Advice on investing in Vanguard and HSBC funds

uccalms

Hi. I am a first time investor and after reading on the forum plus researching around for long term investment (10+ years), I would like to put £40,000 each in HSBC Global Strategy Balanced Portfolio and Vanguard LS60 (or maybe even VLS 80). To be more cost efficient, would it be better if I invest directly with Vanguard for the VLS fund and find a platform for the HSBC one or just find a trading platform like Hargreaves Lansdown or AJ Bell since I only have a couple of funds to manage? Once that lump sum is done, I also want to drip feed £100 into each each month.

Any advice would be much appreciated. Thanks in advance!

Linton

The problem with investing in a single manager platform like Vanguard is that it is a hassle to move some of your money into another manager's fund. In my view a fraction of a % difference in cost is not sufficient benefit for the reduction in flexibility.

bowlhead99

Vanguard's Vanguardinvestor platform is 0.15% a year. HSBC's Global Investment Centre is 0.39% a year. Independent platforms which let you hold funds from multiple managers are available with a variety of cost structures, generally between that sort of price range (though HL is an outlier at 0.45%).

It is more cost effective to put the funds on whatever platform gives lowest total cost of ownership. However, as Linton says, it's more convenient to put things on one single platform with just one account relationship and logon details to remember, see everything in one place etc. So it's a trade off.

If you are adding £200pm and want that money to be going into two funds, and you want it to be in an ISA, you would need to use an independent platform as you can't fund two separate S&S ISAs in the same tax year. However, if for some reason you don't want to use an ISA (or can't because you have already maxed out your annual allowance while putting the initial £80k in), that won't be an issue.

A solution which would probably work well for low fees is:

1) Put the £80k into the funds via a cheap fixed-fee platform such as IWeb which charges per trade but doesn't charge a percentage based fee on your balance. Split the money £41k HSBC, £39k Vanguard

2) Put £200pm into the Vanguard fund via the Vanguardinvestor platform who charge a low percentage fee on assets under administration and don't charge anything for your monthly purchase transactions

By the end of the year the £2400 added to Vanguard will have roughly 'caught up' the fact that you had £2k more in HSBC at the start. The exact split between the rival funds doesn't really matter as they are both globally allocated and probably similar levels of risk depending which exact products you buy. Next year when you get another ISA allowance you can re-balance between them if you want (their respective performances, which won't be the same, will have moved the ratio between them anyway).

If you are concerned about having £80k all on one platform you could do less at IWeb and more at Vanguard from the start. The 0.15% on Vanguard's platform isn't going to take a huge bite out of your overall performance.

uccalms

Thanks Bowlhead and Linton. Bowlhead, that's invaluable advice. I'll have a look at IWeb.

Iain_For

Hope you don't mind a question not directly related to your post but I'm curious as to why you chose those two funds? They've much in common, and similar performance, though the HSBC one does seem to have less of a UK bias than VLS 60.

dunstonh

They've much in common, and similar performance, though the HSBC one does seem to have less of a UK bias than VLS 60.

HSBC is risk targetted. VLS is not. Asset weightings are different.

Yes, they are similar but there are differences.

uccalms

Iain_For wrote: »

Hope you don't mind a question not directly related to your post but I'm curious as to why you chose those two funds? They've much in common, and similar performance, though the HSBC one does seem to have less of a UK bias than VLS 60.

Hi Iain. I think Dunstonh can explain much better than me. I had my eyes on the Vanguard funds but don't want to hold all the stock and shares with the same company and HSBC global seems pretty much spread out. I want something which is not too risky in the long term and hopefully these will do ok rather than the money sitting in the bank earning sub 1% rate. I have nearly exhausted all the high street saving options.:)

Iain_For

uccalms wrote: »

Hi Iain. I think Dunstonh can explain much better than me. I had my eyes on the Vanguard funds but don't want to hold all the stock and shares with the same company and HSBC global seems pretty much spread out. I want something which is not too risky in the long term and hopefully these will do ok rather than the money sitting in the bank earning sub 1% rate. I have nearly exhausted all the high street saving options.:)

Thanks, I held two similar passive fund of funds myself for a while from different fund managers, one being Vanguard VLS 60, but as they both held similar holdings and were both ultimately held with the same custodian bank I wasn't sure whether I was really diversifying risk much.

busy_dad

If you put all into VLS 60 on Vanguard's platform @0.15% you are looking at £120/year fees based on £80k. This would allow you to drip feed monthly for no extra cost.

Conversely with IWeb it is a £25 opening fee, then £5 trade. Therefore drip feeding £200 per month would cost a total of £85 in year one and £60 thereafter. You could lower the fee further by not paying in monthly and just adding £2400 annually - that would reduce your fee to £30 in year one and £5 per year thereafter.

With IWeb you also have the flexibility to invest in other (non Vanguard) funds/shares/ETFs as you wish.

As the fees involved are very low relative to the amount invested this might be seen as splitting hairs, but looking at the above figures IWeb is cheaper and offers you more flexibility. It does however all depend on your circumstances and how you plan to invest in the future.

Tom99

Or you could go with Halifax and use 12 x £2 regular investor = £24pa plus £12.50 if you want an ISA.

uccalms

busy_dad wrote: »

If you put all into VLS 60 on Vanguard's platform @0.15% you are looking at £120/year fees based on £80k. This would allow you to drip feed monthly for no extra cost.

Conversely with IWeb it is a £25 opening fee, then £5 trade. Therefore drip feeding £200 per month would cost a total of £85 in year one and £60 thereafter. You could lower the fee further by not paying in monthly and just adding £2400 annually - that would reduce your fee to £30 in year one and £5 per year thereafter.

With IWeb you also have the flexibility to invest in other (non Vanguard) funds/shares/ETFs as you wish.

As the fees involved are very low relative to the amount invested this might be seen as splitting hairs, but looking at the above figures IWeb is cheaper and offers you more flexibility. It does however all depend on your circumstances and how you plan to invest in the future.

Thanks busydad. I have opened an ISA account with iWeb but can only put £20K in that... the remaining £60K would count two seperate trades as I want £20K more in VLS60 and 40K in the HSBC Global, so together, does that count as 3 trades? Sorry, I really have no experience in this... I still plan to drip feed monthly so that any loss is evened out.