles Stanley be a better choice for me?

Any thoughts would be hugely appreciated!
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  • Linton
    Linton Posts: 17,246 Forumite
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    Going for VLS80 seems a reasonable start for a beginner. I and other people here would question as to whether it is optimal to drip feed. It may make you less nervous which is good, but on the other hand whilst your money is out of the market you are missing out on the 1.5% dividend. Plus you may miss out on growth which is slightly more likely than a fall. So on balance drip feeding when you dont need to loses you money.

    In your circumstances I would only invest in individual shares as a learning experience. VLS80 will be investing in thundreds/thousands of companies from acros the globe each only taking up a small% of your total investment and so a failure of one would be insignificant. Why would you then want to hold a much greater % in each of what must be a fairly arbitrary selection of UK companies where a single failure would have a high impact? In my view there are situations where individual share investing is a sensible way to go, but being a beginner with a relatively small amount of money to invest isnt one of them.
  • chockydavid1983
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    You've missed off your age but I was similar to you in having most in cash before buying a house and only then starting to invest.
    I started about a year ago and am currently in VGLS 100 via Cavendish for ISA and Best Invest for SIPP. Both platforms seem fine so far, though I've not really spent much time on either website.
    I drip feed into my ISA with the occasional lump sum and lump sum into my SIPP depending on bonuses.
    I'm looking to add Blackrock Global Property REIT shortly for diversification.
  • greenglide
    greenglide Posts: 3,301 Forumite
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    Are you truly "self employed " or are you employed by your own limited company?

    If you have your own limited company then it is normally better to pay pension contributions from the company rather than your own.

    NEST is normally used by employers for auto-enrollment, it is normally a good buy for personal contributions - you are probably better off with a Personal Pension or a SIPP.

    Pension contributions attract tax relief at your highest rate and could be used to avoid and higher rate tax. Why are you not already doing this?
  • xylophone
    xylophone Posts: 44,626 Forumite
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    Why would you want to use NEST?

    Do you trade through a limited company?

    https://www.moneyadviceservice.org.uk/en/articles/pensions-for-the-self-employed

    You could consider some form of personal pension.

    If you are trading as a limited company the company could make contributions on your behalf.

    http://www.contractoruk.com/money/what_are_my_pensions_options.html
  • dunstonh
    dunstonh Posts: 116,661 Forumite
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    Besides promising myself I'll start a personal pension this year (most likely NEST?)

    Nest is aimed at very small employers needing to offer an auto-enrolment scheme. It is not normally used by individuals. What attracts you to NEST.
    then drip feed the bulk into a tracker fund (thoughts on Vanguard Lifestrategy 80% in my situation, anyone),
    Investing into a sold tracker fund is not a good idea. VLS80 is not a tracker fund. It is a fettered fund of funds (multi-asset fund) - multi-asset funds are a good idea for lazy investors.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • oysteroyster
    oysteroyster Posts: 54 Forumite
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    edited 8 September 2016 at 1:19PM
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    Thanks for the quick replies, all - lots to think about there.

    Whoops, missed out that I'm approaching 30 years old - for that reason, would the VGLS 100 be a better consideration for me than the 80? I'll certainly take on board what @Linton has said about drip feeding vs investing in individual shares - I suppose I just want a little bit of a thrill with something higher risk for the potential of higher gains - I also like the idea of some small time micromanagement (I enjoy graphs and statistics!), rather than just purely putting money away and forgetting about it. Perhaps there are better options for this though

    @greenglide et al - As a sole trader I am indeed truly self employed - income of around £50k pa. Having done quite a bit of reading, a pension through NEST (now open to the self employed) keeps popping up in articles as being the best option out there for the self employed, with much lower fees levied than on other personal pensions, with a SIPP not advisable until I have a bigger pot to play with - unless anyone can tell me otherwise. But yes, I agree I have been a fool not to take advantage of the tax relief of this earlier.

    Articles such as this have driven me towards a pension with NEST:

    https://www.theguardian.com/money/blog/2014/sep/09/hand-pension-money-to-government-nest
    http://www.thisismoney.co.uk/money/pensions/article-2255778/A-frills-nest-egg-saves-30-000.html
    But even with the initial fee factored in, long-term savers will be facing charges that work out at 0.5% a year, or a third less than the private providers under the new cap. If you are self-employed, Nest is virtually a no-brainer. For many small and medium-sized employers, it stacks up extremely well against the private companies.

    @dunstonh - Excuse me if my terminology and understanding is a bit off. At this early stage, I don't think I can be much more than a lazy investor, though keen to up my control of things once I gain better understanding. If I call the VGLS a multi-asset fund, lazy or not, does that make it a good call for me, in your opinion?
  • Linton
    Linton Posts: 17,246 Forumite
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    If you want more thrills with a potential for a higher gain I suggest you would be better off adding other riskier funds covering areas where the VLS series are relatively weak rather than investing in individual shares. Areas like Small Companies or Emerging Markets are often used for this purpose.

    The differences between VLS80 and VLS100 arent that large, but if you are thinking about a really long term investment then I personally would go for VLS100. On the other hand if you werent thinking really long term VLS80 is arguably too risky.
  • xylophone
    xylophone Posts: 44,626 Forumite
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    https://www.cavendishonline.co.uk/pensions/

    A SIPP would be a possibility, even with a modest start.

    Hargreaves Lansdown could suit you because of the excellent web site/efficient service and not overly expensive for modest amounts.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    My thoughts at this stage are to open a S&S ISA, pump in the full £15k annual allowance and then drip feed the bulk into a tracker fund (thoughts on Vanguard Lifestrategy 80% in my situation, anyone), then have a go at investing in five or six individual company shares, diversifying over several different industries. Does this sound like a potentially sensible way to go?

    Not with the amounts you talk about, no.
    Lets say "the bulk" is £10k? That only leaves £5k amongst 5 shares, so £1k a share.
    Or if the bulk was say £12k, its only £500 a share.

    If you want a 'flutter" I think you'd be better off picking a sector to do that in, lets say you think Asia or Bioscience or Venezuelan Beaver Pelts are good sectors , then buy one or no more than two investment trusts or funds that cover those sectors. (if you spread too thin, a big rise on one doesn't matter)

    On the drip feed question, then since on average shares rise, then on average you are worse off by drip feeding. You are of course less likely to take a big hit, but you'll miss a big rise as well.

    I know most here are big on just a spread of global funds, maybe even one fund, but i see little harm in taking say 10-20% and trying your luck and you may come off well and continue, or you may decide you'd have been better off in a global fund and leave it at that and at least have learned a lesson before you get into big money.
  • oysteroyster
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    Thanks all - don't know what I'd do with out these forums.

    But once again, all this conflicting information is essentially why I've not started a pension (and to a lesser extent investing) - as soon as I think I've stumbled across the solution for both, other suggest an array of "better" ideas and I'm back to the confused beginning. I guess there's too many variables to find the definitive answer but these two decisions are among the biggest I've ever been faced with in many ways!
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