Simple Stocks and Shares ISA Options Advice

Corbula

Hi, I'm looking for some general advice on Stocks and Shares ISA and recommendation for a provider.

My current situation is I have a regular Cash ISA but can't pay into that as I've also got a Help To Buy ISA. So I've got a good amount all in my regular current account that I want to move out of there for varying reasons (safety and so it have a potential to get returns).

My plan is to move £5k in a new Natwest Saving Builder and around £10k into a Stocks and Shares ISA as I can't put this into my cash ISA. I'm not going to put this into it in one go but maybe £2.5k at a time for the next 4 months.

I was looking at the Virgin one but I've read that everyone is saying it's too expensive at 1% a year, however according to there website they seem to have a good return?
I've looked at others but none of them seam nearly as clear on all aspects of this like Virgin does.

I'm not an investor so I'm not looking to be managing it myself all the time. I thought the point of them was to put money into them and just leave it while the company invests and hopefully brings a return, much like a Cash ISA without the investment.

I know these are long term 5-10 year investments which is fine as I have savings elsewhere (the accounts mentioned) and if I really do need some of it I'm free to take some out anyway.

What providers would you recommend to me with the sort of money I'm looking to invest and where I don't have to micro-manage it? Would the Virgin one be best to keep things simple?

Thanks all.

masonic

Corbula wrote: »

What providers would you recommend to me with the sort of money I'm looking to invest and where I don't have to micro-manage it? Would the Virgin one be best to keep things simple?

The amount of money you have to invest doesn't really place any limitation on your choices.

Since you are not interested in trying to actively manage your investments (which is sensible given the vanishingly small proportion of investors that are able to do this successfully), what you should be looking for is a passively managed fund that invests in as broad a range of assets as possible. Such a fund can be held alone, with zero maintenance. Arguably Virgin provides one, perhaps two such funds you could opt for, but as you say, 1% per year in charges is considered quite expensive for a passive investor.

Alternatively, you could look to funds like Vanguard Lifestrategy or L&G Multi Index. These come in several flavours that correspond to various levels of risk. Charges are considerably less at 0.2-0.3%. But, in this case the cost of the fund will not cover the cost of running your S&S ISA account. If you opt for a cheap provider like Charles Stanley Direct, you would pay another 0.25% per year to them, making the total cost around 0.5% or half what you would pay to Virgin, for something that I would consider better quality than what Virgin is offering.

These might seem like small numbers we are discussing, but over the years they can have a significant impact.

I would also say that 5 years would be a bit short in terms of timeframe. Not a problem if the stockmarket is doing well, but your chance of losing money is considerably greater over 5 years than it is over 10 years.

george4064

Compare ISA platforms here: http://monevator.com/compare-uk-cheapest-online-brokers/

I second masonic's suggestion to consider the global multi-asset funds such as Vanguard LifeStrategy, they are a simple one-stop solution for a globally diversified portfolio.

xylophone

My plan is to move £5k in a new Natwest Saving Builder

Open a couple of Tesco current accounts and deposit £2500 in each?

dunstonh

I was looking at the Virgin one but I've read that everyone is saying it's too expensive at 1% a year, however according to there website they seem to have a good return?

Well they are not going to tell you its a bad return are they?
You should always take companies own marketing material with a pinch of salt.

It is also a very bad way to invest (single sector investing that is)

I know these are long term 5-10 year investments which is fine as I have savings elsewhere (the accounts mentioned) and if I really do need some of it I'm free to take some out anyway.

5 years is short term. 10 years is medium term. 15+ is long term.
An economic cycle is around 10 years. So, ideally you should invest for 10+ years. Although you can usually get away with 5+ in most periods.

Corbula

Thank you for the responses.

Thanks for the information Masonic and George. I was looking at the Vanguard Lifestrategy, it seems American based with everything in dollars, am I right? If this is the case is what they are offering actually a stocks and shares ISA and therfore still eligible under the personal allowance for tax? I didn't see anywhere it actually mentions that it is an ISA.
Are most of there investments based in America then even in a global fund?
Also I found it difficult to understand what charges they have and what the performance is like.

Dunstonh, thanks for your response. I know what you mean about not telling you about a bad return but surely they have to be truthful in their performance.

When you say about single sector investing, do you mean with one company? So you mean it's better splitting between say Vanguard lifestrategy and Charles Stanley? Surely if your with one of them your money is spread amongst a lot of places to reduce risk anyway?

Thanks for the info about the Tesco current account Xylophone. Seems like a good idea.

masonic

Corbula wrote: »

I was looking at the Vanguard Lifestrategy, it seems American based with everything in dollars, am I right?

Vanguard Lifestrategy is a UK product designed for UK investors and it is priced in sterling.

If this is the case is what they are offering actually a stocks and shares ISA and therfore still eligible under the personal allowance for tax? I didn't see anywhere it actually mentions that it is an ISA.

No they are not offering an ISA. They are offering investment products that can be held within an ISA. A S&S ISA is just a type of investment account that you would need to open with a provider like Charles Stanley Direct. You then buy investments within it.

If this is still not clear to you, I suggest you take a look at this section of the MSE guide on S&S ISAs.

Are most of there investments based in America then even in a global fund?

The US makes up around 40-50% of global markets and Vanguard Lifestrategy holds about the same proportion of US companies. It does have a bias towards UK investments, which make up about a quarter of the fund instead of the 5-10% that would be held by a truly passive global fund.

You should note that the other series of funds I mentioned, L&G Multi Index, holds a lower proportion of US stocks in its funds.

Also I found it difficult to understand what charges they have and what the performance is like.

Did you try looking on their website?
https://www.vanguard.co.uk/uk/portal/investments/all-products?assetType=BALANCED

You could also try Trustnet: https://www.trustnet.com/ia-unit-trusts/price-performance?univ=O&Pf_Manager=VNUK&Pf_IncAcc=A&fundName=Lifestrategy

bowlhead99

Corbula wrote: »

Thank you for the responses.

Thanks for the information Masonic and George. I was looking at the Vanguard Lifestrategy, it seems American based with everything in dollars, am I right? If this is the case is what they are offering actually a stocks and shares ISA and therfore still eligible under the personal allowance for tax? I didn't see anywhere it actually mentions that it is an ISA.
Are most of there investments based in America then even in a global fund?
Also I found it difficult to understand what charges they have and what the performance is like.

They are a massive fund management group headquartered in USA. You have probably gone onto their US consumer website and found their lifestrategy product designed for americans and priced in dollars.

However, Vanguard UK are the people who operate the UK lifestrategy product line. They don't sell direct to the public (yet), but you can buy them on most popular UK fund platforms (in pounds) and inside an ISA. https://www.vanguard.co.uk/uk/portal/investments/all-products?assetType=BALANCED

In the US, their lifestrategy product range has names like conservative growth, moderate growth, income fund etc. Over here they are named 80% equity fund, 60% equity fund, 100% equity fund etc, reflecting how much of the portfolio is company shares (equities) and how much is made up of company & government bonds.

Dunstonh, thanks for your response. I know what you mean about not telling you about a bad return but surely they have to be truthful in their performance.

No, they are not necessarily being untruthful but of course they are going to tell you it is a decent return. They don't show the returns from other popular products from other providers. "They seem to have a good return" is useless without context.

I mean, a cash account pays 1% and their UK FTSE Allshare tracker returned 10% a year compounded over the last five years or 5% a year averaged over the last ten years or whatever, so you think it looks a nice return compared to cash.

But when Virgin tell you about those returns, they don't tell you that if you just wanted to have a fund that just tracks the UK Allshare index up and down you could just pay a few quid a year fixed fee to Halifax Sharedealing, or about 0.25% on your asset value from a bunch of other competitive fund platforms to give you an ISA wrapper, and then use it to buy other rival funds which also have that goal of tracking that exact same index, with fund fees between 0.06% and 0.1% a year instead of the total 1% a year that Virgin want to charge you for that simple product. The companies making up the FTSE AllShare index pay about 3.5% a year in dividends, but by the time Virgin take an entire percent out of that for their fee, you have much less profits being re-invested ; you are damaging your potential wealth.

That's why people tell you to avoid them. Well, that and the fact that until recently they only really offered a couple of very simple funds, for example that UK index tracking fund - and investing all your money into a fund that was all in the UK stockmarket and no other worldwide stockmarkets and no other asset classes like government and company bonds, was really bad quality investing. Within the last year or two they have started to offer slightly more funds but still with the expensive high fee.

When you say about single sector investing, do you mean with one company?

It was a reference to the fact that Virgin's popular and famously expensive index tracker fund was only investing into one type of investment - company shares on the UK stockmarket following a specific proportion (most of your money into the giant companies of the index like Shell, BP or banks or pharmaceutical companies). You should spread your money around to also invest in US shares, Europe shares, Asian shares, emerging markets shares, UK and overseas bonds as well, and so on. Use a fund that invests globally into a really mixed set of assets, not just UK company shares. Virgin do now have some 'multi asset' funds but when people talk about Virgin ISAs everyone on here just remembers them as being famous for their massively overpriced UK index tracker.

So you mean it's better splitting between say Vanguard lifestrategy and Charles Stanley?

No, in that example, Charles Stanley Direct is the investment fund supermarket company which is giving you the ISA and a platform from which you can buy funds to put inside the ISA. Vanguard Lifestrategy is an example of a fund that you would buy inside the ISA. So all your money would be in the Vanguard fund, accessed through your Charles Stanley ISA account. The Vanguard fund itself is investing in shares and bonds in lots of different companies and governments all over the world across all different countries and industries.

Surely if your with one of them your money is spread amongst a lot of places to reduce risk anyway?

Yes your money is spread perfectly well if you buy a fund which is diversified and investing across the world. You don't need to split the money between lots of different fund managers to achieve that, because you can buy just one of these mixed asset portfolio funds from Vanguard or their rivals, where the money gets spread around a lot. If you bought something really simple and basic like an index fund that only invests in one country (e.g. the UK FTSE all-share index or the US S&P500 index or the Japan TOPIX index or whatever), you would have your eggs in one basket.

So just to reiterate, investing is about spreading your money far and wide. Dunstonh's comment that 'single sector investing is bad quality investing' is true, but he probably said it because when you were talking about Virgin's ISA with a 1% fee, he jumped to the conclusion you meant their incredibly overpriced UK tracker fund that they have been running for years, which we have warned lots of people against investing in, in the past.

However, you might have been looking at their "Global Share Fund" or their "Bond, Gilt, UK and Overseas Share Fund" which are much more mixed and better for an investor who doesn't want a specialist single-country investment. They are still way overpriced for what they are, and only suitable for people with very small amounts of money to invest who want somewhere they can put a few pounds a month instead of the £50pm or bigger lump sums which other platforms might want. For those people the 1% a year fee - though very expensive for their very simple funds - is not a huge amount of money because there's hardly anything being invested. 1% is only a pound on a £100 investment total. On your £10k, it would be £100 a year of charges which is very expensive for a simple product.

*edit - I see Masonic has already answered while I got distracted by the telly! Ah well hopefully it is clearer now with two different explanations

Corbula

Thank you for the very informative post bowlhead, that has made it much clearer.

I'm going to take some time to look into a little more but I think what I'm going to do is go with Charles Stanley Direct and the Vanguard Lifestrategy 80 Fund. Put in roughly £10k in small chunks and just leave it there and see how it goes while keeping an eye on it. If it does drop though I'm not going to panic and withdraw, just ride it out

One question I have, on this website it say about Charles Stanley that the minimum deposit is £50 regular monthly direct debit or £500. Does that mean I can either put a minimum of £500 or a £50 a month Direct Debit until there is £500 there?
So if I put a couple of thousand in at the start that would cover it? I don't have to keep putting £50 a month after that?

On the Charles Stanley Direct website it says that it's free to trade funds but it's £11.50 to trade stocks & shares. So I'm a right in saying that the Vanguard Lifestrategy 80 is a fund and I could change to one of the others at Vanguard or else where whenever for free? The £11.50 is only if I'm trading individual stocks and shares in specific companies? Much like an active trader? Which I won't be doing.
https://www.charles-stanley-direct.co.uk/Our_Charges/

I'm also going to take advantage of the Tesco current accounts at 3% as there's no criteria for them. I noticed though that this rate doesn't start until April so will wait until closer to the time for that. Thanks for the info though xylophone.

jimjames

Corbula wrote: »

I'm also going to take advantage of the Tesco current accounts at 3% as there's no criteria for them. I noticed though that this rate doesn't start until April so will wait until closer to the time for that. Thanks for the info though xylophone.

That's not correct. Tesco has been paying 3% for some time so you can open an account now

Corbula

Oh right, just reading on there website I thought it was from April. It must just mean it's fixed from that date. Thanks for the info Jim.