first stocks and shares ISA: Cavendish or Vanguard

magritte

Dear all. I plan to open my first ever stocks and shares ISA and thinking about investing £100 / month, which is what I can afford to 'park' long term. I already have emergency savings, I'm contributing to my pension and I'm also overpaying on my mortgage. I read a bit about stocks and shares ISAs, but I don't have any experience investing and want to learn more. I can't decide between Cavendish and or Vanguard though. What platform would you choose for a newbie? Vanguard seems more tempting as it's got lower platform charge, but it looks like fund choice is limited. Any tips on this? Thank you. 

Alexland

It really depends if you want to pay more for the extra choice that Cavendish offer? Have you looked at the investments on Vanguard and seen anything you like? Is there anything on Cavendish you like more? Sometimes you can find slightly cheaper fund choices when you have a bigger choice which might help offset the higher platform cost.

For example a 2 fund portfolio of HSBC FTSE All World (0.13%) and Vanguard Global Bond Index Hedged (0.15%) on Cavendish, would depending on the ratio, be between 0.07% and 0.09% cheaper than putting all the money into a Vanguard Lifestrategy (0.22%) fund on Vanguard Investor. That covers most of the platform difference and would in my view be a better investment.

ColdIron

You should decide what investments you want to meet your objectives before you choose your platform and not the other way around, the platform is a secondary concern. For small sums, you want a percentage fee provider. One of Vanguard's multi-asset funds may well be suitable and it would make sense to use Vanguard Investor to hold it but there are other similar funds available and you ought to consider the differences before making your choice

bowlhead99

Depending on the level of risk and volatility you're willing to put up with over the long term, Vanguard will probably have two or three mixed asset funds (holding a range of different asset classes - like UK and international shares and different types of bonds) that might be suitable for your needs.

They will also list another 70ish funds that you won't want because they can be broken down as either:

(a) tens of specialist funds which are not really designed to be held on their own, but as part of a portfolio, because they only cover one class of assets (e.g. something that is 100% equities, or only holds bonds and not equities, or something that only covers one region of the world, etc.

(b) another few mixed asset funds that could be appropriate for some investors but won't be appropriate for you because their risk or performance potential won't be in line with what you're looking for; 

When starting a long term investment with a small amount of money per month, there is no point trying to build a 'portfolio' out of specialist building blocks, so you don't need the funds that fall under (a), and you won't be picking the funds under (b) either.  So the shortlist of funds available at Vanguard that could be useful to you at Vanguard, will literally be a very short list.

If you use the offering from Cavendish you will have access to lots of different mixed asset funds, including the Vanguard ones and the ones from Vanguard's rivals. So obviously there is more choosing to do.

At £100pm it is going to be a long time before you have the tens of thousands of pounds that might make it worthwhile to consider adding extra things to the 'portfolio' beyond what you get from a standard off-the shelf mixed asset fund that's suitable for your risk appetite. So if your choice for that mixed asset fund was a Vanguard one, it would make sense to buy it at Vanguard - because the ongoing holding fee is lower by a tenth of a percent and it will probably be several years before you would be looking for other holdings to add to your portfolio (and could always transfer at that time anyway), so no need to spend the extra tenth of a percent to use a platform that carries lots of other options that you aren't using this year or next year or the year after...

Whereas if your choice for the mixed asset fund was something other than Vanguard, then you wouldn't use Vanguard's platform, you would use another one such as Cavendish. The fact that it costs an extra tenth of a percent of your assets per year is neither here nor there in the context that the net returns from the Vanguard fund will likely differ from the net returns of a rival fund by a lot more than a tenth of a percent per year.

You should decide what fund you want first, before you go shopping for the platform. Once you know what fund you want, the secondary consideration of where to buy it will be a decision that's pretty much made for you - because if it's a Vanguard fund it's sensible to buy it at Vanguard, and if it's not a Vanguard fund you won't be able to buy it at Vanguard.

magritte

Thank you all, there's a lot of food for thought here and it looks like I have to do a bit more reading. Btw, the £100 pcm is a starting point, perhaps in a few years when I become more comfortable with investing (and also with more 'spare' money), I could look at investing more, either monthly or lumps sums. 

Am I correct that both Cavendish and Vanguard charge no fees for closing and/or transferring out funds? 

Alexland

Yup no exit charges for either when the account gets big enough to transfer out to iWeb etc for when fixed charges become cheaper.
If you are super tight like me you use a fixed charge platform like iWeb for historic accumulated contributions and a percentage charge platform (ideally with signup cashback) for current tax year contributions.

DiamondLil

magritte said:

Btw, the £100 pcm is a starting point, perhaps in a few years when I become more comfortable with investing (and also with more 'spare' money), I could look at investing more, either monthly or lumps sums. 

Nothing wrong with £100 per month. It's a few decades ago now since I started monthly investing of £50. And like Alexland, I use iWeb for past accumulated funds, and a percentage charge platform for current, smaller, investments.

Hopingforthesimplelife

You are in exactly the same position I was in 4 years ago. For what it is worth, I started with a small lump sum and £100pm into ls80 with cavendish and about 2 years ago started an additional similar contribution to HSBC global dynamic again via Cavendish with both topped up with lump sums as and when I had the monies (in essence bonus payments from work). It is via the fidelity platform and from reading on here is perhaps not the best in terms of advance functionality, but has been fine for me, certainly to do the basics. 

To answer your question, either should be fine to get you started (bearing in mind the advice/limitations mentioned above).

Alexland

Hopingforthesimplelife said:

It is via the fidelity platform and from reading on here is perhaps not the best in terms of advance functionality, but has been fine for me, certainly to do the basics.

Yes Cavendish are just reselling the Fidelity platform at 0.20% plus 0.05% advisor charge when Fidelity is usually 0.35% direct. My £45 capped ETF SIPP gives my family access to Fidelity Wealth where the price of holding funds in our accounts is reduced to 0.20% so we will probably use them for our S&S ISAs next tax year as we are running out of cashback providers who offer good value that we haven't done yet. At least with Fidelity we can in-specie transfer what we usually hold in iWeb without any trade costs. I wonder how many times those two will let us transfer S&S ISAs before getting annoyed with us.

Thrugelmir

magritte said:

Btw, the £100 pcm is a starting point, perhaps in a few years when I become more comfortable with investing (and also with more 'spare' money), I could look at investing more, either monthly or lumps sums. 

Everybody starts somewhere. The longer you leave the money invested the more it will grow. As with paying down a mortgage the majority of the heavy lifting is backended. Into the final years. 

MinuteNoodles

If you only intend to invest in Vanguard funds it makes sense to go with the Vanguard platform to remove as many fees as possible. 
There's also nothing preventing you from having multiple S&S ISAs with multiple providers however you can only pay into one a year.