Small Investments into Shares/ETFs

ColdIron

Chetverka said:

Rollinghome said:

Like ColdIron, it's not clear to me why you would want fractional shares, unless you intend to have far too many different holdings.  

ETFs are a way to hold many different types of holdings, including equity index trackers, but there are several other ways including OEICs (a type of unit trusts) for trackers and managed investments and investment trusts for managed investments.  ETFs are likely to be foreign domiciled which can make taxation slightly more complicated. 

HSBC and L&G have a range of OEIC index trackers that will automatically be bought as fractions regardless of the type of account or platform, and can be held as accumulation units or as income units. They can have lower costs than many ETFs depending on the platform used.

I don't know anything about Interactive Brokers but as you work for a bank, I should think someone there and having the same restrictions could advise you. Using the platform that best suits your situation is important.  For very small amounts then you should be looking for free trading or your net returns will be small.  A platform like Hargreaves Lansdown which isn't free but charges a percentage fee is expensive for large portfolios but can be dirt cheap for tiny ones.  Wait for the budget to see whether the taxes on investments will change but they are't likely to affect you.

They all look to me expensive, apart from Interactive Brokers

Most of those will let you buy open ended funds (OEICs). There is a lot more choice and you can buy part of a unit for as little as £25

That £11.95 at HL does not apply to funds, there is no charge to buy or sell funds. Any percentage fee platform will be very cheap on small amounts, e.g £4.50 on £1,000 for your first year at HL, the cost of a coffee

When IWeb become Scottish Widows they will offer free regular investing and no annual fee

Then you could use an ISA and avoid all that transferring malarkey, tax and detailed record keeping required by a GIA

What's not to like?

Eyeful

You work for an investment bank but:

1. How much do you know about investing?
2. What are you going to invest in?
3. How long do you intend to invest for?
4.  Have you started a Pension Yet?

I suggest you watch this:
 https://www.kroijer.com/

You mention investing in the US economy. Then I suggest you read this:
https://www.biglawinvestor.com/meet-the-gotrocks-family/

Linton

Chetverka said:

DRS1 said:

Personally I would contribute cash to the ISA (until it is full) and then buy shares when you have enough to buy a full share (or at least buying without incurring disproportionate dealing costs) - buying shares in the GIA and then bed and ISAing them at least raises the possibility of CGT being applicable.  Of course if you only make a gain of £100 pa then you are well under the £3000 allowance so wouldn't need to put any CGT calculations into your self assessment return.  But if you got any dividends while the shares were in the GIA then those would go in the return.

Now I am thinking of going with the ISA Shares account to avoid any potential complications with HMRC.  The Cash ISA currently offers an average return of 4.5%, which, considering the UK inflation rate, isn’t particularly impressive.  

I believe investing in the US economy for ten years could yield around 15% of the average return, which is my rationale for choosing shares. 

Investing in the US economy could also yield a lot less than 15% average/year.  If you had invested in the S&P500 at the start of this century you would not have seen the index getting permanently higher for about 12 years.  The markets in 2000 were dominated by companies that were going to make $billions from the then newly commercialised Internet.  But most didnt. Sound familiar?

Rollinghome

Chetverka said:

Rollinghome said:

Like ColdIron, it's not clear to me why you would want fractional shares, unless you intend to have far too many different holdings.  

ETFs are a way to hold many different types of holdings, including equity index trackers, but there are several other ways including OEICs (a type of unit trusts) for trackers and managed investments and investment trusts for managed investments.  ETFs are likely to be foreign domiciled which can make taxation slightly more complicated. 

HSBC and L&G have a range of OEIC index trackers that will automatically be bought as fractions regardless of the type of account or platform, and can be held as accumulation units or as income units. They can have lower costs than many ETFs depending on the platform used.

I don't know anything about Interactive Brokers but as you work for a bank, I should think someone there and having the same restrictions could advise you. Using the platform that best suits your situation is important.  For very small amounts then you should be looking for free trading or your net returns will be small.  A platform like Hargreaves Lansdown which isn't free but charges a percentage fee is expensive for large portfolios but can be dirt cheap for tiny ones.  Wait for the budget to see whether the taxes on investments will change but they are't likely to affect you.

Thank you @Rollinghome - just checked Hargreaves Lansdown and they charge £11.95 for ETF trade, unless it is placed via direct debit.  
Never heard of OEIC - will have a look. HSBC and L&G  are not on the broker's list, but Hargreaves Lansdown is.

This is what I can choose from:

AJ Bell

Barclays Smart Investor
Fidelity UK
Hargreaves Lansdown
Interactive Brokers
Interactive Investor
Killik & Co
Saxo Capital

They all look to me expensive, apart from Interactive Brokers.

HL charge £11.95 to trade equities, bonds and ETFs, but charge nothing to buy and sell "funds" - which covers unit trusts and the more modern form that are called OEICs (open ended investment companies). 

Instead they have a platform charge which for anything other than very large portfolios is 0.45% pa. So for a £1000 portfolio of funds your total annual fees to them would be £4.50.  Add to that the annual charge for say the HSBC FTSE All-World Index Fund of 0.13% so a further £1.30 pa, £5.80 pa in all, 48p a month.

For that you'd get what some people think is still a posh platform with lots of facilities, including cash ISAs, where you can switch around your investments as often as you like free of any charge.  You'd also have access by phone to a real person to ask questions. I'd assume you could open a non-ISA account just to have a look around.

There are limits on the mininum buy which might be a problem for you, though there is a way to get around it, and they have some sort of regular saving scheme that someone else can tell you about.  Then, when you get to £20k or so remember to have a look around again.

Another option, but not on your permitted list, is something like Invest Engine.

But as others have pointed out the most reliable and straightforward way of increasing your wealth at this point is through cash savings, and that's where I would put my £1k.  Only invest at this stage if you think the increased hassle and risk is worth it for the experience, and won't be disappointed if the rewards are less than you expect.

Equities are expected to give a bigger return than cash over the long as a reward for the risk. That risk is real. Only invest if you are prepared to ride out the falls and stay in for that long term. 

PS. L&G and HSBC are the "fund managers".  Hargreaves Lansdown are a platform, an intermediary like the others on your list who do a bit more than a stockbroker.  I'd suggest you open at HL account and have a poke around, look at some fancy charts etc, even if you decide to stick to cash or find a better option elsewhere.

https://www.hl.co.uk/funds/index-tracker-funds/view-index-tracker-funds

eskbanker

Chetverka said:
I believe investing in the US economy for ten years could yield around 15% of the average return, which is my rationale for choosing shares. 

Why would you only want 15% of the average return?

InvesterJones

For small investments in ISAs, especially multiple contributions, Dodl (part of AJ Bell) is very competitive (0.15%) if you want access to a diversified fund like VLS 80. If you have a fixed amount you can regularly put away then iWeb is/will be even cheaper (free for regular contributions, as mentioned above, £5 to sell).

Rollinghome

InvesterJones said:

For small investments in ISAs, especially multiple contributions, Dodl (part of AJ Bell) is very competitive (0.15%) if you want access to a diversified fund like VLS 80. If you have a fixed amount you can regularly put away then iWeb is/will be even cheaper (free for regular contributions, as mentioned above, £5 to sell).

Dodl is interesting but appears to offer a very limited range of investments, which matters less if they happen to have what you want.  Would be interesting to hear from someone who uses it.

I've used Iweb for the majority of my investments for over 10 years and it suits me well, but it's very bare-bones. There's no hand-holding there and it's not a platform I'd think of for a new investor starting with a very small sum. What concerns many current users is that with the tarting up they're promising will come an increase in charges or even a sell-off of the business.

Chetverka

Eyeful said:

You work for an investment bank but:

1. How much do you know about investing?
2. What are you going to invest in?
3. How long do you intend to invest for?
4.  Have you started a Pension Yet?

I suggest you watch this:


You mention investing in the US economy. Then I suggest you read this:

Thank you, Eyeful,  I just do not see what I am planning to do differently from what is suggested in the link you provided. 

Chetverka

Linton said:

Chetverka said:

DRS1 said:

Personally I would contribute cash to the ISA (until it is full) and then buy shares when you have enough to buy a full share (or at least buying without incurring disproportionate dealing costs) - buying shares in the GIA and then bed and ISAing them at least raises the possibility of CGT being applicable.  Of course if you only make a gain of £100 pa then you are well under the £3000 allowance so wouldn't need to put any CGT calculations into your self assessment return.  But if you got any dividends while the shares were in the GIA then those would go in the return.

Now I am thinking of going with the ISA Shares account to avoid any potential complications with HMRC.  The Cash ISA currently offers an average return of 4.5%, which, considering the UK inflation rate, isn’t particularly impressive.  

I believe investing in the US economy for ten years could yield around 15% of the average return, which is my rationale for choosing shares. 

Investing in the US economy could also yield a lot less than 15% average/year.  If you had invested in the S&P500 at the start of this century you would not have seen the index getting permanently higher for about 12 years.  The markets in 2000 were dominated by companies that were going to make $billions from the then newly commercialised Internet.  But most didnt. Sound familiar?

Is this not correct?
The S&P 500 is a market capitalization-weighted index of the 500 leading publicly traded companies in the United States. Since 1957, the S&P 500 has delivered an average annual return of 10.54%, but when adjusted for inflation, the real return drops to 6.68%.

You are likely raising a point that you can hit some periods when even a 10-year average return will be pretty poor. 

I might have been over-optimistic with expectations of 15% yield. 

Chetverka

ColdIron said:

Most of those will let you buy open ended funds (OEICs). There is a lot more choice and you can buy part of a unit for as little as £25

That £11.95 at HL does not apply to funds, there is no charge to buy or sell funds. Any percentage fee platform will be very cheap on small amounts, e.g £4.50 on £1,000 for your first year at HL, the cost of a coffee

When IWeb become Scottish Widows they will offer free regular investing and no annual fee

Then you could use an ISA and avoid all that transferring malarkey, tax and detailed record keeping required by a GIA

What's not to like?

Thank you so much @ColdIron - having a look if OEICs are available on Interactive Brokers(they do not charge anything for holding assets). 

For example, I found there 

GB00BSZ8GD97
HSBC SP 500 EQUAL WEIGHT EQUITY INDEX "C" (GBP) ACC
ALLFUNDS

What is interesting, it charges 0.17% and Vanguard for its ETF - VUAG charges only 0.07%.

Does HSBC fund have any advantages over VUAG?

Thanks again ColdIron, will be looking more into OEICs to invest into my ISA account in small portions.