Help me splitting the money wisely - Lump sum + regular investing - which platform/fees

mustiuc

Good evening, I am reading this forum on a daily basis but I couldn't get an answer to my questions from other threads.
Basically I do have 40k available to invest (I kept them in cash atm as I need to remortgage the house in Feb/Mar 21 - if house goes down in value/crash I have the funds to overpay/go on a lower LTV/remortgage) but my idea is to invest all of them 20k + 20k and use this year + next year ISA allowance.
After that lump investment I will set a DD for a regular 500mth.
I was checking platforms and their fees compared to the funds I want to invest (I am NOT risk adverse, being set to invest 100% S&S in high return/volatility funds in Large cap/Technology/high return small caps/etc - I already found around 5 funds which match my investment criteria).
It might be silly but I am looking after fees (not interested in Vanguard because I cannot find the funds/etf's I want) and I came across with an idea like this: 
- invest 40k in Iweb due to their very low fees and leave the money in there - I am not dealing funds/changing my mind/panicking on crashes - so the money will stay there untouched/untraded - so no fees basically.
- invest 500mth regularly in Interactive Investor (I could not find Iweb's regular investment fees) due to their "free regular" but paying 120 a year platform fee. The strategy will be the same, select the funds, invest monthly, leave it untouched - again no trades/selling/etc.
I used the calculator from comparefundplatforms to have an idea regards the fees and what I noticed is the lower/longer the period of investment is, platform fees/regular investment fees goes from one extreme to another (eg. 5yr investment - cheapest is let's say Close Brothers and ii/iweb are way more expensive - 20yr investment - ii cheapest, iweb the most expensive - this is an example) - so basically I am interested in a platform with low fees for regular investment/long period of time OR I don't mind on a decent platform where to put all the money (40k + 500mth regular) if is any out there.
At the same time, I believe ii and iweb are part of the same group financial so if they go bust (let's say) the maximum protection is 85k. Shall I consider another platform(s)?

Thanks in advance.

Alexland

iWeb is run by Halifax Share Dealing which is separate to Interactive Investor for the sake of FSCS protection but for the amounts you are talking about it would take a while to exceed the £85k account valuation so it's probably not worth setting up 2 accounts.

iWeb don't have a discounted regular investing rate but it's £2 on Halifax Share Dealing although their ISA account has a £12.50 pa annual charge so would be £12.50 + £24 = £36.50 pa if you were investing in 1 fund per month but £12.50 + (5 x £24) = 132.50 pa if investing in all 5 funds each month. This compares to II at £9.99 per month = £120 pa with free regular investing. So initially on £40k the cost of a fixed price platform would be about the same as a percentage platform such as Fidelity at 0.35% but obviously over time the fixed account could be cheaper. It really depends on what trades you do for the contribution and rebalancing. You could perhaps be smart and use HSD at £36.50 pa to only contribute into the one fund that most needs rebalancing every month instead of all 5 funds, etc. Also check the funds you want to hold are available on the platform as this might limit your choice.

Another more complex option would be to use something like iWeb for your historic lump sum contributions and then Fidelity on percentage charges in another tax year for new contributions. Then you could do the rebalancing by making the appropriate free trades on Fidelity such that your total fund units across both accounts matches your desired allocations. Then every so often when the Fidelity account gets big enough at the end of a tax year do an in specie transfer of the assets to iWeb before opening a new Fidelity ISA for the new tax year regular contributions.

p.s. I don't really understand what you are saying about the relationship between this money and your mortgage but investing is for the medium to long term minimum 5-7 years as you don't want to ever be in a position of requiring the money while markets are down. Generally for investments shorter than 15 years you would tend to mix in non-equity assets to dampen the volatility as you approach withdrawal. The funds you are describing sound quite spicy - high risk does not always mean high returns. Also have you considered if it would be more efficient to invest some or all this money using either a pension or lifetime isa wrapper?

mustiuc

Hi Alex, thanks for your reply. The mortgage relationship with the available cash is when remortgaging we would like to be on a lower LTV for a better deal/rate. So if the markets/house goes down let's say 10k...i will have the cash to compensate and be on that LTV/better rate regardless of what's happening.
I do understand with the lump sum is quite straight forward but I am stuck on regular investing, long term. 
I am tempted to change my mind and use vanguard s&p500 and/or north america for regular investment (with ups and downs) and when it will be a high enough pot to transfer it somewhere else. At the end of the day it would be 6k annually invested and the difference in performance between an ETF with 0.22 OGC and other funds charging up to 1% + platform/regular fees I dont think is very notable.
Do I make sense on what I am saying/thinking or just taking rubbish and overthinking?

Thanks.

ColdIron

mustiuc said:

I am tempted to change my mind and use vanguard s&p500 and/or north america for regular investment (with ups and downs)

Investing 100% equities in a single country would be a pretty ballsy move. Why have you dismissed the rest of the world? The US has had a good run but this will not always be the case, most people would diversify into other geographies: UK, Europe, Japan, Emerging Markets, Asia Pacific etc

Alexland

Just ensure you don't invest money you might need to access to in the next 5-7 years preferably much longer.
Assuming you are comfortable with 100% equities (circa 50% drop during crashes) have you considered just buying an ultra cheap global tracker such as the HSBC FTSE All World at 0.13%?

Alexland

ColdIron said:

Investing 100% equities in a single country would be a pretty ballsy move.

Yup US has done well recently but you could say the same about Japan in the late 80s...

ColdIron

mustiuc said:

It might be silly but I am looking after fees (not interested in Vanguard because I cannot find the funds/etf's I want)

A global tracker or even a multi asset fund with Vanguard Investor would only cost you £4.50 in platform fees for the first year. No opening fee, no transaction charges and 0.15% annual

mustiuc

Well I am pretty sure I found my way to this problem.
Use iweb for lump sum and access a large market of funds/etfs/etc.
Open another account (almosy any I believe) on different platform for regular investing and once the pot is large enough, transfer to iweb and add it to first investment.
I will stay tonight to research better vanguard and fidelity (maybe other platforms) and I'll choose one.

I do not consider is "very risky" what I am doing. I am pretty well in my life... NOT earning large amounts of money (below average) but having a fortunate situation with properties abroad (inheritance) , mortgage here, safe job (not being affected at all by Covid) and what I am doing now is just investing for later in life instead of gambling the money, wasting them on stupid things. Even if I go bad, really bad, I still have a place where to live, money to sustain my bills, pension via workplace, etc.
I do not believe too much in diversification and I have my reasons why. Probably, I might do like a 75 us, 15 japan/asia-pacific, 15 all world portfolio just to say I haven't done it.

Thanks again for the help 

HCIMbtw

You've dismissed vanguard but I personally feel that is a bit premature. 

For context my plan is monthly direct debit into vanguard 100. Once I have built up circa £25-30k move transfer those funds into HSBC All world index fund on the iWeb platform. 

Why? 

Because it is the best value way to hold global equities based on platform costs. iWeb with a transaction charge, vanguard with % platform fee.. it means holding larger sums in Vanguard is sub optimal.. but for regularly monthly contributions it is best. 

So if I was in your position I would look at using iWeb for the 40k, investing in in 2 chunks within an ISA wrapper (in whatever fund you like). 

But for a platform for regular direct debit payments I would not (personally) dismiss vanguard. 

Alexland

HCIMbtw said:

For context my plan is monthly direct debit into vanguard 100. Once I have built up circa £25-30k move transfer those funds into HSBC All world index fund on the iWeb platform.

The main problem with using this Vanguard>iWeb technique (that Monevator kindly called the Alex Manoeuvre) is that Vanguard don't offer the cheapest global tracker so you end up with some time out of the markets while the fund trades occur (and a £5 sell, £5 buy cost on iWeb) in order to get into the target position.

https://monevator.com/cheapest-stocks-and-shares-isa-hack/

So if you take into account the additional fund management costs with Vanguard, the hassle of transferring ISA, the trade costs on iWeb and the time out of the market, it might be easier to just make your regular contributions into Halifax Share Dealing at £36.50 pa from the outset if they are big enough that the percentage charges will become high within 1-2 years. We are fortunate in having access to Fidelity at the reduced 0.20% rate where we could invest in the same fund from the beginning making it more viable to transfer to iWeb at the end of each tax year.

Although in the OP's position it will take some time to ISA wrap the value of these proposed investments so there will inevitably be some time out of the market anyway in which case a combination of a percentage platform and fixed platform might work out better for the next few years.

HCIMbtw

Alexland said:

HCIMbtw said:

For context my plan is monthly direct debit into vanguard 100. Once I have built up circa £25-30k move transfer those funds into HSBC All world index fund on the iWeb platform.

The main problem with using this Vanguard>iWeb technique (that Monevator kindly called the Alex Manoeuvre) is that Vanguard don't offer the cheapest global tracker so you end up with some time out of the markets while the fund trades occur (and a £5 sell, £5 buy cost on iWeb) in order to get into the target position.

https://monevator.com/cheapest-stocks-and-shares-isa-hack/

So if you take into account the additional fund management costs with Vanguard, the hassle of transferring ISA, the trade costs on iWeb and the time out of the market, it might be easier to just make your regular contributions into Halifax Share Dealing at £36.50 pa from the outset if they are big enough that the percentage charges will become high within 1-2 years. We are fortunate in having access to Fidelity at the reduced 0.20% rate where we could invest in the same fund from the beginning making it more viable to transfer to iWeb at the end of each tax year.

Although in the OP's position it will take some time to ISA wrap the value of these proposed investments so there will inevitably be some time out of the market anyway in which case a combination of a percentage platform and fixed platform might work out better for the next few years.

Is it named after you? 
didn't realise this had a name, just seemed a pretty simple and logical way of doing it myself

based on my contributions (£900pm) my horizon for any transfer is like 2.5 years minimum... and if OP is looking at contributing £500pm I expect theirs to be longer. In contrasts if I was in the position where I could put £2,000 into an ISA 10 months a year I would probably just do as you say and stick to iWeb as the one platform. 

A couple of days out the market isn't the biggest worry for me.. appreciate a lot can happen in a couple of days, but I'll just make sure I am not doing it around any notable election dates. 

I can't remember which is the best value platform for regular contributions that may give you access to the same funds.. think it was AJ Bell but would have to check that..