First Time Investor advice please

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
4 replies 781 views
AndyP21AndyP21 Forumite
2 Posts
edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
Hi everyone

After reading the Bogglhead Guide and a set of articles on monevator.com I wanted some of your advice please. Apologies for what are most likely extremely trivial and basic questions to follow.

23 years old

Desired asset allocation
- 70 equities - 15% Domestic, 45% World, 10% Emerging Markets
- 30% bonds

Lump Sum investment - 10k
Monthly Investment - £1700

Through comparison wesbites, iWeb seems to work out as the cheapest ISA platform.

In terms of specific funds for the desired asset allocation here is what I have narrowed it down to:

Domestic Equities - 15%
- iShares UK Equity Index Fund D (GB00B7C44X99) OCF 0.06%
- Fidelity Index UK Fund P (GB00BJS8SF95) OCF 0.06%
-Vanguard FTSE UK All Share Index Trust (GB00B3X7QG63) OCF 0.08%

International ex-UK equity - 45%
- L&G International Index Trust I (GB00B2Q6HW61) OCF 0.13%
- Vanguard FTSE Dev World ex-UK Equity Index (GB00B59G4Q73) OCF 0.15%

Emerging Markets Equity - 10%
- Fidelity Index Emerging Markets Fund P (GB00BHZK8D21) OCF 0.21%

UK Govt Bonds - Intermediate - 30%
- Lyxor FTSE Actuaries UK Gilts (GILS) OCF 0.07%
- Vanguard UK Government Bond ETF (VGOV) OCF 0.12%

Questions
1. Most of the above are index funds - I have read that for UK investors ETF equivalents are cheaper? Could this be elaborated please with regards to the pros and cons of the index funds vs ETF's in this case?

2. Is there anything which sounds alarm bells or you think could be changed/improved?

3. iWeb states a transaction fee of 0.5% and a dealing commission of £5 - are these applicable on a monthly basis where each fund is bought?

Replies

  • WildsoundWildsound Forumite
    354 Posts
    100 Posts Second Anniversary Photogenic
    ✭✭
    What is your financial goal with this plan? If it's for retirement, I would argue (at your age) that you should be upping your equity allocation to nearer 100%.

    If it's for a first time buyer purchase, then 70% equities might be too high if you're intending to buy within the next 5 years
  • AlexlandAlexland Forumite
    8.8K Posts
    1,000 Posts Fourth Anniversary Photogenic Name Dropper
    ✭✭✭✭
    I don't understand how iWeb worked out cheapest if you intend to make monthly contributions at £5 per trade and intend to run multiple funds? That sounds very expensive.

    In terms of the asset allocation my advice would be that it's way too complicated for what are relatively small amounts of money. There's no reason to think your portfolio would perform any better than a mixed asset fund such as Vanguard LifeStrategy, HSBC Global Strategy, etc.

    Alex.
  • AndyP21AndyP21 Forumite
    2 Posts
    Thank you both for taking the time and effort to share your replies.

    I am a first time investor and the plan is to start saving this regularly for retirement.

    I've updated the above to:

    Domestic Equities - 10%
    - iShares UK Equity Index Fund D (GB00B7C44X99) OCF 0.06% or Vanguard FTSE UK All Share Index Trust (GB00B3X7QG63) OCF 0.08%

    International ex-UK equity - 65%
    - L&G International Index Trust I (GB00B2Q6HW61) OCF 0.13% or Vanguard FTSE Dev World ex-UK Equity Index (GB00B59G4Q73) OCF 0.15%

    UK Govt Bonds - Intermediate - 25%
    - Lyxor FTSE Actuaries UK Gilts (GILS) OCF 0.07% or Vanguard UK Government Bond ETF (VGOV) OCF 0.12%

    Overall I think a 3 fund portfolio would suit me best for simplicity.


    The things I still do not completely understand on the Iweb platform are: ( I have tried attaching a link to the fund page on iWeb directly but it does not allow me to do so. Plugging any of the above ISIN's on the iweb fund page search engine will bring the relevant information up if it is more useful in this way)

    1. Dealing commission - £5 - if a fund was bought on a monthly basis, would a £5 charge be applicable each time. I have read this is applicable to ETF's but not OEICs so was not certain.

    2. What does the 0.5% transaction fee mean?

    Many thanks everyone and sorry for the basic questions
  • AlexlandAlexland Forumite
    8.8K Posts
    1,000 Posts Fourth Anniversary Photogenic Name Dropper
    ✭✭✭✭
    1) Yes iWeb will charge you £5 every time you buy anything that's the only way they make money as they have no ongoing platform fee. Others such as Hargreaves Lansdown don't charge for OEIC trades as they make money from their ongoing platform fee. So if you are buying 3 things a month on iWeb it will cost £15 per month which is expensive so there would be better options elsewhere.

    https://www.iweb-sharedealing.co.uk/charges-and-interest-rates/charges.asp

    2) I don't know where you are seeing the 0.5% but it could be stamp duty which is a UK government tax on share and investment trust purchases. Stamp duty does not apply to buying ETFs and OEICs (although they may pay stamp duty within the fund). Alternatively it could be a reference to the trading costs incurred within the fund, etc by the fund manager.

    3) As a first time investor what makes you believe your 3 fund selection would beat a professionally allocated and extensively peer reviewed low cost mixed asset fund?

    Alex
This discussion has been closed.
LATEST MSE NEWS AND GUIDES

Cut overdraft charges

10 tips to pay less for your overdraft + how to pay it off

MSE Guides

FREE tennis coaching

Find your nearest session and pre-book your place online

MSE Deals