Novice Investor seeking advice

sofa_searcher · 26 August 2017 at 1:15AM

Hi all, I would highly appreciate some feedback on my plans for investing as a beginner.

For some perspective, currently 24, no debts, pay into company pension plan. The plan is to drip feed £120 a month into 2/3 ETFs and 1 Fund (also plan to use peer to peer lending). The ETF’s and fund under consideration include

iShares Core FTSE 100 UCITS ETF (UK exposure/growth) – Logical investment as a UK resident. My worry is the impact of Brexit.
Vanguard All-World High Dividend Yield ETF or SPDR S&P Global Dividend Aristocrats UCITS (World exposure/fixed income) – Chosen as a source of income and for diversification based on location.
Vanguard Lifestrategy 80 (Mixed assets) – A popular and large fund with diy investors. Picked 80% equity as I am young and can take on the risk.

Is this a good mix for a novice investor? Other being considered

iShares Global Water UCITS ETF – It’s an essential commodity which I believe is relatively safe as holdings consist of large utility companies.
iShares S&P 500 Health Care Sector UCITS ETF – Likewise, an essential industry and large pharma are considered safe but ‘boring’.
An emerging market ETF but I think is out of my depth so I’ll leave that for later.

In terms of platform I considered
3 etf / 1 fund (@ £30 each) – POTA
2 etf / 1 fund (@40 each) – POTB

TL;DR
My first choice is Fidelity but could someone explain the extra “Our Service Fee" charge as explained below? Otherwise I like the look of TD Direct even though they are slightly more expensive than Fidelity.

Platforms fees considered over 1 and 5 year in ();
1.Fidelity – POTA: £45.09 (£225.45) / POTB: £45.08 (£225.40)
Platform fee for total investment < £7499.99 is £45. No dealing costs for funds and 0.1% for all other investments, making this platform very cheap. Although I checked the cost for buying Ishares FTSE 100 ETF and there’s an additional “Our Service Fee" taking the total cost to 0.43%, is this unique to Fidelity?

2.TD Direct – POTA: £54 (£270) / POTB: £36 (£180)
Slightly more expensive than Fidelity but better variety of investment options. Platform fee is waived with active regular investing. Regular investment in funds are free so charges come from buying ETFs i.e POTA: 3x12x£1.50=£54 POTB: 3x12x£1.50=£36.

3.Hargreaves Landsdown – POTA: £60.48 (£367.2) / POTB: £42.48 (£277.2)
Relatively expensive but good platform and customer service based on reviews. Platform fees come to £6.48 per annum (0.45%x£1440) for both POTA/B and dealing comes to £54 and £36 respectively.

4.Selftrade – POTA: £58.32 (£334.8) / POTB: £42.48 (£244.8)
Lower #3 solely due to Hargreaves's reputation. Can anyone speak of their experience with selftrade? Platform fees is 0.30% for both POTA/B and dealing comes to £54 and £36 respectively.

(Others initially considered: The Share Centre – POTA: £58.32 (£334.8) / POTB: £42.48 (£244.8), AJBell/Youinvest – POTA: £78.48 / POTB: £60.48, Charles Stanley Direct – Do not offer a monthly investment and III - Just expensive)

Thanks in advance for the feedback

bostonerimus · 26 August 2017 at 3:33AM

VLS80 has fixed income and also overweights UK equity.........why do you want more UK equity and what is the attraction of dividends at such a young age? I'd stay away from particular sector or geographical specialization, you might do well and you might not.

Alexland · 26 August 2017 at 6:31AM

Agree with above comment.

chockydavid1983 · 26 August 2017 at 8:03AM

I have VLS but wouldn't want to add more UK to it as it's already pretty high. I'd stick with just VLS initially until the portfolio is maybe 6 figures.

sofa_searcher · 26 August 2017 at 11:01AM

bostonerimus wrote: »

VLS80 has fixed income and also overweights UK equity.........why do you want more UK equity and what is the attraction of dividends at such a young age? I'd stay away from particular sector or geographical specialization, you might do well and you might not.

chockydavid1983 wrote: »

I have VLS but wouldn't want to add more UK to it as it's already pretty high. I'd stick with just VLS initially until the portfolio is maybe 6 figures.

The attraction of dividends is for diversification and for reinvestment. If it doesn't make sense at this point I'll probably hold off for now.

I don't necessarily want more UK exposure due to Brexit so I'll look into a Europe or Emerging market ETF.

Any opinions on the platforms I mentioned in my original post?

pinkllama · 26 August 2017 at 11:18AM

Fidelity charge £45 per year to hold ETF’s
If you are going to follow the excellent advice to just hold Lifestrategy 80 then Vanguard themselves are a good choice at 0.15% with no trading fees. You could just set up a monthly direct debit and forget it for the next few years. Once your investment is worth £40k+ consider moving over to a fixed fee platform such as iWeb who just charge £5 per transaction with no platform fee.

I believe the most important thing is to have low fees and keep it simple. If you only look at your portfolio once a year and don’t think about it day to day, wondering whether to change funds/ETF’s then you’re giving yourself the best possible chance of success.

sofa_searcher · 26 August 2017 at 10:17PM

pinkllama wrote: »

Fidelity charge £45 per year to hold ETF’s
If you are going to follow the excellent advice to just hold Lifestrategy 80 then Vanguard themselves are a good choice at 0.15% with no trading fees. You could just set up a monthly direct debit and forget it for the next few years. Once your investment is worth £40k+ consider moving over to a fixed fee platform such as iWeb who just charge £5 per transaction with no platform fee.

I believe the most important thing is to have low fees and keep it simple. If you only look at your portfolio once a year and don’t think about it day to day, wondering whether to change funds/ETF’s then you’re giving yourself the best possible chance of success.

Based on the advice given I'll be going with Vanguard since fees are 0.15%. I stick with Lifestrategy 80% and FTSE Emerging Markets UCITS ETF since the Lifestrategy doesn't cover emerging market

ColdIron · 26 August 2017 at 10:35PM

Do you mean apart from its Vanguard Emerging Markets tracker?

darkidoe · 27 August 2017 at 1:29AM

sofa_searcher wrote: »

Based on the advice given I'll be going with Vanguard since fees are 0.15%. I stick with Lifestrategy 80% and FTSE Emerging Markets UCITS ETF since the Lifestrategy doesn't cover emerging market

Vanguard LS 80 does cover EM:

Vanguard Emerging Markets Stock Index Fund 6.0%

I would consider Vanguard LS 100 given your age, based on a recent article I read regarding risk and accounting for human capital into your risk profile. Just something to think about.

Also consider going the ETF route with the FTSE All-World UCITS ETF (VWRL). Would be somewhat similar to the Vanguard LS 100% i suppose but has all the benefits of being an ETF being somewhat a simpler to understand.

bigadaj · 27 August 2017 at 8:22AM

darkidoe wrote: »

Vanguard LS 80 does cover EM:

Vanguard Emerging Markets Stock Index Fund 6.0%

I would consider Vanguard LS 100 given your age, based on a recent article I read regarding risk and accounting for human capital into your risk profile. Just something to think about.

Also consider going the ETF route with the FTSE All-World UCITS ETF (VWRL). Would be somewhat similar to the Vanguard LS 100% i suppose but has all the benefits of being an ETF being somewhat a simpler to understand.

Your suggestions are logical but may not be best for an individual.

For example there's an argument that even for someone fairly young a low bond content to a multi asset fund would be more optimal, based on a risk return analysis if not absolute return at least. On that basis I'd be as happy, if not more so, with the LS 80 rather than the Ls100.

I'd disagree that the etf route is simpler than the fund route, the latter is probably easier to understand and is less likely to involve derivatives, sampling and counter party risk. The fact it's vanguard reduces some of my concerns and etfs can be held more cheaply on many platforms but again costs shouldn't be the tail wagging the investment dog in all cases.

sofa_searcher · 27 August 2017 at 1:53PM

Somehow i missed that. In that case just a lifestrategy fund should suffice.

The decision now is whether to stick with 80% or 100% equity?
If i go the 100% route, is it then worth getting a fixed income fund for diversification?

Novice Investor seeking advice

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