Total Beginner - Lifetime ISA Commission Fees?!?

gordy010

Hi,

This is possibly the most simple of all simple questions but I've tried to find an answer and I can't :-/

I have just started a LISA with Hargreaves Lansdown with the intention of using it for saving for retirement (on top of pension obviously).

As I don't really know what I'm doing, despite reading a number of guides, I added only £25 to it in order to try and work out what I'm doing.

After a bit of research I decided that Scottish Mortgage Investment Trust 5p shares seemed like a good bet. I presume they were originally 5p many moons ago as they were actually 426p each lol!

Anyway, with £25 I thought I would be able to get 5 but there was a commission of £11.95 to pay???

Is this the normal charge for investing in funds / shares each month as it doesn't seem right to me....? Would I be better adding the money as cash over a number of months so that I can buy more shares and presumably the commission is the same?

Sorry for what is probably a stupid question but I really appreciate any help....

Thanks

eskbanker

gordy010 wrote: »

Anyway, with £25 I thought I would be able to get 5 but there was a commission of £11.95 to pay???

Is this the normal charge for investing in funds / shares each month as it doesn't seem right to me....? Would I be better adding the money as cash over a number of months so that I can buy more shares and presumably the commission is the same?

£11.95 is the charge for a one-off purchase - if you're going to make monthly purchases then you can set up a regular purchase arrangement for £1.50 per month, as per http://www.hl.co.uk/shares/share-dealing/dealing-charges

However, £25 here and there isn't really a viable option going forward, although doesn't do any harm purely as a familiarisation exercise - what are your plans for investing between now and retirement? Which guides did you read that convinced you that buying Scottish Mortgage Investment Trust was the right thing to do?

gordy010

Hi eskbanker,

Thanks very much for your reply.

I eventually worked out that the one off purchase was way more than the regular £1.50 charge for regular saving / purchases.

The £25 is just for getting a feel for how things work as you say - I would intend to up this to £4K annually to get the maximum bonus on a LISA.

I have never looked at ISAs before and have concentrated on my pension in the past (which still gets maximum contribution), however the gov't bonus makes it interesting with the potential for growth making it even moreso.

I can't recall which guide suggested SMT but it appeared to be doing well over the last 5 years. I may however look to split my investment between this, an index tracker fund and a managed fund (say 33 / 33 / 33) if this is sensible to do?

I'm 37 so the investment will have 23 years of work to do.....

Thanks for the help - I really appreciate it!

dunstonh

Anyway, with £25 I thought I would be able to get 5 but there was a commission of £11.95 to pay???

Its not commission. Its a fee.

Is this the normal charge for investing in funds / shares each month as it doesn't seem right to me....?

Shares, ETFs and ITS are direct investments and have dealing costs. UT/OEICs do not have dealing costs.

£25 is far too low to be buying direct investments. You should stick to funds.

snowqueen555

I think HL have a £100 minimum investment in funds. You are best off keeping that £25 in cash or putting a little bit more in and buying a fund.

gordy010

Hi all and many thanks for the responses so far - I appreciate it greatly as I try to work out what I'm supposed to be doing!

For clarity the £25 investment thus far was only to get a feel for how things worked, and it has helped as I quickly learnt about fees when buying shares lol

Long term I plan to add around £300 each month as well as reinvesting any income (and using accumulation funds where possible to make this easier).

I can appreciate that even at that level of £ input shares may still be a bad idea due to fees etc and I should ignore these to concentrate on funds?

Based on my inexperience of ISAs and all things S&S the Vanguard LifeStrategy 80% Equity Accumulation fund appears as a good starting point, being passively managed with relatively high risk/return with 80% equites for low management cost...

Would this be better than an actively managed fund in my case do you think? As stated I'm 37 and have no intention of touching the LISA til 60 at earliest, with any income before then to be reinvested / accumulation, and circa £300 added each month (small in comparison to others I realise).

Thanks again, truly appreciated :-)

Viking_mfw

I'm in a similar beginning situation and having read around concluded that a passively managed fund was a better bet because of fees (lower) and the long term nature of the LISA investment (I'm also 37). I'm in the Vanguard 100% at the moment and plan to stay in that probably til 50 before switching to a lower risk. I'm going lower risk in the normal S&S ISA but the bonus in a LISA makes me feel comfortable with a higher level.of initial risk. YMMV.

gordy010

Thanks Viking,


I don't have any other ISAs but the passive fund does appear the way go based on all the reading I've done and the very limited nature of my understanding :-)