S&S LISA - fund/tracker options

Alexland

noclaf said:

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?

Over short periods of time it's almost 50/50 which way the market will move but you should never need to pay the 9.95 fee to buy when you can do a scheduled monthly investment from the cash balance for 1.50 and cancel it after the first run as described above.
Just check the investment you choose is eligible for their regular investment service.

Alexland

Nuggy96 said:
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?

Yes that's what we have been doing although it takes us 4 months to make the contributions at £1k per month so 5 trades total including the final bonus each tax year. In some of those scheduled trades we also include the £250 interim bonuses if they have been added. We could reduce the number of trades to 3 per account if my wife and I alternated our contributions into different months but I really like the account cash and unit volumes matching as it's less to think about. If we did live trades the prices we achieved would vary which would also annoy me. Overall it costs an extra £6 (2 trades each) per year to feed my obsessive nature - a small luxury.

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?

Depends if you are intending to use your full ISA allowance. Otherwise by paying the fees from the LISA account that's less money tied up until age 60. Your choice not material either way.

Nuggy96

Great, thanks, that has been very very helpful. Learnt a lot from your 5/6 posts.

noclaf

Alexland said:

noclaf said:

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?

Over short periods of time it's almost 50/50 which way the market will move but you should never need to pay the 9.95 fee to buy when you can do a scheduled monthly investment from the cash balance for 1.50 and cancel it after the first run as described above.
Just check the investment you choose is eligible for their regular investment service.

Just to make sure I've understood this right:
I could add £4k in the new tax year then either setup a £3950 transaction and cancel after first one or alternatively I could setup £1000 per month regular payment e.g: 4 transaction for the £4k and 1 for the £1k bonus so 5 in total then cancel after the 5th transaction completes.
In both scenarios above the cost per transaction is £1.50 as it's a 'regular' payment?(subject to investment eligibility).
Given the above and the 0.25% capped fee for ETF's the Lyxor etf you suggested earlier in the thread starts to look quite a cost effective option overall.
Apologies for the 5 trillion questions and thanks again!

Alexland

noclaf said:

Just to make sure I've understood this right:
I could add £4k in the new tax year then either setup a £3950 transaction and cancel after first one 

Yes then do it again for £1k a month or two later when the bonus has been added to the cash balance.

alternatively I could setup £1000 per month regular payment e.g: 4 transaction for the £4k and 1 for the £1k bonus so 5 in total then cancel after the 5th transaction completes.

If you did this (1) there wouldn't be any cash in the account to pay platform fees so while you might contribute £1k you invest a bit less and (2) the full £1k bonus might not be in the account in time for the 5th month (maybe only 750 of it depending on exact contribution date and processing times) so that trade may fail but it might work next month. I keep an eye on the accounts and only schedule the trades when I can see there is enough free cash already in the account.

In both scenarios above the cost per transaction is £1.50 as it's a 'regular' payment?(subject to investment eligibility).

Yes 1.50 provided you only use the regular scheduled investment feature and the investment is supported.

Given the above and the 0.25% capped fee for ETF's the Lyxor etf you suggested earlier in the thread starts to look quite a cost effective option overall.

It is very cost effective as the account valuation grows. LCWL is good because unlike similar VEVE or HMWO it accumulates so no dividends to reinvest. Ideally it would be an All World tracker but in the ETF market the cheapest option to get that 10% EM is a Vanguard ETF at almost double the price. We have plenty of other investment accounts (these LISAs are only about 6% of our overall S&S investments) so I just go slightly higher on emerging markets in my workplace pension to compensate.

Apologies for the 5 trillion questions and thanks again!

No problem - have been waiting at the car dealer for a service/mot so you stopped me getting bored

noclaf

Alexland said:
 No problem - have been waiting at the car dealer for a service/mot so you stopped me getting bored

Always happy to help!
Have you seen this ETF on AJ Bell: Amundi Index Solutions - Amundi Prime Global UCITS ETF DR (GBP) PRIW
At 0.05 even cheaper than the Lyxor but no idea of track record and seems to be quite a new/recent offering.The EM coverage is minimal too.

Alexland

noclaf said:

Have you seen this ETF on AJ Bell: Amundi Index Solutions - Amundi Prime Global UCITS ETF DR (GBP) PRIW
At 0.05 even cheaper than the Lyxor but no idea of track record and seems to be quite a new/recent offering.The EM coverage is minimal too.

PRIW tracks the Solactive GBS Developed Markets Large & Mid Cap index and produces an annual distribution that would need platform reinvesting. When investing in smaller ETFs you need to make a judgement on liquidity. LCWL is already small at only $680m and according to the LSE website was only traded 420 times last month but PRIW is even smaller at less than $200m and was only traded 55 times last month. There are days, even several days in a row, where no trades occur on PRIW.

Compared that to the big $27,000m Blackrock SWDA at 0.20% which was traded nearly 3,000 times last month. Less liquid investments tend to have a bigger bid/ask spread cost on trades, the prices update less frequently and there may be times when they become difficult to trade at reasonable prices. LCWL is probably the smallest I would go for and even then with the hope it keeps getting bigger and more liquid. Lyxor are a bigger european ETF issuer than Amundi and seem to be throwing marketing money at their Core ETF range to make that happen.

noclaf

Alexland said:

noclaf said:

Have you seen this ETF on AJ Bell: Amundi Index Solutions - Amundi Prime Global UCITS ETF DR (GBP) PRIW
At 0.05 even cheaper than the Lyxor but no idea of track record and seems to be quite a new/recent offering.The EM coverage is minimal too.

PRIW tracks the Solactive GBS Developed Markets Large & Mid Cap index and produces an annual distribution that would need platform reinvesting. When investing in smaller ETFs you need to make a judgement on liquidity. LCWL is already small at only $680m and according to the LSE website was only traded 420 times last month but PRIW is even smaller at less than $200m and was only traded 55 times last month. There are days, even several days in a row, where no trades occur on PRIW.

Compared that to the big $27,000m Blackrock SWDA at 0.20% which was traded nearly 3,000 times last month. Less liquid investments tend to have a bigger bid/ask spread cost on trades, the prices update less frequently and there may be times when they become difficult to trade at reasonable prices. LCWL is probably the smallest I would go for and even then with the hope it keeps getting bigger and more liquid. Lyxor are a bigger european ETF issuer than Amundi and seem to be throwing marketing money at their Core ETF range to make that happen.

Excellent point, didnt think of it from that angle but certainly important and as you say hopefully the LCWL will gain traction and get bigger. I suspect it's a bit 'under the radar' compared to your Vanguard's and HSBC's of the index/etf world.

Alexland

noclaf said:

I suspect it's a bit 'under the radar' compared to your Vanguard's and HSBC's of the index/etf world.

Both Lyxor and Amundi were top 5 european ETF issuers last year ahead of Vanguard at number 6 and HSBC wasn't even in the top 10.
https://www.etfstream.com/news/which-etf-issuers-dominated-europe-in-2019/

noclaf

Alexland said:

noclaf said:

I suspect it's a bit 'under the radar' compared to your Vanguard's and HSBC's of the index/etf world.

Both Lyxor and Amundi were top 5 european ETF issuers last year ahead of Vanguard at number 6 and HSBC wasn't even in the top 10.
https://www.etfstream.com/news/which-etf-issuers-dominated-europe-in-2019/

IL get my coat.....