ISA mistake - opened a General Investment Account.

DRS1

James19791 said:

So given that annual tax summaries are produced by Nutmeg at the end of the tax year, I would say it seems 'easier' in a sense to wait for those documents and use them to pay the due CGT if any?  Reporting it to HMRC should be doable with the Nutmeg documents. I realise that by not knowing any current FY sales you are going in 'blind' in terms of current capital gains but I know likely CGT figures now anyway (around £1k per £20k +/- extra depending on fund sales) which I can either pay from the proceeds of the sale or from other cash.

I think most people report their capital gains through self assessment.  The deadline for an SA tax return is the end of January following the end of the relevant tax year.  So for this 25/6 tax year it is 31 January 2027.  So no worries about having the end of year report in time.

You will only be "blind" as regards any Nutmeg dealings after you have sold the investments you want to sell in this tax year.  Presumably you can't switch Nutmeg off and stop them doing any more deals?

I don't know how many separate investments you have in the Nutmeg portfolio but you may want to think about which ones you sell and what the CGT implications are.  Selling all of one investment may give a different result than selling one quarter of everything.  Then again what will Nutmeg do if you sell all of one thing?  Start buying more of it?

I think most people would just sell £20k of the Nutmeg investments draw it out of Nutmeg and put it in the S&S ISA.  Then they'd pay the CGT out of other cash - it won't be due for quite a while anyway.

Caveat - there is this thing called real time reporting for CGT.  I am not sure how that works and when the payment date would be for CGT on any gains reported that way.

James19791

DRS1 said:

James19791 said:

So given that annual tax summaries are produced by Nutmeg at the end of the tax year, I would say it seems 'easier' in a sense to wait for those documents and use them to pay the due CGT if any?  Reporting it to HMRC should be doable with the Nutmeg documents. I realise that by not knowing any current FY sales you are going in 'blind' in terms of current capital gains but I know likely CGT figures now anyway (around £1k per £20k +/- extra depending on fund sales) which I can either pay from the proceeds of the sale or from other cash.

I think most people report their capital gains through self assessment.  The deadline for an SA tax return is the end of January following the end of the relevant tax year.  So for this 25/6 tax year it is 31 January 2027.  So no worries about having the end of year report in time.

You will only be "blind" as regards any Nutmeg dealings after you have sold the investments you want to sell in this tax year.  Presumably you can't switch Nutmeg off and stop them doing any more deals?

I don't know how many separate investments you have in the Nutmeg portfolio but you may want to think about which ones you sell and what the CGT implications are.  Selling all of one investment may give a different result than selling one quarter of everything.  Then again what will Nutmeg do if you sell all of one thing?  Start buying more of it?

I think most people would just sell £20k of the Nutmeg investments draw it out of Nutmeg and put it in the S&S ISA.  Then they'd pay the CGT out of other cash - it won't be due for quite a while anyway.

Caveat - there is this thing called real time reporting for CGT.  I am not sure how that works and when the payment date would be for CGT on any gains reported that way.

I'm querying with nutmeg now about my exact options over control of sales etc.

I've always thought though that the only control I have is adding or withdrawing from the portfolio.  So I would understand it that if I had £100 invested and the portfolio is:

60% fund A ETF = £60
30% fund B ETF = £30
10% fund C ETF = £10

Then if I withdraw £50 I would have:

Fund A £30
Fund B £15
Fund C £5

masonic

I don't think their systems are set up to allow bespoke control of how your money is spread between investments. Likely they are pooling investor money within each of the portfolios they offer.

James19791

dunstonh said:

I admit I am only just learning about index funds etc having been with Nutmeg and not really thinking of it but surely there are several index funds that weigh the US differently or even exclude them?  

That would be active management and not passive.
It is possible to build a portfolio of trackers using active management on the weightings.

Or perhaps you are saying that because a majority of funds have a big US weight that is the reason a majority of index funds have outperformed 'managed funds' because of recent US success? 

Correct.   US was best in this cycle. So, anything heavy in US equities has done well.   US was amongst the worst in the previous.  So, anything heavy in US equities previously did poorly.

I've heard though that a lot of research has been done on 'passive' low fee funds v 'managed' high fee and it's pretty conclusive when fees are taken off that 'passive' out performs? It's only what I've heard over the last few weeks though.  

You need to be careful of recency bias and where the research comes from.   In the US, its virtually impossible for active funds to beat passive.  So, any research based on US data will reflect that.     In some countries, it is different.   UK equity used to be an area where managed frequently was better but that was in the cycle when equity income was king.  Not total return.

I'm just trying to understand this but aren't all Index funds 'passive' in the sense that they just track the Index in question? 

masonic

James19791 said:

dunstonh said:

I admit I am only just learning about index funds etc having been with Nutmeg and not really thinking of it but surely there are several index funds that weigh the US differently or even exclude them?  

That would be active management and not passive.
It is possible to build a portfolio of trackers using active management on the weightings.

Or perhaps you are saying that because a majority of funds have a big US weight that is the reason a majority of index funds have outperformed 'managed funds' because of recent US success? 

Correct.   US was best in this cycle. So, anything heavy in US equities has done well.   US was amongst the worst in the previous.  So, anything heavy in US equities previously did poorly.

I've heard though that a lot of research has been done on 'passive' low fee funds v 'managed' high fee and it's pretty conclusive when fees are taken off that 'passive' out performs? It's only what I've heard over the last few weeks though.  

You need to be careful of recency bias and where the research comes from.   In the US, its virtually impossible for active funds to beat passive.  So, any research based on US data will reflect that.     In some countries, it is different.   UK equity used to be an area where managed frequently was better but that was in the cycle when equity income was king.  Not total return.

I'm just trying to understand this but aren't all Index funds 'passive' in the sense that they just track the Index in question? 

The underlying funds may be passive, but if you actively manipulate the weightings of them in your portfolio like Nutmeg does, that is active management. Nutmeg will charge a fee for this, so you don't get it for free.

James19791

masonic said:

James19791 said:

dunstonh said:

I admit I am only just learning about index funds etc having been with Nutmeg and not really thinking of it but surely there are several index funds that weigh the US differently or even exclude them?  

That would be active management and not passive.
It is possible to build a portfolio of trackers using active management on the weightings.

Or perhaps you are saying that because a majority of funds have a big US weight that is the reason a majority of index funds have outperformed 'managed funds' because of recent US success? 

Correct.   US was best in this cycle. So, anything heavy in US equities has done well.   US was amongst the worst in the previous.  So, anything heavy in US equities previously did poorly.

I've heard though that a lot of research has been done on 'passive' low fee funds v 'managed' high fee and it's pretty conclusive when fees are taken off that 'passive' out performs? It's only what I've heard over the last few weeks though.  

You need to be careful of recency bias and where the research comes from.   In the US, its virtually impossible for active funds to beat passive.  So, any research based on US data will reflect that.     In some countries, it is different.   UK equity used to be an area where managed frequently was better but that was in the cycle when equity income was king.  Not total return.

I'm just trying to understand this but aren't all Index funds 'passive' in the sense that they just track the Index in question? 

The underlying funds may be passive, but if you actively manipulate the weightings of them in your portfolio like Nutmeg does, that is active management. Nutmeg will charge a fee for this, so you don't get it for free.

Sure I understand that my Nutmeg account is definitely 'actively managed'.  

I'm interested in the question of whether low fee 'passive' index funds are better than higher fee 'actively managed' funds when fees are taken off. 

Theoretically, if I invest in 2 Index funds (myself and not through Nutmeg or similar) does this constitute 'active management'?  

eskbanker

James19791 said:

Theoretically, if I invest in 2 Index funds (myself and not through Nutmeg or similar) does this constitute 'active management'?  

Technically, yes, in that you're making a decision about the selection of the two products and how to allocate your money between them, both initially and then whether or not to rebalance later on.

However, it may not be fruitful to get too hung up on semantics, as there is a matter of degree involved, i.e. buying into a couple of mainstream index funds on a buy and hold basis is nothing like as active as day-trading individual stocks or many other styles in between the extremes.

masonic

James19791 said:

masonic said:

James19791 said:

dunstonh said:

I admit I am only just learning about index funds etc having been with Nutmeg and not really thinking of it but surely there are several index funds that weigh the US differently or even exclude them?  

That would be active management and not passive.
It is possible to build a portfolio of trackers using active management on the weightings.

Or perhaps you are saying that because a majority of funds have a big US weight that is the reason a majority of index funds have outperformed 'managed funds' because of recent US success? 

Correct.   US was best in this cycle. So, anything heavy in US equities has done well.   US was amongst the worst in the previous.  So, anything heavy in US equities previously did poorly.

I've heard though that a lot of research has been done on 'passive' low fee funds v 'managed' high fee and it's pretty conclusive when fees are taken off that 'passive' out performs? It's only what I've heard over the last few weeks though.  

You need to be careful of recency bias and where the research comes from.   In the US, its virtually impossible for active funds to beat passive.  So, any research based on US data will reflect that.     In some countries, it is different.   UK equity used to be an area where managed frequently was better but that was in the cycle when equity income was king.  Not total return.

I'm just trying to understand this but aren't all Index funds 'passive' in the sense that they just track the Index in question? 

The underlying funds may be passive, but if you actively manipulate the weightings of them in your portfolio like Nutmeg does, that is active management. Nutmeg will charge a fee for this, so you don't get it for free.

Sure I understand that my Nutmeg account is definitely 'actively managed'.  

I'm interested in the question of whether low fee 'passive' index funds are better than higher fee 'actively managed' funds when fees are taken off. 

Theoretically, if I invest in 2 Index funds (myself and not through Nutmeg or similar) does this constitute 'active management'?  

The main issue with active management is that it adds costs and in the vast majority of cases does not add value. Whether you invest in an actively managed fund where costs are incurred internally within the fund, opt for a managed portfolio where a provider like Nutmeg charges you a fee, or you DIY actively manage where you'll incur bid-offer spread / swing pricing and potentially trading fees, the outcome is you've paid extra as a result of the active management and therefore have to generate higher gross returns to cover those costs before the exercise can be profitable. The more trading that occurs, the higher the hurdle will be.

It is possible to buy two index funds and sit on them for 10 years without trading and your resultant extra costs would be negligible. You might even save on fund fees if the two are cheaper than the cheapest single fund option.

dunstonh

James19791 said:

dunstonh said:

I admit I am only just learning about index funds etc having been with Nutmeg and not really thinking of it but surely there are several index funds that weigh the US differently or even exclude them?  

That would be active management and not passive.
It is possible to build a portfolio of trackers using active management on the weightings.

Or perhaps you are saying that because a majority of funds have a big US weight that is the reason a majority of index funds have outperformed 'managed funds' because of recent US success? 

Correct.   US was best in this cycle. So, anything heavy in US equities has done well.   US was amongst the worst in the previous.  So, anything heavy in US equities previously did poorly.

I've heard though that a lot of research has been done on 'passive' low fee funds v 'managed' high fee and it's pretty conclusive when fees are taken off that 'passive' out performs? It's only what I've heard over the last few weeks though.  

You need to be careful of recency bias and where the research comes from.   In the US, its virtually impossible for active funds to beat passive.  So, any research based on US data will reflect that.     In some countries, it is different.   UK equity used to be an area where managed frequently was better but that was in the cycle when equity income was king.  Not total return.

I'm just trying to understand this but aren't all Index funds 'passive' in the sense that they just track the Index in question? 

They are passive with respect to the benchmark that they have chosen to track. 

However, there are very many benchmarks and those benchmarks will have a criteria.    All Cap, Large Gap only,  Large & Medium cap only etc.   And then benchmarks that use a different methodology. Book value for example.
Then you have country-specific and regional benchmarks.   And different benchmark companies, like FTSE, MSCI or Bloomberg.

If you have a portfolio of 10 trackers for each of the major regions/countries, how much are you going to put in each.  10% into 10 funds?      A weighted spread on market cap?   A weighted spread on book value?   

Every option is an active decision.  However, the underlying assets you use in your decisions can be passive.

DRS1

James19791 said:

DRS1 said:

James19791 said:

So given that annual tax summaries are produced by Nutmeg at the end of the tax year, I would say it seems 'easier' in a sense to wait for those documents and use them to pay the due CGT if any?  Reporting it to HMRC should be doable with the Nutmeg documents. I realise that by not knowing any current FY sales you are going in 'blind' in terms of current capital gains but I know likely CGT figures now anyway (around £1k per £20k +/- extra depending on fund sales) which I can either pay from the proceeds of the sale or from other cash.

I think most people report their capital gains through self assessment.  The deadline for an SA tax return is the end of January following the end of the relevant tax year.  So for this 25/6 tax year it is 31 January 2027.  So no worries about having the end of year report in time.

You will only be "blind" as regards any Nutmeg dealings after you have sold the investments you want to sell in this tax year.  Presumably you can't switch Nutmeg off and stop them doing any more deals?

I don't know how many separate investments you have in the Nutmeg portfolio but you may want to think about which ones you sell and what the CGT implications are.  Selling all of one investment may give a different result than selling one quarter of everything.  Then again what will Nutmeg do if you sell all of one thing?  Start buying more of it?

I think most people would just sell £20k of the Nutmeg investments draw it out of Nutmeg and put it in the S&S ISA.  Then they'd pay the CGT out of other cash - it won't be due for quite a while anyway.

Caveat - there is this thing called real time reporting for CGT.  I am not sure how that works and when the payment date would be for CGT on any gains reported that way.

I'm querying with nutmeg now about my exact options over control of sales etc.

I've always thought though that the only control I have is adding or withdrawing from the portfolio.  So I would understand it that if I had £100 invested and the portfolio is:

60% fund A ETF = £60
30% fund B ETF = £30
10% fund C ETF = £10

Then if I withdraw £50 I would have:

Fund A £30
Fund B £15
Fund C £5

Ah I get you.  That is a bit of a pain as you would have to do CGT calculations for all three funds.