Compound interest

Bravepants

smej said:

Say its with a platform like iWeb that charge an annual fee. Other than their transaction charges of which I don't intend to make any, what else is there? Do you mean taxes when I intend to sell or withdraw? 

Sorry, yes ISA is a tax wrapper. You pay no tax on income or capital gains on funds held in an ISA. The only snag is that a person holding the ISA can only pay in £20,000 per year. So it would take you 3 years to pay £50k into your ISA.

BUT you could pay in £20k this year, and another £20k after 5th April. You could then pop the remaining £10k in a general investment account (not in an ISA). You are allowed to make £2000 per year in dividends for funds invested outside an ISA, without paying tax on them and also you can make capital gains of £12,300 per year without paying capital gains tax.  So your £10k should be free of tax until 2022 when you can pay it into your ISA.

Fees and/or charges would include the 0.22% annual fee of the Vanguard fund, and you would also pay iWeb's platform charge.

For example, I hold VLS 60 for which I pay 0.22%, but I also hold it on Vanguard's own platform so I also pay 0.15%, making a total of 0.37% annual fee. Despite my funds being in an ISA I still have to pay the fees.

grumiofoundation

smej said:

Say its with a platform like iWeb that charge an annual fee. Other than their transaction charges of which I don't intend to make any, what else is there? Do you mean taxes when I intend to sell or withdraw? 

I web doesn't charge an annual fee.

The funds you invest in have charges  - although you don't directly pay them (taken out of fund) they detract from the performance of your investments. 

Depending on what you invest in OCF could be 0.1%, could be >1%. 

You do not pay any tax when you use ISA.

smej

Thanks for all the replies. I'm thinking 10-15 years down the line when that £50k will hopefully have grown. Those fees are quite small really when we are dealing with bigger figures. 

grumiofoundation

smej said:

Thanks for all the replies. I'm thinking 10-15 years down the line when that £50k will hopefully have grown. Those fees are quite small really when we are dealing with bigger figures. 

Are they? 

Over 50 years, 7% return (before fees) , the difference between paying charges of 0.1 and 1% is 600k. 

MaxiRobriguez

Assuming 7% growth over 50 years is brave.

Once you factor in costs, potential tax changes in the future, inflation, a lot of commentators suggesting at least a decade of lower returns given current prices....

.. then if it was me I'd feel a lot more comfortable predicting 4% growth over that timeframe. If you reduce the timeframe to 10-15 years I'd go even lower at 2-3%.

smej

The S&P has returned 9.83% average since 1930. Or just under 7% adjusted for inflation. 

Alexland

MaxiRobriguez said:

Once you factor in costs, potential tax changes in the future, inflation, a lot of commentators suggesting at least a decade of lower returns given current prices....

Yup and of course the Dalbar investor behaviour analysis suggests the average equities investor will only get around 50% of the long term market return above inflation anyway due to lots of mental stuff going on in our little dysfunctional brains. That's why I like to challenge myself for how many years I can resist clicking the trade button in some of our accounts.

Thrugelmir

smej said:

The S&P has returned 9.83% average since 1930. Or just under 7% adjusted for inflation. 

And the return for a UK investor adjusted for currency fluctuations?  Nor are 90 year time frames that useful for the majority of investors. 

MaxiRobriguez

smej said:

The S&P has returned 9.83% average since 1930. Or just under 7% adjusted for inflation. 

Casually avoiding 1929 there, and not accounting for interest rates falling for 40 odd years, push towards globalisation, "democratisation" of markets bringing more people in, DC pensions... all of which have been a boon for S&P stocks.

Sure, you may get another half century of 7%. Would I use that as the benchmark for forecasting? No. - much rather undercook it and end up with more money than I anticipated than overcooking it and being disappointed.

Thrugelmir

MaxiRobriguez said:

smej said:

The S&P has returned 9.83% average since 1930. Or just under 7% adjusted for inflation. 

Casually avoiding 1929 there, and not accounting for interest rates falling for 40 odd years, push towards globalisation, "democratisation" of markets bringing more people in, DC pensions... all of which have been a boon for S&P stocks.

Sure, you may get another half century of 7%. Would I use that as the benchmark for forecasting? No. - much rather undercook it and end up with more money than I anticipated than overcooking it and being disappointed.

The US was an emerging market not so long ago either.