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  • FIRST POST
    • samuelodog
    • By samuelodog 17th Apr 18, 12:42 PM
    • 7Posts
    • 0Thanks
    samuelodog
    Newbie to Index Tracker Investing
    • #1
    • 17th Apr 18, 12:42 PM
    Newbie to Index Tracker Investing 17th Apr 18 at 12:42 PM
    Dear All,

    I am looking to start investing - have very little to begin with and want to start off doing something quite safe - ish, with the possibility of slowly growing a portfolio or making a bit of money.
    I looked here but can make no sense of any of it:

    FTSE 100 tracker funds
    Cheapest fund: iShares UK Equity Index - 0.07pc charge

    Cheapest ETF: iShares FTSE 100 Ucits ETF, HSBC FTSE 100 Ucits ETF - 0.07pc charge
    Cheapest fund shop specific deal: L&G UK Index Trust - 0.06pc charge via Hargreaves Lansdown

    FTSE All Share tracker funds
    Cheapest fund: iShares UK Equity Index, Fidelity Index UK - 0.06pc charge
    Cheapest ETF: SPDR FTSE UK All Share ETF - 0.2pc charge

    I am a complete novice - looking to put out a direct debit of say... 30-40 a month onto something? Am I way off the mark? Any advice of a simple way to do this and make a wee bit would be appreciated.

    Many thanks

    Sam
Page 1
    • ewaste
    • By ewaste 17th Apr 18, 12:56 PM
    • 63 Posts
    • 40 Thanks
    ewaste
    • #2
    • 17th Apr 18, 12:56 PM
    • #2
    • 17th Apr 18, 12:56 PM
    I gather if your on this forum you have the recommended couple of months of expenses in savings accounts and/or high interest current accounts e.g. Nationwide FlexDirect 5% on 2500 for a year?

    If your starting out the forum would probably suggest a 'Multi-Asset' fund like the oft mentioned Vanguard LifeStartegy range rather than sticking to one index like the FTSE 100. However the usual question would be what are you saving for e.g might a LISA be of interest if your saving/investing for buying property.

    What is your pension provision like as this is an obvious place to save long term and in a tax efficient manner?
    • samuelodog
    • By samuelodog 17th Apr 18, 1:00 PM
    • 7 Posts
    • 0 Thanks
    samuelodog
    • #3
    • 17th Apr 18, 1:00 PM
    • #3
    • 17th Apr 18, 1:00 PM
    I don't have anything in Nationwide FlexDirect 5%.
    I don't understand your second paragraph!
    I'm only saving to try to make my money work more for me.
    I have a pension with work.
    I'm a total noob.
    Basically... I just got a pay bump, I save c. 200 a month - just firing into a bank account form my pay. I want to fire some away and potentially do something with it - at least have a chance of making it work more - investing in something - stocks/shares. I dont understand them at all, just want to try something different and potentially make a bit more money.
    thanks
    • dunstonh
    • By dunstonh 17th Apr 18, 1:17 PM
    • 94,514 Posts
    • 62,460 Thanks
    dunstonh
    • #4
    • 17th Apr 18, 1:17 PM
    • #4
    • 17th Apr 18, 1:17 PM
    I am a complete novice - looking to put out a direct debit of say... 30-40 a month onto something?
    Most have a minimum of 50pm.

    Single sector investing is bad quality investing. Especially if you are considering one of the worst stockmarket indexes of the last 25 years. You should use a multi-asset fund instead.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • samuelodog
    • By samuelodog 17th Apr 18, 1:26 PM
    • 7 Posts
    • 0 Thanks
    samuelodog
    • #5
    • 17th Apr 18, 1:26 PM
    • #5
    • 17th Apr 18, 1:26 PM
    So... what is a multi-asset fund and how do I access it? What kind of return does it yield?
    Many thanks, sorry for my ignorance.
    • ewaste
    • By ewaste 17th Apr 18, 1:27 PM
    • 63 Posts
    • 40 Thanks
    ewaste
    • #6
    • 17th Apr 18, 1:27 PM
    • #6
    • 17th Apr 18, 1:27 PM
    The normal advice for most people is to first establish and emergency fund equal to a couple of months expenditure, this is held in cash. Ideally this would be held in as high an interest account as you can find rather than sitting in your current account which your pay goes into both becuase it will earn more interest and also becuase you'll be less inclined to spend it unnecessarily.

    My second paragraph was in relation to your mention of index tracker funds, the funds you had mentioned track a single index e.g. the FTSE 100 which is an index of the 100 largest UK listed companies. This to many would be a concentrated risk as it's betting on the performance of the 100 largest companies whereas other funds would diversify across multiple indexes e.g the Vanguard LifeStrategy range track indexes of European and American companies and can also include bonds.

    When I ask what are you saving for I should have asked, Do you own your own home or already have a mortgage because if they answer is no then a Lifetime ISA may be an efficient way to save up for a mortgage deposit. Otherwise a traditional Stocks and Shares ISA via platform such as Hargreaves Lansdown would be the default route, although platforms do have minimums as DunstonH mentions.

    The risk is that if you don't know what and how long you are saving or investing for then needing to access any money tied up in investments could lead to you being forced to sell at a loss.
    • samuelodog
    • By samuelodog 17th Apr 18, 1:48 PM
    • 7 Posts
    • 0 Thanks
    samuelodog
    • #7
    • 17th Apr 18, 1:48 PM
    • #7
    • 17th Apr 18, 1:48 PM
    I own a home, paying off a mortgage.
    I'm working on para 1.
    The Vanguard LifeStrategy range track index sounds good - how do I do that? Or is the traditional Stocks and Shares ISA via platform such as Hargreaves Lansdown better for me?
    • ewaste
    • By ewaste 17th Apr 18, 2:14 PM
    • 63 Posts
    • 40 Thanks
    ewaste
    • #8
    • 17th Apr 18, 2:14 PM
    • #8
    • 17th Apr 18, 2:14 PM
    That's good to hear you've got a mortgage and are building a cash emergency fund.

    You can invest in either the Vanguard LifeStrategy funds or similar held in a S&S ISA, which is a tax wrapper, via a platform. Hargreaves Lansdown is just one such platform and it offers a variety of tax wrappers including a Stocks and Shares ISA, so you could open a S&S ISA with them and then purchase units in whatever funds you wanted.

    Which fund you chose would largely be based on your risk tolerance and as a new investor it's likely to be low. Therefore starting with something like LifeStrategy 40 or 60, which contain 40% and 60% shares respectively, might be a good starting point for regular investment via direct debit.

    It might also be worth doing some reading on Monevator for example:- http://monevator.com/category/investing/passive-investing-investing/
    Last edited by ewaste; 17-04-2018 at 2:47 PM. Reason: Spelling mistakes and typos :|
    • samuelodog
    • By samuelodog 17th Apr 18, 2:20 PM
    • 7 Posts
    • 0 Thanks
    samuelodog
    • #9
    • 17th Apr 18, 2:20 PM
    • #9
    • 17th Apr 18, 2:20 PM
    many thanks, I'l look into it.
    • samuelodog
    • By samuelodog 17th Apr 18, 2:23 PM
    • 7 Posts
    • 0 Thanks
    samuelodog
    whats the difference between the 40% and 60%?

    If I fire 30 a month into this - what will it mean say... 5 yrs down the line?

    thanks again
    • dunstonh
    • By dunstonh 17th Apr 18, 2:26 PM
    • 94,514 Posts
    • 62,460 Thanks
    dunstonh
    whats the difference between the 40% and 60%?
    as the fund name suggests it is 40% equity and 60% equity.

    If I fire 30 a month into this - what will it mean say... 5 yrs down the line?
    Not a lot. its only half an economic cycle and the bulk of the money would not have been in there 3 years let alone 5. You could be in a loss position or gain but somewhere similar to what you paid in is likely.

    Regular contributions take around 15 years to show their worth.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Crashy Time
    • By Crashy Time 17th Apr 18, 2:27 PM
    • 6,519 Posts
    • 2,439 Thanks
    Crashy Time
    whats the difference between the 40% and 60%?

    If I fire 30 a month into this - what will it mean say... 5 yrs down the line?

    thanks again
    Originally posted by samuelodog

    Nobody can tell you with any certainty I`m afraid. If you are only investing 30 a month you would be just as well buying premium bonds or lottery tickets IMO.
    • Crashy Time
    • By Crashy Time 17th Apr 18, 2:33 PM
    • 6,519 Posts
    • 2,439 Thanks
    Crashy Time
    Have a read at this, relatively simple concepts, but the guy is an ex hedge fund manager and knows what he is talking about IMO. It advises a cautious widely diversified approach, but there is a lot of food for thought about how you may want to develop your own approach as you gain knowledge. The bits about how having all or most of your "savings" in London property could lead to disaster and how volatility can affect returns are just two interesting observations among many.


    https://www.amazon.co.uk/Investing-Demystified-Speculation-Sleepless-Financial/dp/0273781340
    • Lungboy
    • By Lungboy 17th Apr 18, 2:43 PM
    • 1,466 Posts
    • 1,452 Thanks
    Lungboy
    Have a read at this, relatively simple concepts, but the guy is an ex hedge fund manager and knows what he is talking about IMO. It advises a cautious widely diversified approach, but there is a lot of food for thought about how you may want to develop your own approach as you gain knowledge. The bits about how having all or most of your "savings" in London property could lead to disaster and how volatility can affect returns are just two interesting observations among many.


    https://www.amazon.co.uk/Investing-Demystified-Speculation-Sleepless-Financial/dp/0273781340
    Originally posted by Crashy Time
    Or watch the distilled version on youtube.
    • samuelodog
    • By samuelodog 17th Apr 18, 3:50 PM
    • 7 Posts
    • 0 Thanks
    samuelodog
    many thanks all.
    • bostonerimus
    • By bostonerimus 18th Apr 18, 1:47 AM
    • 2,263 Posts
    • 1,566 Thanks
    bostonerimus
    You've received some good advice ie invest in a multi-asset fund inside an ISA. But if you have a pension you should also be contributing as much as you can to that.....and probably using a similar multi-asset approach with an equity bias if you are thinking long term. The advantages of a pension over an ISA are the employer contribution and that it reduces your current taxable income....but the ISA is far more flexible and there's no tax on withdrawals. So they are sort of complimentary.
    Misanthrope in search of similar for mutual loathing
    • Tom99
    • By Tom99 18th Apr 18, 4:41 AM
    • 2,626 Posts
    • 1,792 Thanks
    Tom99
    If you invest in Vanguard Lifestrategy 60% or 80% then 40%/20% of your investment is going to be in bonds rather than equities.
    What is likely to happen to bond values if interest rates rise as they are expected to do? Many think bond values will fall.
    If you are also of that view you may want to decide on a equity/cash split rather than equity/bond/cash split.
    • jimjames
    • By jimjames 18th Apr 18, 1:20 PM
    • 12,741 Posts
    • 11,429 Thanks
    jimjames
    Nobody can tell you with any certainty I`m afraid. If you are only investing 30 a month you would be just as well buying premium bonds or lottery tickets IMO.
    Originally posted by Crashy Time
    I disagree. It's good to get started even with small amounts which you can then increase later on
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Zola.
    • By Zola. 18th Apr 18, 2:25 PM
    • 1,299 Posts
    • 535 Thanks
    Zola.
    Getting started is the most important thing!

    However, I agree that you should really try to put in more each month if possible, to make any sort of difference. But you can build up to that.

    Agree with Dunstonh in that it takes a long time to show the worth. E.g I have been investing for around 3 years now, and the last time I checked my fund value, it was only up 100 compared to what I have been putting in (almost 10,000).

    Its all about the compound interest, and time. The value of my fund doesn't really matter now, as I don't want to touch it for a very long time.

    Albert Einstein famously said:

    "Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. Compound interest is the most powerful force in the universe."

    Would recommend this website, to see what you could expect / play around with some numbers.

    https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

    Do you have a number for a goal? This will help you determine what you need to be putting in to have a chance of achieving it.
    Last edited by Zola.; 18-04-2018 at 2:33 PM.
    • A_T
    • By A_T 18th Apr 18, 2:54 PM
    • 521 Posts
    • 354 Thanks
    A_T
    I have been investing for around 3 years now, and the last time I checked my fund value, it was only up 100 compared to what I have been putting in (almost 10,000).
    Originally posted by Zola.
    What are you invested in almost everything has grown at least 10% in the last 3 years?
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