Investment newbie

eskbanker

inkypinky999 wrote: »

thanks, am i correct that at the moment only 2 are offering S&S LISA, HL, nutmeg, so my options are fairly limited for the platform?

No, the MSE article that that thread was set up to discuss lists the three providers at http://www.moneysavingexpert.com/savings/lifetime-ISAs#bestbuysstocks

inkypinky999

eskbanker wrote: »

No, the MSE article that that thread was set up to discuss lists the three providers at http://www.moneysavingexpert.com/savings/lifetime-ISAs#bestbuysstocks

thank you.

inkypinky999

so i have taken the first step by opening an H&L LISA and bought £500 pounds of VG LS 80 Equity Accumulation funds.
Now I do need to read, read and read before i plan rest of my portfolio.

any recommendations, at the moment those 12K are earning 1.5% interest in Satander123.

atush

inkypinky999 wrote: »

thanks, any specific books/websites I should focus on?

Search for, and read the thread here about the Vanguard series

atush

If you have access to a company matched pension you should consider funding that .

I agree, bumping up your pension should be considered as part of your ongoing strategy.

FinancialThing

Big question for me is do you have any debt (car loans, student loans, credit cards) aside of a mortgage? If so I'd pay of the debt before I invested a single penny.

If no debt, then I second the Vanguard recommendation. I believe they are the best fund company hands down. You can invest directly with them which is great because the fees are rock bottom. I personally like the US S&P500 tracker because I think the FTSE is too small. If you invest for 30-40 years consistently, you will be very happy at retirement.

I would stay away from buying single company shares as it's generally a losing way to invest because our emotions get in the way when the shares aren't performing well. It's human nature to buy high and sell low. Also it's impossible to pick out the shares which are going to do well. All it takes is one bad management decision to wipe away years worth of gains.

I applaud what bostonerimus said and I would look at an index trackers and forget other actively managed funds such as Fundsmith, Woodfund or Blackrock. These heavily advertised superfunds are designed to part you with your money by the way of fees. The fees on these funds will end up costing you a small fortune over the period of your investing lifetime.

Just to illustrate how damaging a 0.5% fee can be, here's some numbers on your £12,000 invested for 30 years:

6% annual return compounded: £72,270.90
6.5% annual return compounded: £83,901.58

That extra 0.5% fee most funds charge will cost you over £11,000 in lost returns over 30 years. That number becomes worse as you invest more over your lifetime. Fees are a very important issue to pay attention to. Keep them as low as possible.

One other piece of advice, never invest in something you don't understand. Take the time to read and research. John Bogle (Founder of Vanguard) wrote an excellent book called the Little Book of Common Sense Investing which I high recommend. Index trackers are simple to understand. You're buying the entire index (S&P, FTSE or whichever you choose). When the markets are doing well, your tracker will do well, and vice versa. No different from actively managed funds.

eskbanker

FinancialThing wrote: »

If no debt, then I second the Vanguard recommendation. I believe they are the best fund company hands down. You can invest directly with them which is great because the fees are rock bottom. I personally like the US S&P500 tracker because I think the FTSE is too small.

While investing in individual shares is undoubtedly unwise for the novice investor, why would you recommend an individual index as an alternative rather than taking this to its logical conclusion and using global funds of funds to diversify across geographies?

FinancialThing wrote: »

I applaud what bostonerimus said and I would look at an index trackers and forget other actively managed funds such as Fundsmith, Woodfund or Blackrock. These heavily advertised superfunds are designed to part you with your money by the way of fees. The fees on these funds will end up costing you a small fortune over the period of your investing lifetime.

Blackrock also offer passive funds and all funds have fees - clearly most investors will want value for money but generally you get what you pay for and so it's simplistic to base active versus passive decisions around fees.

FinancialThing

eskbanker wrote: »

While investing in individual shares is undoubtedly unwise for the novice investor, why would you recommend an individual index as an alternative rather than taking this to its logical conclusion and using global funds of funds to diversify across geographies?

Hi ESK...

You might be right but for me the logical choice is the US S&P500 which has returned a hair under 12% annually since inception. Global index trackers have generally underperformed S&P funds long-term. While there's no guarantee the future will copy the past, I would rather bet on the U.S. for future growth and earnings.

eskbanker wrote: »

Blackrock also offer passive funds and all funds have fees - clearly most investors will want value for money but generally you get what you pay for and so it's simplistic to base active versus passive decisions around fees.

I was referring to Blackrock's managed funds which I see some as high as 1.67% which is shocking, Some of Blackrock's trackers have fees as high as 0.57%. My S&P500 Vanguard tracker has an 0.10% annual fee so for my, it makes send to go directly to the source and to pay the lowest fees possible. When I discovered just how damaging fund fees are, I sold most of my managed funds and kept a few units for comparison. My Vanguard trackers have majorly outperformed every single managed fund I own.

As far as managed funds providing some kind of value or getting what you pay for, this is what the fund managers need the general public (and FA's) to believe otherwise the managers would be unemployed. Historically, 96% of managed funds have lagged the indexs', some by several percentage points, so what investors' pay for is lost returns because fund managers don't have crystal balls to predict the correct stocks to buy. I'm far too unintelligent to attempt to guess which of the 4% will track or possibly outperform the indexs' over the long run. Most managed funds also churn shares (some 100% turnover per year) which leads to fund capital gains tax and trading fees, all of which the fund investors pay for.

eskbanker

FinancialThing wrote: »

Historically, 96% of managed funds have lagged the indexs', some by several percentage points, so what investors' pay for is lost returns because fund managers don't have crystal balls to predict the correct stocks to buy.

Do you have a decent source for that stat?

Not necessarily disagreeing with what you're saying in general though, and I'm a passive fan myself but your earlier post seemed to be implying that only active funds have fees, whereas in fact all funds have fees. Clearly you'd expect active management to cost money so nobody would dispute that on average actives will have higher fees, but that wasn't the way you expressed it.

FinancialThing

eskbanker wrote: »

While investing in individual shares is undoubtedly unwise for the novice investor, why would you recommend an individual index as an alternative rather than taking this to its logical conclusion and using global funds of funds to diversify across geographies?

Blackrock also offer passive funds and all funds have fees - clearly most investors will want value for money but generally you get what you pay for and so it's simplistic to base active versus passive decisions around fees.

eskbanker wrote: »

Do you have a decent source for that stat?

Not necessarily disagreeing with what you're saying in general though, and I'm a passive fan myself but your earlier post seemed to be implying that only active funds have fees, whereas in fact all funds have fees. Clearly you'd expect active management to cost money so nobody would dispute that on average actives will have higher fees, but that wasn't the way you expressed it.

The stats are documented inside John Bogle's Little Book of Common Sense Investing which is a very interested read, especially if you are interested in passive investing. There is a new version being released in Nov 2017 which will hopefully have more up to date numbers.

I could have been clearer in my writing and didn't intend to imply trackers were fee-less. They do however carry fees far lower than any managed fund. Because of the wealth of internet, forums and book information de-mystifying DIY investing, Informed investors' don't have to be subject to these high fees anymore.

I'm passionate about people saving themselves from the claws of managed funds :j