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    • adonis10
    • By adonis10 4th Apr 18, 3:46 PM
    • 1,575Posts
    • 204Thanks
    Lifetime ISA - 1 year on..
    • #1
    • 4th Apr 18, 3:46 PM
    Lifetime ISA - 1 year on.. 4th Apr 18 at 3:46 PM
    So, I am sat here considering a last minute foray into the LISA market but cannot get the doubts out of my head.. Well, the doubts are those that come from the fairly negative press and low take up that has surrounded the product.

    My 72k of savings and investments are split as follows:
    - 20k workplace pension (total contributions of 29%/month)
    - 10k s&s ISA invested in VG LS 80 and 100
    - 5k premium bonds
    - 37k in higher interest current accounts and regular savers

    I have a low mortgage (141k on a 360k property) and so do not feel that I would need the 4k before retirement, however I am put off by all the negativity surrounding the product.

    With only a day left to benefit from 1k top up for 2017/18, advice needed......
Page 2
    • bowlhead99
    • By bowlhead99 10th Apr 18, 3:46 PM
    • 8,234 Posts
    • 15,017 Thanks
    Just done a little more research which suggests that for VG LS, AJBp Bell are actually more expensive when you factor in the fund managers charge, as below:

    [ Etc.]

    So it is in fact 0.47% annual charge and 2.52 transaction charges, frustrating as I found this out after opening and funding the AJB account. Schoolboy error.
    Originally posted by adonis10
    I think you are confusing the terminology here. What you had in your previous post #17 was fine:

    AJ Bell - 0.25% management charge but 1.50 per deal.
    HL - 0.45% management charge but no deal charges.

    With the 4k I imagine I will drip feed it into funds (more than likely VG LS 80) so the dealing charges will impact me, however if I opt for 4 deals of 1k it will still work out marginally cheaper with AJB.

    AJB - 6 dealing charges + 10 charge = 16
    HL - 18 charge
    Originally posted by adonis10
    HL are going to be charging you *their fees* of 0.45%
    Or AJB are going to be charging you *their fees* of 0.25% +1.50 for each of your transactions.

    With 1000 invested for a full year, the fee from the AJB platform would be 4.00 or (2.50 +1.50)

    With 1000 invested for a full year, the fee from HL would be 4.50

    Obviously in the first year if you are drip feeding at AJ Bell, some of your 1000s are not going to be invested for a full year - and so the initial 1.50 per transaction you carry out, will feel relatively more expensive by comparison to the percentage-based component of the fee. Whereas in year two and beyond, you have relatively more money 'at work' for the year and so the percentage based component is relatively higher.

    So, AJB is not a bad place to be and the charges _from the platforms_ are just as you had laid them out on post #17. Those are the only platform-specific fees you will pay.

    Your extra calculations are nothing to do with those fees from the platform, they are costs of the fund manager (eg Vanguard) running their fund.

    Those general fund ongoing charges are 0.22% no matter whether you choose to use AJB or HL or someone else. And their estimated annualised transaction costs of 0.102% (which are a bit of a guess really, but published by vanguard in line with regulations) will also be the same regardless of whether you use AJB or HL to buy into the Vanguard fund.

    Those 0.102% transaction fees relate to the costs that the Vanguard fund itself incurs when it's buying shares of HSBC or Tesco or Facebook etc and employs a broker to do that. They are not saying that every time you do a purchase you personally incur a 0.102% fee just because you did it through AJB. They are saying that for every 1000 that you keep invested in the fund for a whole year, they'll probably spend about a pound on the costs of buying and selling the underlying investments of the fund. That includes the costs of when they have to buy and sell assets to accommodate joiners and leavers such as yourself, and to accommodate rebalancing the portfolio between asset classes, and to accommodate companies being promoted into the various indexes or relegated out.

    So, you may have had a misconception about what you were reading before you did your purchase on the AJ bell site, but nothing has changed since your post 17 which would make AJB more expensive than it was going to be.

    In some rare cases, platforms with high percentage fees may negotiate lower rates with certain fund managers that reduce ongoing charges from the managers and can make the platform a bit more competitive, just on those funds where they have a sweet deal. But vanguard is not one of the managers that plays that game, so, the fund-level costs wouldn't be better at HL than AJB. Only the platform fees, and the service quality you get for those fees, are the differentiator here.
    Last edited by bowlhead99; 10-04-2018 at 3:50 PM.
    • adonis10
    • By adonis10 20th Apr 18, 9:47 AM
    • 1,575 Posts
    • 204 Thanks
    I think you are confusing the terminology here. What you had in your previous post #17 was fine: ... .
    Originally posted by bowlhead99
    Makes sense, thanks for clarifying.

    Next step is to decide what to invest in and when. I am probably going to opt for a split between VG LS 80 and 100 but really struggling to decide when to invest. I would rather drip feed but this would obviously result in more transaction costs, however this could be offset at times by gains made through paying a lower unit price. I'd hate to invest 3k now only for the fund to lose 10% over the next year, whereas that could be minimised to, say, 5-6% with drip feeding.

    Any advice? I fully expect an answer of 'you are over thinking it and cannot time the market'!
    • Zorillo
    • By Zorillo 20th Apr 18, 10:07 AM
    • 355 Posts
    • 214 Thanks
    You're overthinking it and cannot time the market.
    • adonis10
    • By adonis10 20th Apr 18, 10:13 AM
    • 1,575 Posts
    • 204 Thanks
    You're overthinking it and cannot time the market.
    Originally posted by Zorillo
    • bowlhead99
    • By bowlhead99 20th Apr 18, 10:43 AM
    • 8,234 Posts
    • 15,017 Thanks
    . I'd hate to invest 3k now only for the fund to lose 10% over the next year, whereas that could be minimised to, say, 5-6% with drip feeding.

    Any advice? I fully expect an answer of 'you are over thinking it and cannot time the market'!
    Originally posted by adonis10
    I agree with the answer you suggested, kindly supplied by Zorillo

    Let's say for example you invest your 3000 today at 1 a unit and it falls 10% in a year and so at the end of the year you will have 3000 units at 90p for 2700 of value.

    You would hate that because you know that if you had drip fed in 500 chunks every other month, you might have been buying at a range of prices which might include 1 the first purchase but later 99p and 96p and 95p and 92p etc, so over the year your 3000 would have bought more than 3000 units so when the price falls to 90p you have more than 2700 left. You'd have lost less money because you get a blended result somewhere between taking the risks and rewards of the investment and the risks and rewards of staying in cash.

    But, what if you decide to not buy all today and do a drip feed model, and the range of prices over the course of the year is 100p, 102p, 105p 101p, 99p, 92p. Then you'll have purchased fewer than 3000 units. So after a year or so when they price falls to 90p, you have less than 2700 of value for your 3000 cost, because you bought fewer than 3000 units.

    I'd put it to you that you can't time the market so you don't reliably know whether the price is going to go 100 99 96 95 92 90, or 100 102 105 101 99 92, so you don't know whether the drip feed will be worse or better than just doing 3000 units at the first price you're offered. But presumably you are buying because you hope/expect it will go up rather than down. If you are cautious really think it will go down, best to buy something with lower risk.

    Buying something high risk but buying it really slowly so you only just finish getting your 3k into it (at potentially higher prices) just before it crashes... is going to be equally frustrating, or even more so, than just buying it now and bracing for impact

    FWIW, I do indulge in some timing and portfolio shifts myself from time to time but couldn't recommend it to anyone else. If it's my money I only have myself to blame and am fine with that. Everyone else should practice what I preach rather than what I actually do for myself. Most of my money gets invested when I have it available which results in some sort of natural 'drip' effect. If you invested 3k this year and 3k in another year or so and another 3k after that and so on... you'll be investing at a range of prices in different parts of the economic cycle; no need to do monthly or quarterly really.
    Last edited by bowlhead99; 20-04-2018 at 10:46 AM.
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