Stocks and Shares ISA

MoneyBall

Morning Guys, I currently have £30k+ in a easy access ISA getting me 0.55% AER currently (bad I know and lazy on my part) I’ve been advised to go to a financial advisor about investing in a stocks and shares ISA as you get more back than any of the other savings accounts. Just interested to know what people’s thoughts are about this in the current climate as stocks/shares and interest rates are all taking a beating? Is now a good time to get involved or would it be better to wait for a bit of stability? (I understand stocks and shares are far from stable at the best of times and you have to take the highs with the lows).

Appreciate any help/guidance. 

MB

dunstonh

Is now a good time to get involved or would it be better to wait for a bit of stability? (I understand stocks and shares are far from stable at the best of times and you have to take the highs with the lows).

What you are seeing on the markets now is normal.   It happens every periodically.  Three losses of this level (two of them actually greater) have occurred in the last 20 years and 5 larger in the last 100 years. And dozens of smaller but still significant drops.     

So, if you invest in equities, you should expect periods like this every decade or so.      It is not a case of if it will happen but when it will happen. The reasons it happens always vary.  The way it falls will vary (short and quick, long and drawn out or double dips, triple dips etc).   However, they are always coming.

Everyone has a different tolerance to losses.    So, you can adjust the risks you take to suit your loss behaviour.     If you can handle periods of paper losses then you are good to invest.  If you can't then you should not.

Royal5555

Similar question eg a friend of mine has been investing on a modest scale into a Hargreaves Lansdown Stock and Shares ISA for a few years albeit advised by his astute Father. He has recommended I do the same especially given the recent collapse in Shares/funds etc. Any tips on funds or should I stick with HL master portfolios which are allegedly designed to help newbies get started in investing? I have read any tiny amount and there are those who believe in passive eg lower management fees etc and those who seem to prefer a more balanced portfolio, interested in views, thanks

Alexland

Royal5555 said:

Any tips on funds or should I stick with HL master portfolios which are allegedly designed to help newbies get started in investing?

While HL master portfolios are targeted at newbies their purpose is to make higher than average profit for HL shareholders and the weight of research suggests that with their active management and high charges they are unlikely to have a better long term investment performance, for a similar risk profile, than a simple multi asset fund from Vanguard, Blackrock, etc which use passive indexes.

Why pay HL a total platform and fund manager charge of around 2% pa when someone like Vanguard have a high quality product for around 0.4% pa. That extra circa 1.6% of fees compounds up over the years and really damages your return.

Royal5555

Thanks for this, makes total sense and easy trap for a newbie to fall into. Is their wealth 50 funds also set up like this to make them a nice income in fees?

Alexland

Yes their Wealth 50 list is marketing material for some of their matey fund managers. To be fair there is at least one good fund on that list that I hold on a cheaper platform.

Royal5555

Interesting, 1 fund out of 50!! Is there a resource you can point a newbie to quickly gain an understanding of the right funds to invest in. Given the current situation, passive stockmarket tracker funds appear to make sense eg low management fees and sharp falls maybe a good time to get in for the long haul

Alexland

Hmm, there isn't really a 'right' fund or shortcut to building knowledge and finding something suitable depends on your outlook, objectives and risk appetite. We often end up suggesting that S&S beginners look at the Vanguard LifeStrategy multi asset fund series on the Vanguard Investor platform. Or if you want a high volatility stock market tracker something like their Global All Cap fund.

Royal5555

Thank you for the heads up, appreciated!

Mrc44

Alexland said:

Hmm, there isn't really a 'right' fund or shortcut to building knowledge and finding something suitable depends on your outlook, objectives and risk appetite. We often end up suggesting that S&S beginners look at the Vanguard LifeStrategy multi asset fund series on the Vanguard Investor platform. Or if you want a high volatility stock market tracker something like their Global All Cap fund.

Hi Alex , 
I am currently invested in vls80 and keep seeing VWRL mentioned , what would be the main difference between the two funds other than the LifeStrategy holding 20% in bonds and over a 20year period would you expect there performances to be similar or one to outperform the other by quite a margin? (I understand you don’t have a crystal ball for future performance or mentioned funds)  
thanks 

Alexland

Mrc44 said:

I am currently invested in vls80 and keep seeing VWRL mentioned , what would be the main difference between the two funds other than the LifeStrategy holding 20% in bonds and over a 20year period would you expect there performances to be similar or one to outperform the other by quite a margin? (I understand you don’t have a crystal ball for future performance or mentioned funds) 

VWRL is an ETF so has a bid/ask spread and no FSCS protection. It has a very similar asset allocation to their Global All Cap fund covering equities in proportion to their global weightings in both developed and emerging markets. They are both tracking specific and similar FTSE indexes. Given the choice I would rather have the fund but then I hold most of our money in ETFs to benefit from capped platform fees on large account balances at Fidelity, AJ Bell, etc. On platforms where it makes no difference I hold funds.

The VLS fund series are not a trackers and contains underlying funds in a designed allocation to get market exposure. For the equities proportion VLS have a bias to hold around 25% UK stocks compared to their global weighting of circa 5%. Over a very long measurement period, you would expect a 100% equities fund to do slightly better than an 80% equtiies fund but it really depends when you buy and sell the fund units at particular points in the economic cycle. There can be long periods in which equities do badly. VLS80 should give you a smoother ride but is still considered adventurous with market crash drop potential of around 40%+ from peak.