Stocks and Shares ISA

Steve123456789

Been thinking about a stocks and shares ISA with Vanguard.


Pay a couple of hundred quid a month in and see what happens.


What should I know?

MaxiRobriguez

That it's relatively sensible.

Do it via an SIPP/ISA platform so you avoid tax implications, pick a global equity fund so you have diversification and continue topping up even if prices drop.

Also consider whether the £200 a month could instead come out from your salary if you have an employer pension scheme that matches (or better) salary sacrifice.

Steve123456789

Yeah, my plan was to use an ISA with Vanguard.


Why keep topping up even if prices drop? Everyone says this, but I don't get it.


I don't understand the second part. Could you explain please?


Apologies for my ignorance.

DrSyn

Steve123456789 wrote: »

Yeah, my plan was to use an ISA with Vanguard.

Why keep topping up even if prices drop? Everyone says this, but I don't get it.

I don't understand the second part. Could you explain please?

Apologies for my ignorance.

Watch this it will explain lump sum & drip feeding:-
https://www.youtube.com/watch?v=DMznHFuGJr4

An alternative to VLS is the HSBC Global Strategy Portfolios

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/

You can open a Vanguard ISA with Vanguard directly:-

https://secure.vanguardinvestor.co.uk/en-GB/Process/Registration/Apply/Select

Which risk grade are you thinking of using?

SonOf

Why keep topping up even if prices drop? Everyone says this, but I don't get it.

If you buy something, would you rather buy it at £1 or £1.50?

Steve123456789

The highest risk one.

DrSyn wrote: »

Watch this it will explain lump sum & drip feeding:-


An alternative to VLS is the HSBC Global Strategy Portfolios



You can open a Vanguard ISA with Vanguard directly:-



Which risk grade are you thinking of using?

chriss1979

Researching similar things myself at the minute!

I think that the logic is that by regular investment it smooths out the ups and downs a bit rather than going all in and the whole (presumably a lot larger) initial investment going either up or down.

Prism

chriss1979 wrote: »

Researching similar things myself at the minute!

I think that the logic is that by regular investment it smooths out the ups and downs a bit rather than going all in and the whole (presumably a lot larger) initial investment going either up or down.

For most people its simply that they get paid at a regular interval and therefore only have the funds to make regular payments. A lump sum is usually best investing immediately.

MaxiRobriguez

Steve123456789 wrote: »

Yeah, my plan was to use an ISA with Vanguard.


Why keep topping up even if prices drop? Everyone says this, but I don't get it.


I don't understand the second part. Could you explain please?


Apologies for my ignorance.

So the basic premise of investing is "buy low, sell high" - the best way to "buy low" is to buy shares when the price is declining or has already fallen.

For example, let's say you want to invest in Fund A and Fund B because both of these funds are well diversified, have fund managers with decent track records and have a cheap annual charge. You believe both have the same growth prospects.

Both funds are priced at £10 per share when you're ready to make your first purchase, and you have £2,000 to invest, so you pick up 100 shares in each. Next month when you're ready to buy again, also with £2,000, Fund A is now priced at £8 per share and Fund B is priced at £12 per share. You split your £2,000 equally again between the funds.

Now you have 225 shares of Fund A and only 183 shares of Fund B, but the growth prospects of both funds haven't changed... you just own fewer shares of Fund B because you paid more at the time. So buying shares when they are falling in value means you get to buy more shares in total, and is generally a smart move to make, especially if you are not planning to cash in the investments in the near (aka, next 5-10 years) future. There's a nice chart on these forums that basically showed if you invest for 10+ years you have almost a 100% chance of coming out with a profit. In that case, buy when stuff is cheaper will improve your margins if left long enough to ride volatility over weeks and months.

In regards to my point about sacrificing salary if your company allows you too - if you're employed most companies now offer a salary sacrifice pension scheme to their staff. It typically means if you forgo an amount of your salary, your employer will pay this into a pension on your behalf, and typically as a perk will match your contribution up to a certain amount. You can then use the money in this pension scheme to invest in various funds.

The reason this is beneficial is because of the employer topping up your contribution - essentially free money - and by sacrificing your salary it means you effectively avoid the tax you would have paid on it. Basically, if you're on £30k and sacrifice £5k of salary, you get £5k put into your pension. Had you not sacrificed that amount, you would only be getting about £3,400 - because you would have had to pay the rest in income tax and NI.