Stocks and Shares ISA's

romeshw

Hi,

I put money into a mutual fund, which I buy at Fidelity, but through Best Invest, which means I don't pay any initial charge. In fact, I wouldn't accept paying any initial charge unless I was getting face-to-face advice.

For example, Invesco Perpetual normally charge 5% inital charge, but by going through Best Invest, there's none.

My tips would be:
1) Do some reading on Mutual Funds (Guide for Dummy's is pretty good) and invest yourself (an index tracker is a good starter), which can mean you don't pay any initial charge on your ISA.
2) "Phase" your investment (ie £200 a month for three months, rather than one £600 sum). This will help ensure that you don't put all your money in at a peak and give you a resonable average price.
3) Over the long-term (10+ year), the stock market is a relatively safe and steady earner. You can expect average returns over 10 or more years to be in the 10% range.
4) Use as much as you can of your ISA allowance each year (whether it's cash or stocks/shares), it's a great tax-free wrapper

dunstonh

I put money into a mutual fund, which I buy at Fidelity, but through Best Invest, which means I don't pay any initial charge. In fact, I wouldn't accept paying any initial charge unless I was getting face-to-face advice.

IIRC, the only difference between Best Invest and other IFAs is the initial commission. Not all Fidelity FNW funds have no initial charge even if nil initial commission is taken. You are also paying full trail commission as well which is fine if you are getting advice but that makes them poor value against HL if you are not.

1) Do some reading on Mutual Funds (Guide for Dummy's is pretty good) and invest yourself (an index tracker is a good starter), which can mean you don't pay any initial charge on your ISA.

Only risk of that of course is the risk. The average UK consumer is cautious when it comes to investing. FTSE trackers are medium/high risk so picking a tracker as your single investment option would be above their risk profile.

2) "Phase" your investment (ie £200 a month for three months, rather than one £600 sum). This will help ensure that you don't put all your money in at a peak and give you a resonable average price.

Possibly a good idea at the moment but in 5 of the last 6 years that would not have been a good thing to do most of the time.

3) Over the long-term (10+ year), the stock market is a relatively safe and steady earner. You can expect average returns over 10 or more years to be in the 10% range.

Not on a FTSE tracker

romeshw

dunstonh wrote: »

You are also paying full trail commission as well which is fine if you are getting advice but that makes them poor value against HL if you are not.

Not sure I follow you on this point. As far as I can see the fund I invested in (Invesco Perpetual Asian Acc) would have had a 5% initial charge for an ISA which became nil % by going through Best Invest. What do you mean by trail commission? And what is HL?

dunstonh

Not sure I follow you on this point. As far as I can see the fund I invested in (Invesco Perpetual Asian Acc) would have had a 5% initial charge for an ISA which became nil % by going through Best Invest.

If you went direct to Inv Perp then that would be 5% initial. If you bought through advice using an IFA taking maximum commission then you would expect it to be 3% as the typical maximum although the FSA publish the IFA average at 1.8% (based on previous 6 months transactions). Best invest dont take any initial commission so you dont pay an initial charge.

That is quite normal on execution only business with IFAs and discount brokers. The reason is that the funds have a typical annual management charge of 1.5% and 0.5% goes to the IFA or broker. So best invest are sitting back and getting 0.5% which is where they really make their money. So, effectively they are getting paid the same as a servicing IFA yet they are not doing anything for it.

HL have a good ISA contract for those doing DIY where they will rebate some of that 0.5%. Its typically around 0.1-0.2% but its still a rebate.

HL are Hargreaves Lansdown. A discount IFA with their own investment platform for those that want to do DIY investing.

Ian_W

romeshw wrote: »

Not sure I follow you on this point. As far as I can see the fund I invested in (Invesco Perpetual Asian Acc) would have had a 5% initial charge for an ISA which became nil % by going through Best Invest. What do you mean by trail commission? And what is HL?

If you look at the section "At a glance" at the top of THIS PAGE you'll see that HL rebate 0.25% [half] their their trail comm on that fund.
The AMC isn't shown explicitly but is reflected in the unit price.

romeshw

Thanks for the info. Would it be an idea for me to consider transferring all my ISA (current and previous years) to HL in order to obtain the rebate? Would you recommend HL in general for execution only?

Ian_W

romeshw wrote: »

Would it be an idea for me to consider transferring all my ISA (current and previous years) to HL in order to obtain the rebate? Would you recommend HL in general for execution only?

Read Martin's ARTICLE on discount brokers. BestInvest are recommended but AFAIK they don't rebate any of their annual trail commission whereas HL do as a loyalty bonus. It's not always 0.25%, on some funds it's less.
Personally, I [and many on here judging from other posts] would recommend them for execution only purchases of funds.
Before you transfer check if there are any charges for doing so and I think your transfer from Fidelity to HL will be a cash sum rather than the funds themselves. Doesn't affect the ISA status just means you have to instruct HL where you want the money invested and you'll be out of the market for a time.

giger

Your charge sounds about right to me. I am in Skandia and all their investments are front loaded i.e you pay setup costs etc up front but then you never have to pay them again if you transfer funds or when you sell.

Just a bit of info from my personal experience; I started investing in PEPs and ISAs 10 years ago when significant gains could be made (i.e 50% in a year) I saw huge sums of money on my balance sheets but it doesn't mean anything until you have it in your bank account. Needless to say with 9/11 and other world wide events most of these funds bombed, but then recovered. I sold most of mine recently. After 10 years the PEPs (mix of high,medium,low risk) returned around 6% (very disappointing to me and not worth 10 years of worry) but the ISAs spread over a similar risk level returned just under 50%. The problem is you never know year to year how they will perform and you need to be able to ride out any downward movements. It only becomes a problem if they are down when you need the cash.

I would be careful over what funds and risk levels you apply, I certainly wouldn't want all of my money in these schemes as they do sometimes drop bigtime (I saw a 40% fall in one year).

Strangely, some stocks are very high right now, not low. Drip feeding money in will also spread the risk but you need to be happy with the fund choice and keep an eye on it from time to time.

JoeShmoe_2

IMHO equities are done for at least 5-10 years unless you find funds that are investing in specifics (Japan, Water, alternative energy etc). Even the commodities funds are oversold

The basic maths and the history of the FTSE and the DOW tells the basic story