Fund charge (cashpot or not)

Grenage

As I don't max out my ISA allowance by a long way, I've always just put the spare cash into funds. Is there any benefit to having cash in a platform pot so that charges aren't taken from the active funds?


I can't see that there is in my position, but I wanted to check I'm not missing anything obvious.

cattie

I currently keep a couple of hundred or so £'s as cash in my GIA account to go towards charges levied by the platform & IFA to avouid them selling off some of my funds. I'm in the process of switching to iweb & ditching the IFA & whilst I'll still leave a bit of cash to pay for fees, it'll be much lower amount.

AnotherJoe

I always leave a little cash for charges just because I've generally got some left over anyway (dividends and spending that couldn't use up all the money) but I suppose its probably best to have charges paid out from a bank account if thats possible (it may not be), mostly to stop them having to sell an investment and then possibly also charging you for selling that investment.
Plus it would affect my OCD tendencies, i often buy investments in neat round numbers, say 2,000 or 100 or 750 whatever and it would be very annoying to end up with say 1,998 or 97 or similar.

Grenage

Cheers. My thinking was that if the cash had been in the fund, it would have accumulated interest; in a pot it's stagnant. £10 out of a fund or £10 out of a pot is still £10 I no longer have.

bowlhead99

Grenage wrote: »

Cheers. My thinking was that if the cash had been in the fund, it would have accumulated interest; in a pot it's stagnant. £10 out of a fund or £10 out of a pot is still £10 I no longer have.

The reason many people keep a cash float is that with a lot of providers - if you owe them money for platform fees and don't have that money in a cash account with them on the due date, they will sell off one of your fund holdings to get the money, and charge you for making them go to the hassle of disposing of your assets to get the cash.

Some providers will make it free to buy and sell funds yourself, but still charge you for a sale transaction if they are having to instigate it themselves because you didn't get them their money on time. And when they do the sale to raise the money for you, they are essentially selling off your portfolio indiscriminately (e.g. selling your largest holding, or first alphabetical holding etc), rather than selling what you would have chosen to sell yourself.

Once you have paid a couple of these fees or suffered one of these annoying sales, it helps you learn a lesson to just keep a cash float.

If you are expecting portfolio growth of say 5% a year, the 'opportunity cost' of having a tenner sit there all year uninvested is only 50p

But if you don't maintain a cash float, and they are not the sort of firm who charges you a penalty when they sell your fund units to get the cash, you probably don't need to worry about it.

Grenage

Ah thank you; that clears it up. I did throw a little into the pot a while ago, I just wanted a sanity check.