First time investing help - directly with the fund, or via 3rd party?

Rich99

Hi, I've decided to try investing some money. I've never done this before, and have been reading up. I've decided that I'd like to go with a passive tracker fund, and the Legal & General UK/International funds seem to be recommended in various places.

So now I want to invest - I see that I can do it directly on the L&G site. However I also read an advice site that said the charges were cheaper if going through Hargreaves & Lansdown. Yet the H&L Vantage account lists a price per deal, whereas the L&G one doesn't mention such a charge.

Clearly I'm new to all this, but what are the advantages of going through a third party such as H&L, versus doing it direct with L&G?

Thanks!

jimjames

I'm not sure HL (no &) will be cheaper as they're one of the most expensive platforms but using a platform rather than direct means you can get funds from different companies inside your ISA which makes it much easier long term to have a balanced portfolio.

dunstonh

I've decided that I'd like to go with a passive tracker fund, and the Legal & General UK/International funds seem to be recommended in various places.

That is high risk. Especially for a new investor. Do you have the behaviour to accept the value dropping by half? i.e. if you had £10,000 in one statement but the next one said £5,000, would you just shrug it off or would you pull the money out to avoid losing more?

L&G trackers are good in some areas but not others. There is no one best tracker provider. It depends on the area and how you buy it.

However I also read an advice site that said the charges were cheaper if going through Hargreaves & Lansdown.

HL is an expensive platform. There are many cheaper. Platforms are a value added service. i.e .you pay a platform charge. You may get a cheaper share class on the funds (but that goes for all platforms). However, you have to add the platform cost and the fund cost together.

L&G do operate a different share class for direct applications. These are more expensive than the platform share class. However, they can be cheaper when looking at the total cost.

Rich99

jimjames wrote: »

I'm not sure HL (no &) will be cheaper as they're one of the most expensive platforms but using a platform rather than direct means you can get funds from different companies inside your ISA which makes it much easier long term to have a balanced portfolio.

Thanks for the info - at this stage I'm just dipping my toes in the water, so I don't see a need to go with a platform.

One thing you said, that I hadn't come across on the advice sites - you mentioned an ISA. Does this mean you link an ISA direct to the investment? Is that 'standard' or 'optional'? What's the point of it anyway, given that there's a personal savings allowance of £5k on dividends, and I won't be making anywhere near that amount?

How does it work practically - if I sign up with L&G to invest in their fund, so I automatically get an ISA with them? Or do I need to get an ISA from somewhere else, then somehow link it to the L&G fund?

Sorry for the basic questions, this is all new to me!

Rich99

dunstonh wrote: »

That is high risk. Especially for a new investor. Do you have the behaviour to accept the value dropping by half? i.e. if you had £10,000 in one statement but the next one said £5,000, would you just shrug it off or would you pull the money out to avoid losing more?

L&G do operate a different share class for direct applications. These are more expensive than the platform share class. However, they can be cheaper when looking at the total cost.

Thanks for the advice - I'm only planning on investing money I can 'afford to lose' initially. This is me just getting a feel for how it all works, but the aim is to keep it as a long term investment. The guidance sites didn't seem to suggest that the L&G passive trackers were that massively risky, especially the UK one?

bostonerimus

Rich99 wrote: »

Thanks for the info - at this stage I'm just dipping my toes in the water, so I don't see a need to go with a platform.

One thing you said, that I hadn't come across on the advice sites - you mentioned an ISA. Does this mean you link an ISA direct to the investment? Is that 'standard' or 'optional'? What's the point of it anyway, given that there's a personal savings allowance of £5k on dividends, and I won't be making anywhere near that amount?

You open an ISA account with either H&L or L&G and buy the funds within that account; then all gains, dividend and withdrawals are tax free.

I would look at other options like Blackrock and Vanguard....you can buy cheaply directly from Vanguard but are limited to Vanguard funds.

bostonerimus

Rich99 wrote: »

Thanks for the advice - I'm only planning on investing money I can 'afford to lose' initially. This is me just getting a feel for how it all works, but the aim is to keep it as a long term investment. The guidance sites didn't seem to suggest that the L&G passive trackers were that massively risky, especially the UK one?

Any fund that is 100% equities is risky. Investing in a single region like the UK can also be risky. The general rule is to be invested in a range of stocks and bonds of various types and in various countries; there are mult-asset funds that will do that for you. My comment on the L&G passive trackers is that they are quite expensive for trackers.

dunstonh

The guidance sites didn't seem to suggest that the L&G passive trackers were that massively risky, especially the UK one?

You need to change your source where you are getting your guidance.

All funds have some degree of risk. The risk will vary depending on where it is invested. Different people will have different views on the risks. Some get scared with a 5% loss. Some get scared only when it gets to 50%.

A UK equity fund is considered less risky than a global equity fund but more risky than a corporate bond fund (caveats apply). Whether they are managed or passive has no impact on the risk.

Also, using single sector funds is typically done with larger portfolios and not smaller ones. Mainly as its not really possible or cost effective to build a portfolio of single sector funds with small amounts. For example, if your model has 3% allocated to Japan, then with £10,000 that is just £300. At £100k, its £3000.

If you are building a portfolio then that involves management decisions. i.e. how much are you going to have in each sector. So, what knowledge do you have about building such a portfolio and why do you think you can do better than a fund manager? Would a multi-asset fund be better suited for your knowledge and/or investment amount?

I would look at other options like Blackrock and Vanguard....you can buy cheaply directly from Vanguard but are limited to Vanguard funds.

Whilst the Vanguard platform is cheaper, the vanguard trackers, in most areas, are not as good as the alternative trackers.

atilla

bostonerimus wrote: »

You open an ISA account with either H&L or L&G and buy the funds within that account; then all gains, dividend and withdrawals are tax free.

I would look at other options like Blackrock and Vanguard....you can buy cheaply directly from Vanguard but are limited to Vanguard funds.

Hint of bias in there?
What's wrong specifically with L&G in comparison to Blackrock and Vanguard?

jimjames

atilla wrote: »

Hint of bias in there?
What's wrong specifically with L&G in comparison to Blackrock and Vanguard?

Cost?

Rich99 wrote: »

One thing you said, that I hadn't come across on the advice sites - you mentioned an ISA. Does this mean you link an ISA direct to the investment? Is that 'standard' or 'optional'? What's the point of it anyway, given that there's a personal savings allowance of £5k on dividends, and I won't be making anywhere near that amount?

When you sign up there will be an option for ISA or not, if you've not used your allowance then it's worth it. The dividend allowance drops to £2000 and you still have liability for capital gains tax. ISA tax wrapper generally costs nothing so it's a waste not to use it.
It's very easy to think you'll never have to worry about tax, I thought that too but once you have many years of investments you may well have an expensive problem if you've not used the (free) tax wrappers

bostonerimus

atilla wrote: »

Hint of bias in there?
What's wrong specifically with L&G in comparison to Blackrock and Vanguard?

If you are tracking something like FTSE100 the only distinguishing factor between different trackers should be cost, so choose the cheapest......and, yes I am biased to Vanguard, but they are not necessarily the best in the UK because of their currently limited offerings ie no SIPPs. and if you can find cheaper or better returning trackers then use those.