Cheapest Pension for tracking S&P 500

Jim721

Hi, I wanted to start paying a couple of hundred pounds a month into a pension. I basically just want a fund that will track the S&P 500 for as cheap as I can get it (I also already have a nest pension and will be getting a LISA come April). I believe this would be a SIPPs. Does anyone know which is the cheapest provider for this? I am having trouble with all tables out there as a lot assume a lump sum already in the fund. I wont be transferring in anything. I will start from scratch as I think stocks are overpriced right now and any lump sum will be taking a medium term hit. My thinking is that if I build it up month by month I don't have to second guess when the correction will come. Any help greatly appreciated as my head is spinning!

xylophone

http://monevator.com/compare-uk-cheapest-online-brokers/

dunstonh

I basically just want a fund that will track the S&P 500 for as cheap as I can get it

That is really bad quality investing. Why do you want to do that?

Jim721

Thank you for link to the table.

Why do you think it is bad quality investing? I have other investments too. The reason for this investment is that a S&P500 tracker fund consistently beats managed investments, especially when fees are taken into account. Buffet said it better in his annual shareholder letter than I can. I wont post a long quote but it's worth a read.

jamesd

You do know that over the last fifteen years investors using active funds made 4.04% a year while passive investors only made 2.85%? That's with all fees and investor actions taken into account. The passive investors could have made 4.98% if they had just bought and held the S&P 500 but they didn't do that.

You also might not know that in the US active funds beat passive funds before tax. The US has a higher capital gains tax rate on sales of shares held for less than a year. The UK doesn't and also doesn't make you pay tax on gains made inside your funds every tax year, regardless of whether you sell or not, while the US does. What's right in the US is very heavily influenced by their tax treatment of investments. That's even a big part of why ETFs grew there, they are structured to avoid that annual taxation on gains inside the fund.

What Buffet described isn't what investors normally do.

Jim721

They should have bought and held the S&P 500, which is exactly what I intend to do. I think that was his point, that it's far riskier trusting a managed fund than investing in the S&P500.

Quote: "Further complicating the search for the rare high-fee manager who is worth his or her pay is the fact that some investment professionals, just as some amateurs, will be lucky over short periods. If 1,000 managers make a market prediction at the beginning of a year, it's very likely that the calls of at least one will be correct for nine consecutive years. Of course, 1,000 monkeys would be just as likely to produce a seemingly all-wise prophet. But there would remain a difference: The lucky monkey would not find people standing in line to invest with him."

dunstonh

Why do you think it is bad quality investing?

100% into a single sector is bad investing. It doesnt matter what sector that is.

The reason for this investment is that a S&P500 tracker fund consistently beats managed investments

This isnt about active vs passive. Although it is worth noting that in the UK, most active funds outperform passive than in any other country. It is about picking one area and put all the money in it.

Buffet said it better in his annual shareholder letter than I can. I wont post a long quote but it's worth a read.

He said it to an audience of US investors. You do realise that in the US, the taxation is different to the UK? it makes sense in the US but not in the UK. Plus, US investors tend to be very inward looking.

If you are going to base decisions on flawed information, then you are likely to get lower returns. Plus, Buffet doesnt do what he tells others to do. He also criticises others for doing exactly the same as he does. So, don't what he says to mean you should do it.

AlanP_2

Jim721 wrote: »

Thank you for link to the table.

Why do you think it is bad quality investing? I have other investments too. The reason for this investment is that a S&P500 tracker fund consistently beats managed investments, especially when fees are taken into account. Buffet said it better in his annual shareholder letter than I can. I wont post a long quote but it's worth a read.

What other investments do you have as that could make the S&P 500 idea "good quality investing"? Are your other investments are overwhelmingly not in the US but in the other major geographical markets (UK, Europe ex-UK, Japan, Asia ex-Japan & Emerging Markets)?

Investing just in one market and ignoring all the others is "bad investing" in terms of being unbalanced, no diversification with all your eggs in one basket.

Buffet was talking about a US citizen buying a S&P 500 tracker in the US, paying dollars for it and the US fund & platform fees and subject to the US tax regime.

If that describes you then you should be asking your question on a US investing website really.

If you are UK based then the fund / platform fees won't be the same, the tax treatment of funds will be different and you will paying in sterling so having exchange rate risk as well as investment risk.

Don't get me wrong, Buffet talks a lot of sense in the main, but it is better to consider the broad principles he is talking about rather than the "US centric" specifics he includes for his US readers.

Freecall

Jim721 wrote: »

Hi, I basically just want a fund that will track the S&P 500 for as cheap as I can get

Makes a change from the endless 'I just want to track the FTSE100 for as cheap as I can get' posts I suppose.