Suggestions regarding my ISA mix / Is there an ISA aimed at novices?

bgscotty

Hello.

I welcome a little advice on this world of ISAs.

I currently have 2 ISAs from previous year:

* £6500 at 5.76% in Kent & Reliance
* £3000 @ 5.3% in NS&I

I'm looking to invest in a new cash ISA (£3600) for this year and was going to go for the highest rate that allows transfers-in. I would then open up the ISA and transfer the 2 old ISAs in.

I'm a novice when it comes to stocks and shares so am nervous at investing in a S&S ISA.

However, I would rather use the £3600 allowance than lose it.

Is there such a thing as a S&S ISA aimed at novices, or is there any tips you might give someone new to the area?

I would welcome any other comments as to anything else I might consider with my ISA portfolio. :rolleyes:

Thank you in advance.

BG

Lokolo

Ok.

Do you want to pay someone else to choose the actual shares they are bought? Or do you want to create your own portfolio of shares?

If you want a 'noobs' way of going about it you can do the first option and buy Funds, they typically take 1.5-3% a year and charge around 0.25% first off charge (with H&L). Basically what you are doing is giving money to a fund manager who will then buy shares in certain areas and try and get you some more money back after 3-5 years.

If you want to build your own portfolio I think a lot of people go for Halifax Sharebuilder but I have no idea how to go about this.

So first question is: own portfolio or funds?

turbobob

IMO a fund gives a level of diversification that would not be possible by picking a few individual shares. I was under the impression that generally to make up a decent portfolio of individual shares you would need to be looking at investing 100k+. You also have dealing costs to take account of.

You have to have some concept of risk versus return. That is the greater the risk, the greater the potential returns (but also the potential losses).

Funds are split into various sectors which each carry an average level of risk. For example, funds investing in the UK corporate bond or gilt sectors are considered to have a lower risk than funds in the UK equity sectors. Then you have European funds, smaller company funds, global equity funds etc etc. You can go all the way up to very risky specialised funds. Within each of these sectors you will have funds that are more or less risky than average, and funds that perform better or worse considering the level of risk they are exposed to.

They should be considered long term investments and if you are the type who panics every time the value goes down they may not be for you.

Myself, I am planning on putting some cash in to a few funds within an ISA this year, and I am prepared to accept a moderate risk. I am considering putting some into the Blackrock Absolute Alpha fund, some into a cautious managed fund and a small proportion into a riskier global equity fund to make it interesting.

Theres quite a few sites for carrying out research on ISA funds, some being:

http://www.morningstar.co.uk
http://www.trustnet.co.uk
http://www.citywire.co.uk
http://fundratings.ft.com/fundratings/

Lokolo

turbobob wrote: »

IMO a fund gives a level of diversification that would not be possible by picking a few individual shares. I was under the impression that generally to make up a decent portfolio of individual shares you would need to be looking at investing 100k+. You also have dealing costs to take account of.

I was saying thats what the Fund manager does

Liz_the_Whizz

Lokolo wrote: »

Ok.

If you want a 'noobs' way of going about it you can do the first option and buy Funds, they typically take 1.5-3% a year and charge around 0.25% first off charge (with H&L). Basically what you are doing is giving money to a fund manager who will then buy shares in certain areas and try and get you some more money back after 3-5 years.

I use Hargreaves Lansdown for my funds. I don't think funds are necessarily just for "noobs", they are for anyone who simply wants to spread the risk of direct shareholding in single companies.

On a lot of the 1200+ funds offered by H-L, they rebate the WHOLE initial cost. Total expense ratio or annual charge is usually 1.5-1.75% - if you are paying more than, you really ought to know why.

If you are making a start, they why not buy a minimum amount of say 4 funds per month and see how it goes. A lot of the UK All Companies funds which are not heavily into financials should be looking a good buy - I was pleased with how well Merrill Lynch UK Dynamic has weathered the storm.

Also mentioned several times on this forum is Blackrock UK Absolute Alpha which has remained robust in volatile times. If you buy monthly, then even if fund values drop, it just means you buy more units for when they eventually go up.

Loloko - what's with the 3-5 years? Noticed you said the same on another post. The way you say it makes it sound like some guaranteed fixed-term bond. With funds, you might double your money in a year like people in Gartmore China last year. Or you might lose 50% on the same fund like in the last 6 months. Do you just mean that you need to view it as a long-term investment?

Lokolo

Liz_the_Whizz wrote: »

Loloko - what's with the 3-5 years? Noticed you said the same on another post. The way you say it makes it sound like some guaranteed fixed-term bond. With funds, you might double your money in a year like people in Gartmore China last year. Or you might lose 50% on the same fund like in the last 6 months. Do you just mean that you need to view it as a long-term investment?

Yes... I thought well no point having a fund for a year should have them for least 3-5 years, well from what I got told anyway.

jem16

Try reading through this post - gives excellent pointers.

http://forums.moneysavingexpert.com/showthread.html?t=416337

dunstonh

Is there such a thing as a S&S ISA aimed at novices, or is there any tips you might give someone new to the area?

Depends on what you mean by novice. There are tens of thousands of investments you can place inside an ISA. Each will have pros and cons. However, there is no novice way of doing it because that would suggest you are willing to compromise to not do it properly.

I use Hargreaves Lansdown for my funds. I don't think funds are necessarily just for "noobs", they are for anyone who simply wants to spread the risk of direct shareholding in single companies.

Totally agree. I use unit trusts myself and I am certainly not a noob investor. The level of data available and the range of options/choice make unit trusts the ideal option. Many may say the same about investment trusts and they have pros and cons too.

Yes... I thought well no point having a fund for a year should have them for least 3-5 years, well from what I got told anyway.

3-5 is not enough. 5-10 is the normal minimum you should consider.

jamesd

bgscotty, to get started you might consider this while you learn, assuming 300 a month to split between them:

• 50 BlackRock UK Absolute Alpha class P
• 50 Invesco Perpetual Monthly Income Plus accumulation units
• 80 Invesco Perpetual Income accumulation units
• 70 Artemis Global Growth
• 50 Allianz RCM BRIC Stars

GUYd

jamesd wrote: »

bgscotty, to get started you might consider this while you learn, assuming 300 a month to split between them:

• 50 BlackRock UK Absolute Alpha class P
• 50 Invesco Perpetual Monthly Income Plus accumulation units
• 80 Invesco Perpetual Income accumulation units
• 70 Artemis Global Growth
• 50 Allianz RCM BRIC Stars

I also use Hargreaves Lansdown and Chartwell for Unit trusts and OEICs.
Look at the TER (Total Expense Ratio) for any fund you are considering.
Allianz RCM BRIC Stars has a fairly hefty TER of 2.01% and BlackRock UK Absolute Alpha class P has a massive TER of 2.55% !!
All funds must show the TER in their literature - so always check this. Don't just look at initial / annual charges.

jamesd

Not worth letting TER dissuade you from a good idea that does well. Just part of the picture and some funds like that BlackRock one are expected to have a high TER because of how they work. In its case, it's the trading of derivatives that makes it stable and profit-making in a downturn. Still delivers results worth having for people who want stability.