Vanguard Index / EFT fund and transferring Cash ISA in process

typeractive

Hi all,

After reading, watching YouTube videos, asking questions on here and more reading I am looking to make the steps to change my ISA setup. Currently I have a cash ISA with the post office as they previously had a good rate. I now wish to transfer my cash ISA into stocks and shares ISA. I know this comes with risk (and that word alone could be a debating point in itself).

Anyway, in transferring into this new risky area (to me), I want to try and do what I can to at least play it somewhat safely. My research all started off with initially looking at the S&P 500…it then went down a rabbit warren of Global Index trackers and ETF’s, which I am learning about.

Initially I was looking at the Vanguard Life Strategy 100 (VGLA100A) due to it’s time in the market, average returns and so forth. It should be noted I’m, looking for a minimum 20-year investment and I don’t expect miracles.

I originally posted some questions on here and got some kind responses to make me question my thoughts. I’ve since gone away, done a bit more homework. There is clearly no perfect product and anyone can ‘get it right’ or ‘get it wrong’, only time will tell. But for now have whittled it down to the following:

• FTSE global all cap index fund (VAFTGAG) platform fee 0.13%, ongoing charge fee 0.23% (vanguard own risk rating 5)
• FTSE all world UCITS ETF (VWRP) platform fee 0.00%, ongoing charge fee 0.22% (vanguard own risk rating 6)
• LifeStrategy® 100% Equity Fund (VGL100A) platform fee 0.13%, ongoing charge fee 0.22% (vanguard own risk rating 5)

They each have similar fees, but the VWRP has no platform fee and is available through other platforms (bonus).

Currently I am leaning towards FTSE global all cap index fund (VAFTGAG). It has 7113 holdings, which is around double that of (VWRP), I think VGLA100A has a few more when analysing all the funds combined. I’m unsure on how relevant the Vanguard risk rating is, but the VAFTGAG also has a lower rating than the all world.

I am very aware that previous performance is not an indicator for future success, but it would be silly not to at least look. Overall VGLA100 has performed the best, since inception, and it has been around the longest, though the market 12 years ago may be very different to now. VAFTGAG doesn’t necessarily ever perform the best in recent years, but it appears to be a little less turbulent. Again, I reiterate that I do understand the previous performance will not dictate the future. I’m just trying to make the safest decision in switching from a Cash ISA to that of Stocks and Shares in the aim of trying to make better gains over time.

I am sure the great people on here will have some opinions on the above and whilst there is no best option all round I’d be interested in thoughts.

Next, the transfer process.

I am a bit hesitant to transfer the full cash ISA over to a vanguard stocks and shares ISA in one lump (could work out great, could end in tears). So I was planning to transfer it over on a monthly basis for a year or so. Post Office won’t let me do this as they only allow one transfer. So I am looking to transfer the whole amount from Post Office to Trading 212 Cash ISA who have a good rate, and then hopefully transfer a proportion of funds every month into vanguard – does anyone know if trading 212 has this flexibility?

Thanks in advance for any thoughts and help.

Alistair31

Have you thought about transferring it all over in one go and investing in money market funds (cash-like) what you are not comfortable investing in equity funds initially? You could then sell down monthly within the ISA and purchase your chosen equity fund. All with no transactions fees if done via Vanguard. 

I’ve been doing that over the last year (VWRP and VASTMGA).

Something to consider, but get comfortable with money market funds first. It certainly sounds like you are capable and willing to do your research before wading in - commendable! 

good luck

Albermarle

Did you give any thought to investing via a pension, as suggested in your previous thread ( copy in italics below) . Being a 40% taxpayer with a long term view, it is normally the much preferred investing route.

Investing via a pension ( ignoring your very valuable Teachers pension here) is normally better for building up a retirement pot due to the tax advantages, even taking into account some tax can be paid on withdrawal. This applies especially if you are higher rate taxpayer in employment, and will be a basic rate taxpayer in retirement ( the large majority are ) 
S&S ISA's are better for money that can be put away for 10 years or more, but might  be needed before your late Fifties .
With a pension there is nothing to stop you starting your own pension, rather than utilising the AVC from Prudential, although I am not sure if there are some special advantages with using the in house AVC ( I am not a Teacher) .

typeractive

Alistair31 said:

Have you thought about transferring it all over in one go and investing in money market funds (cash-like) what you are not comfortable investing in equity funds initially? You could then sell down monthly within the ISA and purchase your chosen equity fund. All with no transactions fees if done via Vanguard. 

I’ve been doing that over the last year (VWRP and VASTMGA).

Something to consider, but get comfortable with money market funds first. It certainly sounds like you are capable and willing to do your research before wading in - commendable! 

good luck

Hi @Alistair31, thank you so much for the reply. No, I haven't considered doing this but this may be the / a solution if I can't do the trading 212 route. A quick look at VASTMGA and I see it is a very new fund. There is platform fee (0.12%), and I can't work out the current interest rate. If it is competitive then it could be an option. And if not, but 'one of the safer ways to transfer in over time' then I might need to opt for something like this just for the service alone. 

I see you chose VWRP, any particular reason you selected it? I know we all have differing criteria, volumes and risk appetite / interpretations. Just curious / part of doing research / nosey    lol.

Thank you kindly for the comment on the research. I still feel like I'm lacking a too much information. I think I've got into 'paralysis by analysis' and it is holding me back from actioning!!

typeractive

Albermarle said:

Did you give any thought to investing via a pension, as suggested in your previous thread ( copy in italics below) . Being a 40% taxpayer with a long term view, it is normally the much preferred investing route.

Investing via a pension ( ignoring your very valuable Teachers pension here) is normally better for building up a retirement pot due to the tax advantages, even taking into account some tax can be paid on withdrawal. This applies especially if you are higher rate taxpayer in employment, and will be a basic rate taxpayer in retirement ( the large majority are ) 
S&S ISA's are better for money that can be put away for 10 years or more, but might  be needed before your late Fifties .
With a pension there is nothing to stop you starting your own pension, rather than utilising the AVC from Prudential, although I am not sure if there are some special advantages with using the in house AVC ( I am not a Teacher) .

Hi @Albermarle, I'm potentially looking to do both, but I find pensions more complex to understand. It feels not as straight forward to do AVC's in another provider, as I may lose some unknown benefits....basically I need to learn more, and it feels a lot to digest. 

Alistair31

typeractive said:

Alistair31 said:

Have you thought about transferring it all over in one go and investing in money market funds (cash-like) what you are not comfortable investing in equity funds initially? You could then sell down monthly within the ISA and purchase your chosen equity fund. All with no transactions fees if done via Vanguard. 

I’ve been doing that over the last year (VWRP and VASTMGA).

Something to consider, but get comfortable with money market funds first. It certainly sounds like you are capable and willing to do your research before wading in - commendable! 

good luck

Hi @Alistair31, thank you so much for the reply. No, I haven't considered doing this but this may be the / a solution if I can't do the trading 212 route. A quick look at VASTMGA and I see it is a very new fund. There is platform fee (0.12%), and I can't work out the current interest rate. If it is competitive then it could be an option. And if not, but 'one of the safer ways to transfer in over time' then I might need to opt for something like this just for the service alone. 

I see you chose VWRP, any particular reason you selected it? I know we all have differing criteria, volumes and risk appetite / interpretations. Just curious / part of doing research / nosey    lol.

Thank you kindly for the comment on the research. I still feel like I'm lacking a too much information. I think I've got into 'paralysis by analysis' and it is holding me back from actioning!!

You won’t see a fixed interest rate because that’s not how it works, see…

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/investment-explainer-what-is-a-money-market-fund

Also, since the Vanguard MMF benchmark is SONIA, see…

https://www.bankofengland.co.uk/markets/sonia-benchmark

In short, returns will not be far away from the prevailing BOE interest rate, less the 0.12% fee, over your holding period. 

You may prefer the certainty of a fixed rated but I think it highly unlikely you’ll be able to transfer on a monthly basis between cash/s&s ISA. 

Personally, I chose VWRP because of the exposure it offers, large/mid + emerging markets, a relatively low fee and accumulating nature. I’ve a long time horizon so this works for me. 

incus432

You might take a look at VHVG (Vanguard FTSE Dev World ETF USD Acc) as an alternative to VWRP.

It's Developed World rather than All World, but crucially the ongoing charge is 0.12% compared to 0.22% and the historical performance is similar (marginally better in fact  - 12.73% pa cf 11.72% pa over 5 years)

Good luck

typeractive

Alistair31 said:

typeractive said:

Alistair31 said:

Have you thought about transferring it all over in one go and investing in money market funds (cash-like) what you are not comfortable investing in equity funds initially? You could then sell down monthly within the ISA and purchase your chosen equity fund. All with no transactions fees if done via Vanguard. 

I’ve been doing that over the last year (VWRP and VASTMGA).

Something to consider, but get comfortable with money market funds first. It certainly sounds like you are capable and willing to do your research before wading in - commendable! 

good luck

Hi @Alistair31, thank you so much for the reply. No, I haven't considered doing this but this may be the / a solution if I can't do the trading 212 route. A quick look at VASTMGA and I see it is a very new fund. There is platform fee (0.12%), and I can't work out the current interest rate. If it is competitive then it could be an option. And if not, but 'one of the safer ways to transfer in over time' then I might need to opt for something like this just for the service alone. 

I see you chose VWRP, any particular reason you selected it? I know we all have differing criteria, volumes and risk appetite / interpretations. Just curious / part of doing research / nosey    lol.

Thank you kindly for the comment on the research. I still feel like I'm lacking a too much information. I think I've got into 'paralysis by analysis' and it is holding me back from actioning!!

You won’t see a fixed interest rate because that’s not how it works, see…

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/investment-explainer-what-is-a-money-market-fund

Also, since the Vanguard MMF benchmark is SONIA, see…

https://www.bankofengland.co.uk/markets/sonia-benchmark

In short, returns will not be far away from the prevailing BOE interest rate, less the 0.12% fee, over your holding period. 

You may prefer the certainty of a fixed rated but I think it highly unlikely you’ll be able to transfer on a monthly basis between cash/s&s ISA. 

Personally, I chose VWRP because of the exposure it offers, large/mid + emerging markets, a relatively low fee and accumulating nature. I’ve a long time horizon so this works for me. 

Thanks @Alistair31, I've read your links a couple of times. So these money markets are essentially like low risk loans to corporations with the balance sheets / reputation to be able to pay back. They follow interest rates which are OK at the moment. Granted I take your note on the fees of 0.12%, but I am also think you're probably right about being able to drip feed funds across over a lengthy period of time. Maybe I can straight up ask trading 212! 

Interesting on VWRP. May I ask your time line / expectation? Hope I'm not being too nosey. Thanks for helping!  

typeractive

incus432 said:

You might take a look at VHVG (Vanguard FTSE Dev World ETF USD Acc) as an alternative to VWRP.

It's Developed World rather than All World, but crucially the ongoing charge is 0.12% compared to 0.22% and the historical performance is similar (marginally better in fact  - 12.73% pa cf 11.72% pa over 5 years)

Good luck

Thanks @incus432 I've taken a quick look and this is performing well. 

This is leading me to more questions!

The site you linked to (morningstar - which I have heard of in my digging around). They report the same figures as on the vanguard website, but calculating the average over say 1/2/3/4/5 years etc, is this a simple 'add up all the % returns and divide by number of years' or is it a different calculation? Eg. does dropping 50% in one year requires more than a 50% return the next year to make that money back. Therefore I am wondering if I am looking at the averages incorrectly. Perhaps I need not get too hung up on this as we know the line of past performance and all that but the learner in me wants to figure this out.

Furthermore....is it possible in a providers S&S ISA to invest in multiple indexes / ETF's? E.g. 80% in VAFTGAG, and 20% in VHVG? I know the exposure is very similar for a number of these products and effectively it would be 'double investing' for many companies, but there will be some differences and where a fund may have a higher risk, but lower fees it might mix the portfolio up a bit more. However, I guess having multiple products would reduce the compounding effect overall? Perhaps I need to forget about adding complexities at such as beginner level.

Alistair31

typeractive said:

Alistair31 said:

typeractive said:

Alistair31 said:

Have you thought about transferring it all over in one go and investing in money market funds (cash-like) what you are not comfortable investing in equity funds initially? You could then sell down monthly within the ISA and purchase your chosen equity fund. All with no transactions fees if done via Vanguard. 

I’ve been doing that over the last year (VWRP and VASTMGA).

Something to consider, but get comfortable with money market funds first. It certainly sounds like you are capable and willing to do your research before wading in - commendable! 

good luck

Hi @Alistair31, thank you so much for the reply. No, I haven't considered doing this but this may be the / a solution if I can't do the trading 212 route. A quick look at VASTMGA and I see it is a very new fund. There is platform fee (0.12%), and I can't work out the current interest rate. If it is competitive then it could be an option. And if not, but 'one of the safer ways to transfer in over time' then I might need to opt for something like this just for the service alone. 

I see you chose VWRP, any particular reason you selected it? I know we all have differing criteria, volumes and risk appetite / interpretations. Just curious / part of doing research / nosey    lol.

Thank you kindly for the comment on the research. I still feel like I'm lacking a too much information. I think I've got into 'paralysis by analysis' and it is holding me back from actioning!!

You won’t see a fixed interest rate because that’s not how it works, see…

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/investment-explainer-what-is-a-money-market-fund

Also, since the Vanguard MMF benchmark is SONIA, see…

https://www.bankofengland.co.uk/markets/sonia-benchmark

In short, returns will not be far away from the prevailing BOE interest rate, less the 0.12% fee, over your holding period. 

You may prefer the certainty of a fixed rated but I think it highly unlikely you’ll be able to transfer on a monthly basis between cash/s&s ISA. 

Personally, I chose VWRP because of the exposure it offers, large/mid + emerging markets, a relatively low fee and accumulating nature. I’ve a long time horizon so this works for me. 

Thanks @Alistair31, I've read your links a couple of times. So these money markets are essentially like low risk loans to corporations with the balance sheets / reputation to be able to pay back. They follow interest rates which are OK at the moment. Granted I take your note on the fees of 0.12%, but I am also think you're probably right about being able to drip feed funds across over a lengthy period of time. Maybe I can straight up ask trading 212! 

Interesting on VWRP. May I ask your time line / expectation? Hope I'm not being too nosey. Thanks for helping!  

Some more reading for you on MMF here…

https://monevator.com/money-market-funds/

Personally I’m very comfortable using them in the short term, but I intend/hope to be 100% in equities before long, my only hesitation is investing at these valuation levels, rational or not.

For a bit of context, and since you ask, I’m 34 and my ISA is intended to fund an early retirement, from 50 to 58, then SIPP kicks in before LISA a few years later. Rightly or wrongly, my projection for this plan is based on a 7% real return.

incus432

typeractive said:

Thanks @incus432 I've taken a quick look and this is performing well. 

This is leading me to more questions!

The site you linked to (morningstar - which I have heard of in my digging around). They report the same figures as on the vanguard website, but calculating the average over say 1/2/3/4/5 years etc, is this a simple 'add up all the % returns and divide by number of years' or is it a different calculation? Eg. does dropping 50% in one year requires more than a 50% return the next year to make that money back. Therefore I am wondering if I am looking at the averages incorrectly. Perhaps I need not get too hung up on this as we know the line of past performance and all that but the learner in me wants to figure this out.

Furthermore....is it possible in a providers S&S ISA to invest in multiple indexes / ETF's? E.g. 80% in VAFTGAG, and 20% in VHVG? I know the exposure is very similar for a number of these products and effectively it would be 'double investing' for many companies, but there will be some differences and where a fund may have a higher risk, but lower fees it might mix the portfolio up a bit more. However, I guess having multiple products would reduce the compounding effect overall? Perhaps I need to forget about adding complexities at such as beginner level.

The perfomance figures are just simple maths - look at price now and price (say) 5 years ago and calculate the annual growth rate - it is NOT averaging the individual year-on-year percentages. To take your (unrealistic) example if you start at a price of 100 and have a 50% drop one year (price now 50) and then +50% the next (price now 75) that is a 25% drop, not zero.

Not familiar with VAFTGAG but it's quite dear at 0.23%.  Personally I see no point at all in having multiple funds tracking the same global indexes - I'd go for the cheapest option. Keep it simple.

Any S&S ISA (or SIPP if you are looking at holding in a pension) lets you hold multiple ETFs o(r funds or Investment trusts).  Add bonds, cash funds etc as you wish. But the more you buy and trade the more you waste on fees.

In an earlier post you said something  about platform fees and I wonder if you have misunderstood this. Choose a broker - ie 'platform' which suits you and has low fees. That may be Vanguard, AJ Bell, Iweb. Lloyds, Hargreaves Lansdown etc etc. The best depends on the amount you have and how often you buy and sell (as little as possible!). Monevator have a guide and table https://monevator.com/compare-uk-cheapest-online-brokers/. Then once you have transferred your money in you can buy ETFs/funds etc within it -the fees for those are embedded in the price.  

I used to be with Vanguard but they only let yoiu invest in their own proiducts and they became too expensive for me (0.15% I think). Also their website is really crap IMO. Take a look at Iweb - basic but most ETFs are there, they have zero platform fee and are currently (check) waiving their £100 joining fee. I also have accounts with AJBell- the best website and service: although they are dearer for small pots (0.25%) they cap fees at £42 pa on ISAs just holding ETFs -which is great for larger pots.

Perhaps I need to forget about adding complexities at such as beginner level.

Exactly - do not overcomplicate !

So I am looking to transfer the whole amount from Post Office to Trading 212 Cash ISA who have a good rate, and then hopefully transfer a proportion of funds every month into vanguard – does anyone know if trading 212 has this flexibility?

This sounds overcomplicated too. The more often you buy in your S&S ISA the higher your costs.