Reinvesting and charges questions

ANGLICANPAT

Just starting again with my investing after a long long break, and Ive forgotten the little I knew . Be grateful if someone could clear up some points Im unsure of please.

Ive been on the Compare Fund Platforms.com and filled in the boxes , like amounts , whether Inc or Acc etc but then faced with a box ‘ average annual return before charges ‘. I think Im missing the significance of what/why they are asking, obviously if its a matter of what I want , it would be like 20%+ ! but does it mean I just choose the average % Id be comfortable with or what ?

Anyway I just left that with the 6% that was the example and moved on . Iweb seemed the best for me (as I wont be doing much) —but maybe not if the 2% reinvestment charge applies to my income funds that are set up as Inc Acc. I cant find the answer online. Can anyone clarify that for me please? Might start to add up if charged every time they add to themselves. Could the answer be variable depending on platform?

Last question does 'Fund switches £7.99 x2' just mean £15.98 admin costs between the selling and buying in a switch ? (I know there are other charges for the new fund ) Thank you for any help.

bowlhead99

ANGLICANPAT wrote: »

Anyway I just left that with the 6% that was the example and moved on . Iweb seemed the best for me (as I wont be doing much) —but maybe not if the 2% reinvestment charge applies to my income funds that are set up as Inc Acc. I cant find the answer online. Can anyone clarify that for me please? Might start to add up if charged every time they add to themselves. Could the answer be variable depending on platform?
.

When buying a fund it may be offered in two different classes Inc and Acc.

Inc means an income is paid. Acc means the income is not paid and simply accumulates inside the fund without being paid anywhere. It doesn't get paid out to your account so nothing needs to be reinvested so there is no charge by the platform.

It's not clear what you mean by 'set up as Inc Acc', it will either be Inc or Acc.

If by 'set up as Inc Acc' you mean funds that invest in high income underlying investments, but accumulate the dividends instead of paying them out, then you have nothing to reinvest, so no charges for reinvesting.

If instead you mean that the Inc/Acc type that was selected was 'Inc', then you would have some cash arriving on the platform to reinvest and you could either pay the fees to auto reinvest it, or you could just use it as part of your rebalance process in a manual transaction.


A 2% reinvestment charge for dividends is a relative pittance anyway, because if your dividend is only 5% a year out of your overall assets and the reinvestment charge is 2% of that amount, you are only spending 2% of 5% of your assets on reinvestment costs, which is 0.1% of the total. And the vast majority of things you could invest in will produce dividends of less than 5% (so it will be less than 0.1% running cost to reinvest them), and if it bothered you and you didn't actually want the dividends anyway, you'd presumably just use Acc funds.

Albermarle

Could the answer be variable depending on platform?

Yes. The comparison tools do not cover every detail . In the end you have to go to the platforms websites to get the full picture of every charge .

Like Bowlhead said your question is not very clear .

If you choose the INC option for an open ended fund , then it normally means you are looking for a regular income from the fund , so you would not reinvest it anyway .
If you do not want income then chose the ACC version, so dividends are reinvested automatically ( and with no cost )

If you have shares, investment trusts etc the of course there is no ACC version so the dividends get paid out . If you want to reinvest these, most platforms have a cheap reinvest facility - 2% you mention or a charge of £1.50 seems quite common .

ANGLICANPAT

Thank you both . Very helpful. Sorry I wasnt clear. The Incorporated or Accumulated was just an example of one of the choices I had to fill in on the boxes of the site so it could work out the best platform for me . I already have income funds which are Acc .Was just was unsure of what charges applied re reinvesting plus what to put in the expected average return box. Thanks again