Halifax Sharesaver

johng_uk

Hi all and good afternoon.

I've seen a few threads around regarding the Halifax Sharesaver account. I think that it might be a good idea to pool together everyone's thoughts on this account in the one place, in order that interested parties have an easy reference.

I know very little about the account and would appreciate any advice given. I fill up my cash ISA each year and am currently paying of debt also. This would limit my monthly contribution to HSB to £25-£50 pm. To be honest I think that most people using this account would be investing at the lower end of the scale as big investors would use Hoodless Brennan, Selftrade or another broker (Just an opinion - Maybe wrong!)

On the surface it seems a good system for people to drip feed small amounts of cash into the stockmarket as the charge is £1.50 per deal (purchase) + 0.5% stamp duty. This would equate to roughly 6% of a £25 pm investment - Not as good as it first seemed! Also, I believe that when you come to sell shares, it equates to £13.95 per trade, so it would only seem profitable to sell shares when you own £x,000's worth.

I have a few other questions I couldn't find the answers to on their site:

1) What happens to dividends in this scheme?
2) Do you have to buy shares each month or can you let your contributions accumulate in the account before making a purchase?
3) What are the tax implications on shares/dividends? Are they deducted at source? (I am a standard rate tax payer).

I do think that a dabble would be good fun but am unsure whether it's worth it at my given contribution? My debt is interest free so although substancial, it's not an issue. Might be better just saving the cash in a bank account - But that wouldn't be as much fun!!

Any advice appreciated - Thanks!!

John

eggedd2k

You're right - it wouldn't be as much fun!

I set one of the Halifax Sharebuilder last week and got the paperwork through yesterday. I've set up a direct debit to pay £30 into it at the beginning of each month.

You wouldn't want to invest just £25 a month on shares though - the fees would eat up any gains.

What I plan to do is say invest every other month - so in my case £60 each time. You could let it build up more but it wouldnt be much fun just waiting for months before investing/dabbling.

The price to sell varies - I think I read it's £5 for amounts under £250 but this might have changed. With small amounts you'd have to leave it a good few years and hope to god you'd made some profit before selling.



It's like a good way for a beginner to dabble but on the other hand it wouldn't work out to be investing small amounts every month.


Let me know how you get on

johng_uk

Thats's good at least you can build up a bit of a pot before investing - That answers one of my questions straight away!

The only thing holding me back really is the sales cost vs £ of shares held ratio. At the lower end of the investment scale, it would seem that it was almost purely for fun and to minimise your losses. Sounds weird but you'd have to make a helluva gain to buy and sell regularly and make profit.

Regards

John

eggedd2k

The Sharebuilder account is based on pound cost averaging: http://www.newton.co.uk/pub/investors_guide/benefits_of_regular_investing/how_pound_cost_averaging_can_work_for_you.html

I've been doing some calculations on a spreadsheet and I can see how investing monthly/bi-monthly on the same company's shares actually works.

Even taking into account the fee and stamp duty whilst some months if the share price is high you dont get as many shares it works the opposite for months where the share price is low.

It's deffinitely a long term thing though - certainly no selling after a few months.

Have you found out anything else?

johng_uk

Nice link mate.

I havent't found out a helluva lot more tbh. I found a couple of links :

http://forums.moneysavingexpert.com/showthread.html?t=811689
http://forums.moneysavingexpert.com/showthread.html?t=818475

I added these and then noticed you started them both!! Still it might be good to have them on here and hopefully attract a lot of interest in the thread, as any advice would be great!

Also found this one which may help with share ideas:

http://forums.moneysavingexpert.com/showthread.html?t=818281

This is the link to the Sharebuilding account so anyone glancing at this thread can see what we are on about:

http://www.halifax.co.uk/sharedealing/products/halifax_sharebuilder.asp

I was just really toying with the idea of joining as a bit of fun with the aim of hopefully matching a good performing account (i.e. 6%+ AER) over the med-long term. I've not actually signed up for it yet.

It would be long-term for sure, hence the fact I wouldn't invest more. I am looking into investments for the 3-4 year term with a view to utilising them as a house deposit. All my cash will be invested in these. Sharebuilder would be no more than popping down to the bookies on a Saturday afternoon - If you lose you lose but there's less risk than the bookies and just as much, if not more fun.

Are there any catches or worrying small print that you've seen?

It is a chaep way to expose yourself to the market I guess and learn some ins and outs. In a few years it may prove of bene

johng_uk

A few resource links I got from books I own. Therefore I don't know how good they are, but have a look and see!

http://www.mrscohen.com/personal/home.aspx

http://www.fool.co.uk/investments/investments.aspx
(Some guides on right hand side)

http://money.uk.msn.com/

eggedd2k

Excellent.

Yeah for me the Sharebuilder account is purely just to get me into sharedealing. At 30 quid a month it's certainly money I can afford to lose.

I quite like the idea of say investing in the same company every other month but having two companies initially to invest in - one each month at say £30 each time.

The good thing about the sharebuilder account seems to be that you can just dabble - as long as you fund the account you don't actually have to invest each month.

debbie42

johng_uk wrote: »

1) What happens to dividends in this scheme?
2) Do you have to buy shares each month or can you let your contributions accumulate in the account before making a purchase?
3) What are the tax implications on shares/dividends? Are they deducted at source? (I am a standard rate tax payer).

(1) Dividends are either paid to your account, or can be automatically reinvested for eligible shares.

(3) There is a tax on dividends, at source, so you only have to worry about paying extra if you exceed the threshold. Link here. You also have your CGT allowance when profiting from share sales. If you find some shares that will exceed that via the ShareBuilder then please let me know about it (in advance). Ta!:D

I agree that it should be a learning experience, but it would seriously grieve me to see the dilution of the shares from the overheads on dealing costs with small amounts. Their example indicates you could buy as little as £5 worth of shares at a time, which seems a bit silly, to me. You'd maybe be better off running a virtual portfolio first?

debbie42

eggedd2k wrote: »

The good thing about the sharebuilder account seems to be that you can just dabble - as long as you fund the account you don't actually have to invest each month.

...and they generously pay you a whole 1% on any cash in your account. :rolleyes:

johng_uk

I'll look into it some more tomorrow - Missus is whinging for me to go and watch crap telly!!!

egged2k - Cheers for posting.
debbie42 - TVM for the info. The virtual portfolio is a good idea but I don't know if I'd maintain it regularly if there was no money on it!!

I wonder what sort of percentage ratio between the fees paid/£ invested would be the industry 'norm'? £50pm on this scheme with 0.5% stamp duty + £1.50 fee equates to around 3.5% on an 'every other month' investment.

debbie42

johng_uk wrote: »

I wonder what sort of percentage ratio between the fees paid/£ invested would be the indusrty 'norm'? £50pm on this scheme with 0.5% stamp duty + £1.50 fee equates to around 4% on an 'every other month' investment.

I can sympathise with the actual as opposed to virtual portfolio, in terms of the psychology.

Couple of approx. examples, on £1000 share purchases:
RBS (tight spread, 340.25 - 340.5)
294 shares @ 340.5 = £1001.07 + 11.95 charge + £5 stamp = £1018.02
effective share cost = 346.26
so getting on for a 2% loss just for the trade, before you start including selling costs.

With a wider spread share, e.g. EO. (43 - 44.5), you'd be looking at around 5% loss for a £1K deal.

You'd be talking similar purchasing percentages on around £100 block purchases. Any less and the percentages would rise accordingly. It is a fair old hit to have to recover before you start benefiting from share price rises!