New Investor Advice AJ Bell S&S ISA

Trundley27

Hi all

Just wondering if any one has any tips on S&S ISA’s? I have just opened my first account and am new to S&S ISA’s. After a lot of thought I thought about giving it a go. I am started small but will be regularly saving. I have made a investment in A J Bells Global Fund for emerging markets as I want a more aggressive approach.

Does anyone have any tips on there journey to investing in funds etc using a platform and how they are performing?

Did anybody start small and build up a portfolio?

Cheers!

dunstonh

I have made a investment in A J Bells Global Fund for emerging markets as I want a more aggressive approach.

It is a common error for new investors to do such a thing. You haven't just gone in with a more aggressive approach. You have dived right in at the deep end with 80% loss potential over 12 months.

You have no sensible diversification either.

When you use single sector funds, they are there to be used with other single sector funds to build your bespoke portfolio. With around 10-13 main sectors, that is around 10-13 funds. You have 100% in one.

Did anybody start small and build up a portfolio?

When you say small, what do you mean? How small is yours?
Is the use of a portfolio of single sector funds sensible for your level of investment? is it sensible for your level of knowledge and understanding?

BLB53

It is probably not a good idea to start off your investing without fully understanding what you are doing. I am guessing you did not really have a plan setting out what you want to achieve and how you are going to get there.

I am mindful of the words of Ben Graham 'The investors chief problem...even his worst enemy...is likely to be himself'.

So before going further have a good read of a couple of good (free) sites...
Monevator
http://monevator.com/category/investing/passive-investing-investing/

and DIY Investor
http://diyinvestoruk.blogspot.com/p/basics.html

and then write down your plan of action.

ValiantSon

I have to echo the above comments. In all honesty, you have made a pretty dreadful first choice. I'd sell that fund now and look at investing in a multi-asset fund like Vanguard LifeStrategy; HSBC Global Strategy; or Blackrock Consensus. If you want it to be "fairly aggressive" then just choose one of the higher equity versions, e.g. Vanguard Life Strategy 80; HSBC Global Strategy Dynamic; Blackrock Consensus 85.

If you are looking at regularly investing too, then you have chosen a pretty poor platform on which to do so. AJ Bell charge you £1.50 every time that you buy or sell funds (as well as 0.25% of your investment p.a. and £25 per fund to transfer out), so if you bought more each month then you would add to your annual fees by £18 per year. Lots of other platforms will just charge the per centage fee, e.g. Cavendish or Charles Stanley, who both just charge 0.25% (although Charles Stanley do charge £10 per fund to transfer out). If you end up going for Vanguard LifeStrategy, then using their platform will cost you just 0.15% (no other charges at all).

You can sell the fund you currently have and then apply to transfer the ISA to another (cheaper) provider. This will protect the ISA status of the cash in your account (from selling the fund). Don't withdraw the cash and close the AJ Bell account as this will affect your ISA allowance for the year. Use the transfer option.

I've just looked at the fund costs and you are currently paying 0.5% OCF. A multi-asset fund, which will give you much better diversity, will cost less than half of that.

I'm sorry if this sounds a little bit harsh, but your decision is not a good one, and we are all trying to help you sort it out asap.

Trundley27

God you have all scared the hell out out me here! I did do research obviously not enough! It!!!8217;s a good job it is only £65 as I wanted to start off low! This has not been applied to the investment as yet! But how would I cancel this?

Trundley27

I have obviously made the school boy error! Can I ask why anyone would therefore according to your statistic of a potential 80% loss would want to invest in the fund I just have?

Trundley27

Thank you for such a detailed answer. So would you recommend it if I transfer to vanguard? What my initial plan was is to invest monthly starting off with small amounts, e.g in a more higher risk pattern and invest for the long term (age 30).

So I want growth over 10 to 15 years. How do you think I should approach this method? Is this a sensible method?

dunstonh

Can I ask why anyone would therefore according to your statistic of a potential 80% loss would want to invest in the fund I just have?

Because it can go up 80% in a year as well.

It is a single sector fund, as mentioned and for the average UK investor, emerging markets may form around 5-10% of their overall portfolio.

it is only £65 as I wanted to start off low!

Stick with multi-asset funds. Simple, diversified within the fund itself and ideally suited for those with smaller amounts.

Trundley27

Thank you for such a detailed answer. So would you recommend it if I transfer to vanguard? What my initial plan was is to invest monthly starting off with small amounts, e.g in a more higher risk pattern and invest for the long term (age 30).

So I want growth over 10 to 15 years. How do you think I should approach this method? Is this a sensible method?

Also I was thinking around £60 to £100 per month investment to start with.

Audaxer

Trundley27 wrote: »

God you have all scared the hell out out me here! I did do research obviously not enough! It!!!8217;s a good job it is only £65 as I wanted to start off low! This has not been applied to the investment as yet! But how would I cancel this?

Well, reading the first few posts, I was concerned that you had put thousands just into that one high risk fund, which would have been a disaster. I would just take out the money and put it into a multi asset fund like for example, Vanguard LifeStrategy, HSBC Global Strategy or L&G Multi index fund. You can choose a fund that suits your risk tolerance, i.e. higher percentage of equities mean more volatility but potentially higher returns over the long term. But read up on sites like Monevator first.

ValiantSon

I'm relieved to hear that the sum you had intended to invest was so low.

If you haven't placed a buy order for the fund yet then there is no need to worry. The money will sit in your account as cash until you are ready. Take a look at the options suggested (Vanguard, HSBC, Blacrock, L&G) and get a sense of which one fits with your aims best. Vanguard is commonly recommended, and I like it, but the others are all good funds too. Each is slightly different from the other and will suit people differently. If you did just go for Vanguard I don't think that you would have made a silly choice, but neither would I if you went for HSBC, or Blackrock, or L&G.

If you have placed a buy order for the fund then you can contact AJ Bell and ask if it can be cancelled. If it can't then just sell it and accept a small loss from the trading costs.

Once you've chosen your fund, then choose the platform. If using Vanguard then it makes sense to use their own platform, Vanguard Investor, because it is the cheapest way to do it. Some people don't like it because you can only buy Vanguard investments on it, but that doesn't really matter because for the forseeable future you would only be buying one fund anyway. When your investment pot has grown to £50,000 - £60,000 then it may be worth looking at building a more bespoke portfolio and you would then be free to transfer your investments out from Vanguard to another platform at no cost.

In terms of amounts to invest you could come up against some issues. Most funds have a minimum investment, or the platform requires a minimum each month to invest (not both at the same time). With Vanuard Investor you can start investing with a lump sum of £500, and then add to it with as much and as often as you like, or commit to a £100 per month investment. If you were thinking of possibly £100 per month then that would not be an issue. Other platforms will have their own rules.

Investing on a regular basis is perfectly sensible.