Investing at 30 - fund advice

AnotherJoe

Tarambor wrote: »

Never understood this comment. Most of the VLS UK investing is in companies that make their money globally.

Because due to the artificial bias to the UK, which fair comment is in mega corps that are international, they are highly concentrated in a handful of sectors. If banking, pharma or mining take a hit, there's a disproportionate effect.

Tarambor wrote: »

And when you invest almost or all outside the UK you're massively exposed to currency values so a strong pound can see your fund tank in value as shares priced in Euros or Dollars are worth less in GBP, a weak one can see it rise.

Anyone in VLS will be mostly outside the UK wont they? So I'm not sure of the point you are making?


I dont think exchange rate issues can be evaded anyway because very few companies, even wholly UK ones that only trade in the UK, will be unaffected by global economic conditions and factors whether that be positive or negative. So even a wholly UK only fund will either have a lot of (effectively) international companies or will be affected by global economic conditions.

ValiantSon

WeWereOnABreak wrote: »

Can I open a LISA to purchase VLS100? I don!!!8217;t have one of these yet (didn!!!8217;t make much financial sense before now as I hadn!!!8217;t maximised other options e.g. employer pension contributions) and I!!!8217;ve already paid into a s&s ISA this year. Still have some allowance left, so this might be a potential solution rather than waiting until next year as I originally thought.

Yes, you can buy VLS100 inside a LISA, but be aware that the total subscription across all types of ISA is £20,000 p.a. You also need to keep in mind that if you touch this money before you are 60, then you will pay a penalty.

There isn't much competition in the LISA market, so don't expect particularly great deals. Hargreaves Lansdown will happily take 0.45% platform fee from you, with no dealing charges on funds (but a charming £25 per fund exit fee), while AJ Bell will only charge you 0.25%, but they also want £1.50 per trade (and add the same delightful £25 exit fee).

If you already have an S&S ISA then why not just subscribe the maximum amount in that - buying VLS100, or whichever fund you choose - and then next year review the situation, depositing the remaining amount from the £20,000, and starting your £100 p/m regular investment? (If you do choose to only invest in Vanguard funds then Vanguard Investor is easily the cheapest way to do it for the forseeable future).

Alexland

ValiantSon wrote: »

Hargreaves Lansdown will happily take 0.4% platform fee from you.

Have they reduced their price 0.05% because of their various service quality issues? If going 100% equities in a HL LISA then it's worth considering discounted funds such as L&G International, Blackrock Consensus 100 or Lindsell Train Global Equity.

Alex

ValiantSon

Alexland wrote: »

Have they reduced their price 0.05% because of their various service quality issues?

No, it's a typo. My keyboard is getting increasingly resistant to actually accepting the keys I press! I'll fix it now.

WeWereOnABreak

Thanks for the extra clarifications everyone. Really appreciate your input.

Sounds like I have a few options...

1. open a Halifax LISA this financial year and sink £4k into it (to minimise trading & platform fees and benefit from government bonus)
2. buy VLS100 through my existing s&s ISA (this is ok for the lump sum but the individual trading fees make the regular payments non viable)
3. open an ISA with Vanguard next financial year as this has low platform/trade fees
4. investigate other LISA funds

With regards to the £25 exit fee - this is only applicable if I transfer out a holding to another platform, right? Not applicable for selling? I guess I'm wondering why I'd be too concerned about this if my intention is to hold for a long period... other than it being a nuisance, it shouldn't eat into the gains too much. Or have I missed something?

ValiantSon

WeWereOnABreak wrote: »

Thanks for the extra clarifications everyone. Really appreciate your input.

Sounds like I have a few options...

1. open a Halifax LISA this financial year and sink £4k into it (to minimise trading & platform fees and benefit from government bonus)

Halifax don't offer an S&S LISA.

WeWereOnABreak wrote: »

With regards to the £25 exit fee - this is only applicable if I transfer out a holding to another platform, right? Not applicable for selling? I guess I'm wondering why I'd be too concerned about this if my intention is to hold for a long period... other than it being a nuisance, it shouldn't eat into the gains too much. Or have I missed something?

If you sell all of your assets, HL or AJ Bell will charge you £25 to close the account, so you would need to leave a little cash in, effectively for ever, if you want to avoid the fee (but then what's the point?).

The fee isn't for selling, only for exiting the platform.

The biggest issue with exit fees are that they are a disincentive to move platforms to a better pricing model. As youninvestments grow, and the platform market evolves, you might find a better option elsewhere.

TheShape

Alexland wrote: »

If going 100% equities in a HL LISA then it's worth considering discounted funds such as L&G International, Blackrock Consensus 100 or Lindsell Train Global Equity.

Alex

Not a discounted fund but Fidelity Index World has a reasonable Net Ongoing Charge of 0.13% and, if I'm right, broadly represents the developed world markets in proportion to each other. I have it under consideration for my HL SIPP rather than VLS 100 or Blackrock Consensus 100.

WeWereOnABreak

Hi everyone, I wanted to return to this thread to thank everyone who offered suggestions and information and give you an update on my financial situation.

I've spent the last 8 months doing a lot more research to educate myself on funds and in particular the Vanguard VLS & Global / HSBC Global / Blackrock ones, and now feel I have a much better handle on my options and therefore what I'm going to do.

Key things to note:
1. I'm not able to open another S&S ISA this financial year as I already paid into one in May/June/July so that rules out opening another one until April.
2. Sadly my existing S&S ISA won't permit the purchase of funds, so I can't buy any at the moment.
3. A LISA is not a top priority since I already have a house so the money would be stuck in there until I turn 60, which doesn't give me a lot of flexibility if I needed access to it before then. (I know technically I can withdraw before 60 but I then don't get the 25% bonus, so it's obviously not something I'm really considering.) I'm also likely to become a higher-rate tax payer in the next couple of years, and I'm not convinced the LISA gives as good a return compared to other options (e.g. private pension or ISA tax-free benefits) as it's only a 25% bonus whereas I'd be taxed 40%.

As a result of all this, I've decided to hold onto my lump sum for the last few months and have been busy switching bank accounts to get the bonuses and further build up my cash. I've also been overpaying my mortgage while the rate is low (to protect me from future rises, and give me some flexibility with regard to monthly cashflow and budget). My intention for the 2019-20 financial year is to open a new S&S ISA with (probably) Vanguard so I can pay a lump sum and monthly contributions into it, likely investing in a combination of VLS and Global Equity. My understanding is that the fees will cost 0.15% per year capped at £375 (which requires a £250k investment, so will take a while to achieve). With regard to my existing employer shares, I will sell half (as they have doubled in value over the last 2 years), and for the ones I bought this financial year, I'm waiting to achieve a 20-25% return on them before cashing in (some of them are nearly there). I'll then dump the proceeds into my fund account.

I'd definitely be interested to hear what you think about my initial strategy, and other ideas/options for future investment, in particular once I've built up a pot of at least £50,000 in the Vanguard account (which I forecast will take me roughly 2-3 years based on the lump sums and revised monthly payments I'm planning to deposit).

eskbanker

WeWereOnABreak wrote: »

Sadly my existing S&S ISA won't permit the purchase of funds, so I can't buy any at the moment.

I'm assuming from this comment that you went down the route of Nutmeg or some such, that only offers their own proprietary options rather than the generally-available funds? If you were stuck down a cul-de-sac like that with no means of buying what you actually want to buy then the obvious solution would be to transfer to a mainstream S&S ISA platform, but you're running out of time to do so prior to the end of the tax year so if you want to get the rest of your 2018/19 allowance under the ISA umbrella before it's too late then you might need to put it into a cash ISA in the short term.

WeWereOnABreak wrote: »

I'm not convinced the LISA gives as good a return compared to other options (e.g. private pension or ISA tax-free benefits) as it's only a 25% bonus whereas I'd be taxed 40%.

I can understand the line of argument that prefers pension over ISA but not the one that effectively says that a LISA doesn't offer such good returns as a (presumably non-Lifetime) ISA! For those who qualify for LISAs, you essentially have the same returns as a non-Lifetime ISA but with an extra 25% added by the government - there is the issue of penalties on pre-60 withdrawals but in terms of return LISAs win hands down. Assuming you already have a cash-based emergency rainy day fund for accessibility, why not put £4K per tax year into a S&S LISA and £16K into a non-Lifetime S&S ISA?