Investing Funds or Shares - £500

Alexland

Damper132 wrote: »

would you suggest maybe moving away from HL then as too expensive?

On HL you might pay 0.45% platform and say 0.09% Blackrock Consensus 85 fund OCF so 0.54% total. This compares to Vanguard Investor at 0.15% platform and say 0.22% Vanguard LifeStrategy 80 fund OCF so 0.37% total.

HL have a reputation for good customer service but Vanguard have a reputation for putting the customer first. I have tried both and found them to be equivalent so the comparison really comes down to cost.

However beware HL have an exit fee that might eliminate any cost savings you might make in the near future. In your position I would stick with HL until you find your feet. HL can be better if going active where the fund OCF discounts can outweigh the difference in platform costs.

Damper132 wrote: »

i will definitely look into the investment trusts, its a minefield to figure or what to and what not to do

It won't help as HL charge 0.45% to hold ITs too (although it is capped at £45pa) and you would pay the same trade fee as buying shares.

Alex

s88

I'm very new to investing and recently opened a Vanguard Life Strategy 80 as it's one of the best for beginners. I deposited £500, and make monthly contributions of £150, with the first processed a few days ago. My investments are up £4.63 - so far, so good!


I don't have any experience of other platforms or funds, but the VLS funds seem to be seen in a positive light on here, and a great way to dip your toes, so to speak.

Alexland

s88 wrote: »

I'm very new to investing and recently opened a Vanguard Life Strategy 80 as it's one of the best for beginners. I deposited £500, and make monthly contributions of £150, with the first processed a few days ago. My investments are up £4.63 - so far, so good!

Yes but it so easily could have been 1% in the other direction and you may have been doubting your choice. With VLS80 you will need to brace yourself for market movements up to circa 40% in either direction depending on what is going on in the markets. Still it's a good fund and when you are first starting it's actually good if you get big drops as it means your future contributions are buying more units and the recovery will be more fruitful.

Alex

grey_gym_sock

Prism wrote: »

No index funds have ever beaten their benchmark over the long term, but equally don't typically underperform by much.

your basic message here is spot on. a cheap, well-run index fund can be expected to underperform its benchmark in the long term by a very small margin.

however, some index funds gain extra revenue from stock lending, which can partially offset the fund's charges, reducing that underperformance. and in a very few cases, this revenue can more than offset the charges, leading to outperformance of the index.

e.g. see https://advisors.vanguard.com/VGApp/iip/site/advisor/investments/performance?fundId=0598 - that's 1 of vanguard's US funds - i don't know an example that UK investors are likely to have access to.

Prism

grey_gym_sock wrote: »

however, some index funds gain extra revenue from stock lending, which can partially offset the fund's charges, reducing that underperformance. and in a very few cases, this revenue can more than offset the charges, leading to outperformance of the index.

Ah, I didn't realise that index funds sometimes engaged in that kind of thing. Makes sense given it should be pretty low risk. It certainly can be a way of topping up your earnings. I have a friend who sells call options on their direct share holdings so I should have thought that index funds might use derivatives etc top cover the costs

Damper132

Prism wrote: »

Ah, I didn't realise that index funds sometimes engaged in that kind of thing. Makes sense given it should be pretty low risk. It certainly can be a way of topping up your earnings. I have a friend who sells call options on their direct share holdings so I should have thought that index funds might use derivatives etc top cover the costs

there so much to take in, just about to press the button and make 1st investment into funds now so fingers crossed the first few days will be positive, guess anything is better than measly returns on offer at the moment

grey_gym_sock

we are getting into technicalities now ... new investors don't need to take in all of this ... but, since we've started ...

Prism wrote: »

I have a friend who sells call options on their direct share holdings so I should have thought that index funds might use derivatives etc top cover the costs

index funds shouldn't be selling call options, because that would lead to them failing to track their index accurately. if the index races up, above the strike price of the call option, that would mean that somebody has the right to buy some of the shares the fund holds at the strike price, which is now below the market price; so the fund wouldn't gain all the upside when the index rises. they would instead have a stream of income from selling the call options. so some investors may decide this is something they want to do. but it's an active strategy, which will give different returns (could be better or worse) from the index.

index funds may use derivatives in a other ways. e.g. when they have odd bits of cash in the fund, too small to invest in the 100s or 1000s of shares in their index, they might instead use derivatives to give them a similar return to what they'd have got by buying all those shares directly. this can make the fund track its index more accurately.

george4064

Damper132 wrote: »

there so much to take in, just about to press the button and make 1st investment into funds now so fingers crossed the first few days will be positive, guess anything is better than measly returns on offer at the moment

Just remember to keep the long-term in your head, ignore any short term noise.

Keep calm and carry on (investing!)

Damper132

grey_gym_sock wrote: »

we are getting into technicalities now ... new investors don't need to take in all of this ... but, since we've started ...



index funds shouldn't be selling call options, because that would lead to them failing to track their index accurately. if the index races up, above the strike price of the call option, that would mean that somebody has the right to buy some of the shares the fund holds at the strike price, which is now below the market price; so the fund wouldn't gain all the upside when the index rises. they would instead have a stream of income from selling the call options. so some investors may decide this is something they want to do. but it's an active strategy, which will give different returns (could be better or worse) from the index.

index funds may use derivatives in a other ways. e.g. when they have odd bits of cash in the fund, too small to invest in the 100s or 1000s of shares in their index, they might instead use derivatives to give them a similar return to what they'd have got by buying all those shares directly. this can make the fund track its index more accurately.

Now this is mind boggling stuff, the only call options im used to are Press 1 for customer Service, Press 2 for billing and payments....maybe in a few years this will all make sense :j

Damper132

george4064 wrote: »

Just remember to keep the long-term in your head, ignore any short term noise.

Keep calm and carry on (investing!)

thats going to have to be my, kind of try forget make monthly contributions and hopefully watch it grow overtime guess something is better than nothing, not going to make any money spending it all!!