S&S LISA - fund/tracker options

Nuggy96

Alexland said:

Nuggy96 said:

I'm not up to speed with all the terminologies of investment, so if I were to transfer a 20K  LISA to AJ Bell and invest in VLS80 or HSBC FTSE All World fund. Would the fee by 0.25% with no limit or 0.25% with a £30 limit?  Not sure what category they fall under for AJ bell. 

Those are both traditional OEIC funds so AJ Bell would have no limit on their 0.25% platform charge and it would cost £1.50 per trade. AJ Bell's LISA capping only applies to ETFs, ITs and individual company shares (and gilts and bonds but it's really unlikely you would buy those directly). If you bought those OEIC funds in an EQi LISA then their charge would be 0.20% capped at £40 pa with no fund trading charge.

Interesting thanks for clarifying.

 what’s the difference between say Lyxor World LCWL accumulation ETF/ FTSR All-World UCITS ETF and the HSBC All World Fund. 

Like what are the main differences? Pros/cons

Alexland

Nuggy96 said:
 what’s the difference between say Lyxor World LCWL accumulation ETF/ FTSR All-World UCITS ETF and the HSBC All World Fund. 

Like what are the main differences? Pros/cons

World indexes (from FTSE or MSCI) cover developed markets only and All World indexes include around 10% emerging markets.
A traditional OEIC fund includes FSCS protection up to £85k from fraud etc and you place your trades to buy and sell units in advance of the next daily unit price (based on an assessment of the underlying asset value) being published. There is a good choice of UK domiciled funds.
An ETF is dynamically exchange traded at a live market price like an individual company share although there are processes to ensure the price doesn't deviate much from the underlying asset values. ETFs you can buy are often based in Europe.
There are several more technical differences but those are the main ones.

Nuggy96

Alexland said:

Nuggy96 said:
 what’s the difference between say Lyxor World LCWL accumulation ETF/ FTSR All-World UCITS ETF and the HSBC All World Fund. 

Like what are the main differences? Pros/cons

World indexes (from FTSE or MSCI) cover developed markets only and All World indexes include around 10% emerging markets.
A traditional OEIC fund includes FSCS protection up to £85k from fraud etc and you place your trades to buy and sell units in advance of the next daily unit price (based on an assessment of the underlying asset value) being published. There is a good choice of UK domiciled funds.
An ETF is dynamically exchange traded at a live market price like an individual company share although there are processes to ensure the price doesn't deviate much from the underlying asset values. ETFs you can buy are often based in Europe.
There are several more technical differences but those are the main ones.

Ahh ok interesting, as my LISA will be invested for over 20-30 years I would probably want to lean towards emerging markets. With it being passive and rarely trading I assume ETFs ability to trade  at live prices is a minimal pro? Therefore, in this case it’s best to just concentrate on lowest fees, which would in this case be EQI for funds at 0.2% Up to £40 cap or AJ Bell at 0.25% up to £30 cap for an ETF?

Alexland

Nuggy96 said:

Ahh ok interesting, as my LISA will be invested for over 20-30 years I would probably want to lean towards emerging markets. With it being passive and rarely trading I assume ETFs ability to trade  at live prices is a minimal pro? Therefore, in this case it’s best to just concentrate on lowest fees, which would in this case be EQI for funds at 0.2% Up to £40 cap or AJ Bell at 0.25% up to £30 cap for an ETF?

I agree the ability to live trade ETFs is of minimal benefit to the long term investor but it's interesting to watch ETF unit prices go up and down during the day like the blobs in a lava lamp - not that daily volatility is any indicator of long term outcomes.
With AJ Bell you also need to consider ETF trade fees but if you schedule the trade in advance using their monthly investment feature (you can cancel after one trade occurs) they will do it at the reduced £1.50 rate. It's easy enough but you need to remember to setup the monthly trade in advance and cancel it after (although another forum member told me that if you forget to cancel and there isn't enough cash in the account it just fails without consequence)
With funds you get a broader choice including multi asset funds to limit volatility which might not seem important now but might be of interest as you get closer to withdrawal.
The final part that's much harder to quantify and requires judgement is which platform do you trust to give you good value for possibly 20+ years given there are no S&S LISA providers accepting transfers for those who have now reached age 40.

noclaf

Alexland said:

noclaf said:

Out of interest how often have you chopped and changed funds or etf's completely across any of your platforms/tax wrappers? I'm curious to know if for example you invested in a particular fund or etf for a few years and then completely sold out and reinvested into a different fund? (Maybe due to performance reasons or anything else)

The investment market is constantly changing and fund and platform prices have reduced substantially in the past 20 years so a certain amount of change is necessary as better options and combinations appear. You learn from experience, talking to others plus your circumstances and objectives change as you progress through life events. I started around 20 years ago with a passive fund that tracked the FTSE100 (which seemed a reasonable index at the time) but then went to the dark side about 10 years ago dabbling with company shares both individually and within a small share club before moving on to active funds and then back full circle to realise that I was most comfortable with low cost passive investing. There was a lightbulb moment when I realised it's not about chasing returns but maximising the probability of achieving your objectives. Others have been on different journeys and reached different conclusions.

I completely get this, interesting perspective too. I started my investing journey with AIM miners...the worse place a newbie could even begin. It was all by chance, had to open a brokerage account to hold some shares from a previous employer share scheme..got restless and then sold the lot and reinvested into some random oil mining stocks..made some big gains quickly and lost them even quicker! A few shares actually did ok, Thorntons and 888 were winners relatively speaking. EMED mining and Globo were the horror shows. Came away from investing for a few years, nature of my work meant a lot of scrutiny and admin with holding/investing in shares and funds and it was just tiresome. But in a similar way have come full circle and am more comfortable with passive.
Do you use any active funds generally and for your pensions do you also use passive funds/trackers/etf's?

Alexland

noclaf said:

Do you use any active funds generally and for your pensions do you also use passive funds/trackers/etf's?

For equities I am happy with passive tracker funds/etfs which will never deliver the best results in any given year but will consistently be doing above average each year which is all I need. I do sometimes take an active approach to asset allocation when I feel equities are looking better value (during a correction or crash) switching cash and bonds into equities and riding the recovery but that's about as fun as it gets. I don't try and time the bottom of the market but get gradually into the swimming pool as the situation gets more attractive.

Nuggy96

Alexland said:

With AJ Bell you also need to consider ETF trade fees but if you schedule the trade in advance using their monthly investment feature (you can cancel after one trade occurs) they will do it at the reduced £1.50 rate. It's easy enough but you need to remember to setup the monthly trade in advance and cancel it after

Sorry I don’t fully understand this part. So according to AJ bells fees it’s £9.95 for ETF trades. How do you get it so it’s £1.50, like step by step if I were to invest £4K and then also the £1k bonus coming in or transferring my cash LISA from Moneybox.

noclaf

AJ Bell charge £9.95 per ETF transaction. let's say I transfer £15k, does it make any sense to wait till April 21, add the new contributions and then once HMRC credit the bonus do a single buy for £20k? I assume the answer is no as the additional cost of transacting (Initial £15k and then £5k for new tax year= 2 X transaction cost) would hopefully be offset by the etc performance?

Edit: I looked at the ongoing fees and how quickly they will add up using an OEIC fund, it's quite a significant increase as further contributions are being added so can see the benefit of using the etf from a cost perspective..my head has been turned! 
Just seen your suggestion on how to get the lower fees, whilst I don't like the hassle of setting up and cancelling those payments each year it's only once/twice a year so fairly easy to do.

Alexland

Nuggy96 said:

Alexland said:

With AJ Bell you also need to consider ETF trade fees but if you schedule the trade in advance using their monthly investment feature (you can cancel after one trade occurs) they will do it at the reduced £1.50 rate. It's easy enough but you need to remember to setup the monthly trade in advance and cancel it after

Sorry I don’t fully understand this part. So according to AJ bells fees it’s £9.95 for ETF trades. How do you get it so it’s £1.50, like step by step if I were to invest £4K and then also the £1k bonus coming in or transferring my cash LISA from Moneybox.

You could add the £4k into the AJB LISA account cash balance then setup a regular monthly investment for say £3950 (to leave £50 cash in the account to pay the £30 pa fees charged quarterly) which would cost £1.50 but then cancel it after its first scheduled monthly run completes. Then when the bonus is added a month or two later you would do it again to invest £1k so total annual platform cost would be £30 + (2 x £1.50 scheduled trades).
https://www.youinvest.co.uk/our-services/regular-investments
AJB do have a facility to pay fees from a separate account if you really want but while you are contributing its easier to just leave some uninvested cash (unless you are worried about leakage of your annual ISA allowance). Once you can no longer contribute from age 50 it might be useful to avoid trade costs in selling down investments to pay fees.

Nuggy96

Alexland said:

Nuggy96 said:

Alexland said:

With AJ Bell you also need to consider ETF trade fees but if you schedule the trade in advance using their monthly investment feature (you can cancel after one trade occurs) they will do it at the reduced £1.50 rate. It's easy enough but you need to remember to setup the monthly trade in advance and cancel it after

Sorry I don’t fully understand this part. So according to AJ bells fees it’s £9.95 for ETF trades. How do you get it so it’s £1.50, like step by step if I were to invest £4K and then also the £1k bonus coming in or transferring my cash LISA from Moneybox.

You could add the £4k into the AJB LISA account cash balance then setup a regular monthly investment for say £3950 (to leave £50 cash in the account to pay the £30 pa fees charged quarterly) which would cost £1.50 but then cancel it after its first scheduled monthly run completes. Then when the bonus is added a month or two later you would do it again to invest £1k so total annual platform cost would be £30 + (2 x £1.50 scheduled trades).
https://www.youinvest.co.uk/our-services/regular-investments
AJB do have a facility to pay fees from a separate account if you really want but while you are contributing its easier to just leave some uninvested cash (unless you are worried about leakage of your annual ISA allowance). Once you can no longer contribute from age 50 it might be useful to avoid trade costs in selling down investments to pay fees.

Ahh ok genius, so setting it up as a monthly investment rather than a lump sum, even if investing in an ETF, I would only pay £1.50 a deal, not £9.95?

Also maybe I am missing something but surely it’s better to pay the LISA charges from a separate account and not waste £50 of ISA allowance?

sorry for all the Qs will be easier once my LISA bonus is paid and can actually see how it all works first hand...