Understanding funds - beginner questions

ColdIron

The OCF of 0.15% (£7.50) would be taken from within the fund by the fund managers so you won't pay it directly or receive a bill, you pay this regardless of the platform. The platform charge of another 0.15% (£7.50) would be taken from your cash account at the platform. If your platform was HL this would be 0.45% (£22.50). At these levels don't let the charges tail wag the investment dog. Have you dismissed Vanguard's Lifestrategy?

boomsmitty

Thanks ColdIron.

That makes sense with regards to the OCF of 0.15%, but I'm a bit confused when you mention "another 0.15%". What's that charge called/for? Does one charge pay for the running of the fund and the other for the running of the platform? So in effect my annual charges - all in - on the above example of £5k, would be 0.30% (£15) per annum?

If that's correct and they take 0.15% from the fund in the ISA and 0.15% from a cash source, would it be best to always have £100 uninvested in the account just to pay for those charges?

I have literally just visited Vanguard for the first time today and I like that all their funds are their own - I will look more into that LifeStrategy fund - that's an active fund right? That's why the charges are higher I presume? Also, following on from my original post - we would class those LifeStrategy funds as multi-asset funds wouldn't we? Because they're a mix of equities and bonds. Nice. I think I'm getting there!

Thanks for your time ColdIron, I learn more with every reply.

boomsmitty

Sorry ColdIron, I just re-read your reply and you have clarified the 0.15% platform charge, I was just a bit confused as it was the same as the OCF.

Cheers

ColdIron

boomsmitty wrote: »

That makes sense with regards to the OCF of 0.15%, but I'm a bit confused when you mention "another 0.15%". What's that charge called/for? Does one charge pay for the running of the fund and the other for the running of the platform?

Exactly that

So in effect my annual charges - all in - on the above example of £5k, would be 0.30% (£15) per annum?

In effect, at Vanguard Investor, yes

If that's correct and they take 0.15% from the fund in the ISA and 0.15% from a cash source, would it be best to always have £100 uninvested in the account just to pay for those charges?

£100 would keep you going for many years but that's the general idea. I believe if you don't have enough cash they will sell down a small proportion of your investment but that's probably best avoided

I have literally just visited Vanguard for the first time today and I like that all their funds are their own - I will look more into that LifeStrategy fund - that's an active fund right?

Not quite. It's not a fund that tracks a single index like the FTSE Developed World you mention, its a fund that tracks several indexes and Vanguard determines how much of each. So if you like it's a passive fund with active allocation. No one would call it an actual active investment where a fund manager says I'll invest in these companies and not those other ones

That's why the charges are higher I presume?

There is a small cost for that over a single index tracker but it's still a long way off active fees of +-0.75%

Also, following on from my original post - we would class those LifeStrategy funds as multi-asset funds wouldn't we?

We would

Because they're a mix of equities and bonds.

Precisely

Nice. I think I'm getting there!

It's not hard once you've got your head around the basics, keep going

MarkBargain

iWeb (Lloyds/Halifax) is worth a look at their platform charge is £5 a trade with no annual admin charges once you've paid £25 to join, which is cheaper than % platform charges for many people. It's fun to look at funds using their advanced filter on https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/ as you can search by risk level, charges, past returns, sustainability ratings etc.

ColdIron

iWeb is good for long term buy and hold with little activity, particularly for larger sums. OP is looking at monthly investing with small sums and those fivers will quickly mount up. £60 + £25 opening for the first year and £60 ongoing would dwarf £7.50 pa

boomsmitty

Brilliant.

Yes, that's right. Just want to start with a lump sum and plop a bit in every month for the foreseeable future. I like the idea of knowing that a "set charge" is administered every year - regardless of the amount of transactions.

Vanguard is looking like the forerunner at the moment the more I look. I've got a small amount of money in stock at Barclays Smart Investor which I put in a few years ago when I was even more clueless than I am now. They charge me £4 a month for God know's what, so I'm going to sell up in there soon, close the ISA and invest that into my potential fund once I've settled on it.

LHW99

Don't forget to have a look at the actual platforms, some will let you register and run a virtual portfolio so you can try out the interface.
Until you get north of £30k invested, the difference in platform costs are likely to be minimal.
HL tends to be slick, and generally good for customer support.
I have heard iWeb can be clunky though I have no experience of that or Vanguard.
AJBell is also OK, and as long as you don't want much support Interactive Investor site is OK, but their "back room" can leave leave a bit to be desired (there are threads here somewhere)!

MarkBargain

ColdIron wrote: »

iWeb is good for long term buy and hold with little activity, particularly for larger sums. OP is looking at monthly investing with small sums and those fivers will quickly mount up. £60 + £25 opening for the first year and £60 ongoing would dwarf £7.50 pa

Agreed, although what I do is invest monthly in regular savings accounts (2.9% - 5% interest) then pay into the shares ISA in one lump sum each year when those mature.

MarkBargain

LHW99 wrote: »

Don't forget to have a look at the actual platforms, some will let you register and run a virtual portfolio so you can try out the interface.
Until you get north of £30k invested, the difference in platform costs are likely to be minimal.
HL tends to be slick, and generally good for customer support.
I have heard iWeb can be clunky though I have no experience of that or Vanguard.
AJBell is also OK, and as long as you don't want much support Interactive Investor site is OK, but their "back room" can leave leave a bit to be desired (there are threads here somewhere)!

HL charge 0.45%, which is fine to start with but expensive as the funds grow (£135 a year on £30k). ISAs can always be transferred in future years though, so not much of an issue.