Legal & General index-tracker ISA Advice?

BubbleFrogette

Hello,

I'm thinking of getting an index-tracker ISA. I'm looking to deposit a small amount each month (say £50 - £100) over a long-term period, i.e. at least 5 years. I have looked at Legal & General's UK 100 Index Trust, which has 0.75% management fees & no initial charge. The Motley Fool seems to think this is OK. I'm a virgin when it comes to the stock market and investments so don't want anything to complicated at the moment. Thus, I have 2 questions

- What are people's experiences concerning this product (if any)? and;
- With the market as it is right now, should I wait for a bit more stability before starting this investment?

Any advice welcome and appreciated!
Thanks in advance,
Zoe

Aegis

BubbleFrogette wrote: »

Hello,

I'm thinking of getting an index-tracker ISA. I'm looking to deposit a small amount each month (say £50 - £100) over a long-term period, i.e. at least 5 years. I have looked at Legal & General's UK 100 Index Trust, which has 0.75% management fees & no initial charge. The Motley Fool seems to think this is OK. I'm a virgin when it comes to the stock market and investments so don't want anything to complicated at the moment. Thus, I have 2 questions

- What are people's experiences concerning this product (if any)? and;
- With the market as it is right now, should I wait for a bit more stability before starting this investment?

Timing the market that accurately is a sucker's game. As you're going to be drip feeding, there's no real benefit to you if you wait for a while. If prices drop, you buy more units, if prices rise you buy fewer units. As long as you're comfortable with the risk level of the product, you'll smile as the price drops, knowing that when it rises again you'll have taken advantage of the buying opportunity

Out of interest, why have you opted to only go in to a tracker fund rather than an active fund? If you're concerned about the performance during difficult times, a well-managed active one might be better suited as the manager will try to smooth out the volatility by being defensive when the markets turn sour.

As far as I'm aware, the L&G tracker is quite a good one, but I'm far from an expert on index trackers!

dunstonh

The FTSE trackers are medium/high risk which is typically higher than the average new investor. For example, you could see a 45% loss in 12 months with a FTSE tracker. Could you handle that? Most inexperienced investors are cautious.

If you go with a FTSE all share tracker you are going to be getting mid table performance. Is that what you want?

If you go with a FTSE100 or FTSE250 tracker then you are focusing on either large or mid caps which do tend to perform differently to each other. i.e. FTSE100 trackers have been bottom performers for the last 14 years whereas FTSE250 have been top performers up until late last year when they started to go down very quickly.

Trackers tend to go best in rising markets but suffer more when the markets drop.

Schnorbitz_2

Hello,

I've been perfectly satisfied with the UK Equity Index tracker ISA with L&G. Paid £50 a month into it since 2004, and managed to take £1,500 out of for my car last summer just before the first downturn as a result of the credit crunch. This one matches the All Share, rather than just the top 100 or 350. I have a feeling the fee is actually a little over 0.5% rather than 0.75%.

My opinion on Index tracking is rather more positive than the other posters. I feel that there's still a reasonable chance that active fund managers may not read the market well enough in time, and may perform badly in more volatile times - the fee would be higher too. From my point of view, the whole equity market is a pretty wide spread (!), and is a means of avoiding the stock-specific risk of an active equity investment. The FTSE All Share is normally most active fund managers' benchmark anyway.

Although once I'm earning a bit more, and have maxed out my equity ISA for the tax year (maybe this financial year, maybe next), I intend to start some more active long-term equity investment. Maybe an OEIC. I'll see what's out there.

BubbleFrogette

Thanks for all your advice. I realise that investment is not without risk and since I'm looking at something longer term, I'm comfortable with the situation. Mid-rate performance is fine for me, as I understand that high performance is most often associated with high risk. I suppose the whole thing is a bit of a guessing game (as a scientist I do a lot of speculating anyway!), but until I'm more experienced then I'm happy to keep away from active-managed funds.

Thanks again :beer: