Halifax investment isa advice

racey

dunstonh wrote: »

For example would you pick replicated or synthetic? Would you go with sampled methodology

What do these terms mean?

bigfreddiel

A study has shown that lump sum investments do better than drip feeding.

Even if the lump sum was invested just before a crash.

Just go for it

fj

darkidoe

bigfreddiel wrote: »

A study has shown that lump sum investments do better than drip feeding.

Even if the lump sum was invested just before a crash.

Just go for it

fj

I remember reading a piece on how frequently does drip feeding is works best, comparing, yearly quarterly and monthly, the quarterly came out first somehow. Can't recall where to find that piece again..

Key thing is to keep reinvesting dividends.

bowlhead99

dunstonh wrote: »

Heythere450 wrote: »

I have also read about ETFS, and seen th fidelity investment isa, would this be particularly better than the Halifax isa?

ETFs are a more advanced investment option requiring a greater knowledge of understanding. There is no FSCS protection on them. Do you feel they are right for your knowledge and understanding?

For example would you pick replicated or synthetic? Would you go with sampled methodology?

racey wrote: »

What do these terms mean?

An ETF is an exchange traded fund which holds investment assets usually designed to track the performance of one particular index.

Replicated or synthetic or sampled refers to how they make their money.

Do they physically replicate the construction of the index by holding for example 270 shares of Lloyds Bank to every 79 shares of BP to every 5 shares of Unilever to every 1 share of Severn Trent Water, ensuring they have the same proportions of value between all their holdings as the index they aim to mirror?

Or do they buy a bunch of derivative financial instruments where some counterparty(/ies) in the market will contractually pay them out a return which closely matches the total return of the overall index? You can make a return that looks just the same as someone else's physical return by using something rather more 'synthetic' instead of by more 'naturally' holding shares in the various underlying companies in the exact right proportions yourself.

Or, if there are 4500 companies in an index, do they just buy a representative cross-section 'sample' of them with an expectation that such a set of holdings will give a 'this is good enough' return without actually going to the expense of buying every single company in the exact right proportion, when many companies are highly correlated to each other anyway and small differences from the reality of the index won't move the needle much.

This stuff is not rocket science and anyone can devote a weekend or two to googling terms and reading articles, research and analysis that highlights some of the things it is worth looking out for when selecting an ETF, although they would be far from being an expert.

However I suspect Dunstonh's point was simply that someone who has never made investments before and does not know the first thing about the nuts and bolts of how financial instruments work, should not get distracted by having read that ETFs exist.

If you don't know the implications of physically replicated vs sampled vs synthetic - not just the difference between them but the impact of those differences on potential risk and return -, then you are not ready to use them anyway (even if you claim, as OP did, that you have 'read all relevant websites' ).

But the point of this is not to show off that some of us understand what we are doing while others are winging it (although it can be a pointer to disregard some of the guidance you read on forums from people who are newbies themselves and have had OK results more by luck than judgement).

The wider point is that ETFs are specialist trackers of indices of individual asset classes, whereas what you need for long term investment is a cross-section of different asset classes using a product or products that you can understand. So if you were to use ETFs to achieve your investment aims you would have to understand ETFs and you would have to understand how to construct a portfolio out of them and you would have to buy and sell your different ETFs on the market from time to time to balance your portfolio the way you want it as some rise and fall in value at different relative rates.

For the OP the obvious thing to do is to keep it simple and buy one multi-asset fund that matches their objectives. This can be done in a few ways:

Either using the Halifax Investment ISA service to invest in one of the three Scottish Widows Managed Growth 2 /4 /6 funds that they have available, with a percentage-based charge from Halifax for the administration of it.

Or using the Halifax Stocks & Shares ISA service to invest in a choice of a much broader range of funds from a myriad of providers, with fixed fees for administration and buying/selling.

Or using someone other than Halifax to do access the broad range of funds from lots of providers (Cavendish or HL mentioned as providers with percentage-based charges instead of flat fees - there are many many more with different fee structures).

enthusiasticsaver

I use Halifax sharedealing but I would think an investment isa by them is poor value as most bank products are. You can do some research on passive multi asset well diversified funds and invest in one yourself through Halifax share dealing or another platform.

Suggestions are the vanguard lifestrategy funds, legal and general multi asset and black rock consensus. Morningstar, trustnet and monevator articles and this forum provide a wealth of information.

bowlhead99

Heythere450 wrote: »

I think I have finally made a decision after much thought.

If I go with the vanguard life strategy 60,

Hi,
This might be stating the obvious but worth mentioning now you have done some more research and understand a bit more about what it is that you want.

You'd previously suggested that if you were using the Halifax in-house funds (the Scottish Widows Managed Growth 2,4,6 ones), you would go for the lowest risk one they offer, the "2".

That fund is about two thirds invested in bonds, with the other third split between equities and commercial property (with the equities being predominantly UK-listed companies).

Whereas, the life strategy 60 is (as its name suggests), 60% invested in equities with only 40% in bonds and no direct property holdings.

In the lifestrategy, the equities are mostly outside the UK (just like in the real world, most global listed companies are outside the UK), although a quarter of your equities are UK listed, while less than a quarter of all global shares by value are UK. So you would describe it as a "UK bias" to the holdings rather than literally having most of the funds being invested here.

As such, the lifestrategy 60 fund will give quite different results, and potentially much bigger drops in a downturn, versus the Managed Growth 2.

The LS60 is a bit more comparable to Managed Growth 4, which is 60% equities and property and the rest bonds. Still, they are not the same, because the MG4 is targeting a different (more UK-centric) allocation of equities and has that chunk of direct property which Vanguard LS doesn't use.

Equities are generally the engine of growth while bonds provide much more limited growth but some downside protection (as they won't fall 50% in a major equities crash, like the equities could). Property can provide some growth while also getting some relatively fixed levels of income, so although it can go through market swings of value it can give you some diversification within the part of your investments that isn't equities.

So, while you might be quite happy with what VLS60 gives you, you should be aware it is a couple of notches up in risk from the first fund you were considering. It is towards the middle of the risk scale rather than the bottom.

This step up the potential performance scale *might* be fine with you (because, for example, the stuff at the very bottom of the risk scale does not offer great value for money in terms of long term potential returns and so the returns may fall short of your objectives if you are investing for a long time using mostly 'low risk' products like cash and bonds). But it might not.

The key message is really just to take your time and understand what you are comfortable with, rather than just thinking, "hmm, someone suggested lifestrategy 60 on my thread, and they think it's fine for them, and I looked at it and it seems to be a fund that went up over the last few years while the markets were good, so I'll get it too".

racey

Wise words bowlhead99. :T
I appreciate you taking the time to post in a positive, plain speaking manner.

Snakey

Bleh, where's a raspberry-blowing smiley when you need one.

What can possibly go wrong with following the cack-handed ill-thought-out random walk of a fellow newbie, that's what I'd like to know?