Using My S&s Isa, Cheapest Ftse Tracker?

[JoeDavola]

Hoping that the mods are kind enough to keep this in Off Topic as there's more people that visit here than the investing sub-forum.

I recently read series of posts on an American guy's blog that got me really interested in the idea of investing in a tracker; if you have the time I think this makes interesting reading:

http://jlcollinsnh.com/stock-series/

….he basically says that long term investing shouldn't be any more complicated than putting your money into low cost tracker funds, since over the long term the market always does well. So you should be concentrating on getting exposure to as wide a range of quality stocks as possible with the minimum management charge; since over 10, 20, 30 years that management charge compounds to quite a lot of money.

The articles, while worth reading, are aimed at Americans, though the basic theory applies for us UK folk too.

I think my investment 'strategy', if you can call it that, will be to put the full £11k into the lowest cost FTSE tracker I can find (probably Vanguard), and then in June when the ISA allowance is up to £15k, put the full £15k into another tracker fund (either UK or something tracking a different geographical area), with the aim of moving £15K each year into ISA's.

He reccomends investing with Vanguard, but to invest directly with them in the UK you have to put in at least £100K to take advantage of their ultra-low charges.

Can anyone here reccomend the cheapest way to take one of these tracker funds out quickly? (want to max out my ISA before the end of the financial year)

[SHERWICK]

Hoping that the mods are kind enough to keep this in Off Topic as there's more people that visit here than the investing sub-forum.

I recently read series of posts on an American guy's blog that got me really interested in the idea of investing in a tracker; if you have the time I think this makes interesting reading:

http://jlcollinsnh.com/stock-series/

….he basically says that long term investing shouldn't be any more complicated than putting your money into low cost tracker funds, since over the long term the market always does well. So you should be concentrating on getting exposure to as wide a range of quality stocks as possible with the minimum management charge; since over 10, 20, 30 years that management charge compounds to quite a lot of money.

The articles, while worth reading, are aimed at Americans, though the basic theory applies for us UK folk too.

I think my investment 'strategy', if you can call it that, will be to put the full £11k into the lowest cost FTSE tracker I can find (probably Vanguard), and then in June when the ISA allowance is up to £15k, put the full £15k into another tracker fund (either UK or something tracking a different geographical area), with the aim of moving £15K each year into ISA's.

He reccomends investing with Vanguard, but to invest directly with them in the UK you have to put in at least £100K to take advantage of their ultra-low charges.

Can anyone here reccomend the cheapest way to take one of these tracker funds out quickly? (want to max out my ISA before the end of the financial year)

Why pay any management fee at all? DIY your own ISA with someone like selftrade.co.uk investing £1k each in 11 high div blue chip FTSE 100 stocks with divs reinvested?

[The Spaniard]

Why pay any management fee at all? DIY your own ISA with someone like selftrade.co.uk investing £1k each in 11 high div blue chip FTSE 100 stocks with divs reinvested?

Alternatively, to minimise dealing costs, you could make just one purchase per year of an ETF within a self-select ISA, for example ISF is effectively a FTSE-100 tracker. Note also that there is no 0.5% stamp duty for such an ETF purchase.

http://uk.ishares.com/en/rc/products/ISF/performance

This is NOT investment advice, just information.

[dances with sheeple]

Hoping that the mods are kind enough to keep this in Off Topic as there's more people that visit here than the investing sub-forum.

I recently read series of posts on an American guy's blog that got me really interested in the idea of investing in a tracker; if you have the time I think this makes interesting reading:

http://jlcollinsnh.com/stock-series/

….he basically says that long term investing shouldn't be any more complicated than putting your money into low cost tracker funds, since over the long term the market always does well. So you should be concentrating on getting exposure to as wide a range of quality stocks as possible with the minimum management charge; since over 10, 20, 30 years that management charge compounds to quite a lot of money.

The articles, while worth reading, are aimed at Americans, though the basic theory applies for us UK folk too.

I think my investment 'strategy', if you can call it that, will be to put the full £11k into the lowest cost FTSE tracker I can find (probably Vanguard), and then in June when the ISA allowance is up to £15k, put the full £15k into another tracker fund (either UK or something tracking a different geographical area), with the aim of moving £15K each year into ISA's.

He reccomends investing with Vanguard, but to invest directly with them in the UK you have to put in at least £100K to take advantage of their ultra-low charges.

Can anyone here reccomend the cheapest way to take one of these tracker funds out quickly? (want to max out my ISA before the end of the financial year)

I prefer to drip the money in monthly, hoping to buy some dips in the market, although putting it all in at once yearly over the long term is I suppose dripping it in yearly? (http://en.wikipedia...._cost_averaging)

I posted a similar question recently about tracker fees, it seems a bit more complicated than it may at first appear, because we need to consider fees and "tracker accuracy", which many on here can explain until the cows come home, but it does require some thought and investigation.

Yes, Vanguard always pop up as the cheapest, and I think they pioneered trackers in the 70`s, but as you say it is 100k minimum to invest directly, although you can invest lower amounts through various "platforms", incurring higher charges of course. My FTSE all share tracker is with L+G, and it was very straight forward to open, and I thought charges at about 0.5% were very cheap until I posted on here!

My main interest now is getting the best tracking accuracy plus the lowest fees, because over decades fees are eating away somewhat at our money? One option is build up 100k, then switch it to Vanguard, and investigate tracking other markets as well, or to get to the stage of investing directly in well researched companies, through a discount broker or directly, and making very few trades/withdrawals.

As there have been changes regarding ISA`s in the budget that leaves everything open to re-evaluation again, but so far L+G have been cheap and no problem.

[The Spaniard]

I prefer to drip the money in monthly, hoping to buy some dips in the market, although putting it all in at once yearly over the long term is I suppose dripping it in yearly?

Selftrade charges £12.50 per online trade (any size) and £10.50 inactivity fee per quarter, with no other charges no matter how big your ISA becomes.

Dealing once per year costs £12.50 + 3x £10.50 = £44

Dealing once per quarter (cost averaging) costs 4x £12.50 = £50

No stamp duty for ETF purchases.

I'm not advising or promoting, just showing how cheap a minimalist strategy can be, even for (say) a £1M ISA pot..

[JoeDavola]

Selftrade charges £12.50 per online trade (any size) and £10.50 inactivity fee per quarter, with no other charges no matter how big your ISA becomes.

Dealing once per year costs £12.50 + 3x £10.50 = £44

Dealing once per quarter (cost averaging) costs 4x £12.50 = £50

No stamp duty for ETF purchases.

I'm not advising or promoting, just showing how cheap a minimalist strategy can be, even for (say) a £1M ISA pot..

Maybe I'm being really think here; but how does selftrade (or whoever) 'know' that what I'm using is in my ISA allowance for a given year and hence should not be taxed?

Who is responsible for tracking how much of my ISA allowance has been used up for each financial year?

[JoeDavola]

My FTSE all share tracker is with L+G, and it was very straight forward to open, and I thought charges at about 0.5% were very cheap until I posted on here!

How exactly did you open it? Did you use a particular trading platform? (if that's the right word)

[The Spaniard]

Maybe I'm being really think here; but how does selftrade (or whoever) 'know' that what I'm using is in my ISA allowance for a given year and hence should not be taxed?

Who is responsible for tracking how much of my ISA allowance has been used up for each financial year?

Each ISA provider such as Selftrade will monitor and limit customer ISA subscriptions to their own platforms.

Whether HMRC (or anyone) checks for multiple ISA subscriptions across different providers aggregating to above the annual limit(s) I don't know, though I would assume so.

[dances with sheeple]

How exactly did you open it? Did you use a particular trading platform? (if that's the right word)

No, direct with them, just go to their website and e-mail or phone them to start I suppose http://www.legalandgeneral.com/, can`t remember the detail of opening mine, but they need things like changes to the amount of your direct debit in writing and signed before they will make the changes, which is straightforward enough really. From what I gather the new ISA rules will make it easier to drip feed in larger amounts of money. L+G are one of the cheaper tracker ISA providers I could find, but no doubt this thread will pick up more info on that as it goes along.

More discussion on trackers, fees etc. here http://www.housepricecrash.co.uk/forum/index.php?showtopic=197437&st=345&gopid=1102488890entry1102488890

[dances with sheeple]

Selftrade charges £12.50 per online trade (any size) and £10.50 inactivity fee per quarter, with no other charges no matter how big your ISA becomes.

Dealing once per year costs £12.50 + 3x £10.50 = £44

Dealing once per quarter (cost averaging) costs 4x £12.50 = £50

No stamp duty for ETF purchases.

I'm not advising or promoting, just showing how cheap a minimalist strategy can be, even for (say) a £1M ISA pot..

So no management charges that are a % of the amount invested? I am assuming that they just allow you hold the ISA with them, they don`t run the tracker fund or whatever?

[The Spaniard]

So no management charges that are a % of the amount invested?

I am assuming that they just allow you hold the ISA with them, they don`t run the tracker fund or whatever?

Correct, there is no 'percentage of the size of the ISA' rip-off charge. Quite right too.

AFAIK they don't have their own funds, they just facilitate access to others - basically a stockbroker.

[dances with sheeple]

Correct, there is no 'percentage of the size of the ISA' rip-off charge. Quite right too.

AFAIK they don't have their own funds, they just facilitate access to others - basically a stockbroker.

Who runs the tracker though? That is where the charges will appear? From discussions on here before about selecting and de-selecting the shares yourself, basically mimicking a tracker fund, not being in a managed (figure of speech) tracker sounds too time intensive for my tastes. The only way to really avoid charges would be to do the research yourself on individual stocks, and take Buffets advice - All the eggs in one (or a few) basket(s), and watch the basket, plus trade very infrequently?

[The Spaniard]

Who runs the tracker though? That is where the charges will appear? From discussions on here before about selecting and de-selecting the shares yourself, basically mimicking a tracker fund, not being in a managed (figure of speech) tracker sounds too time intensive for my tastes. The only way to really avoid charges would be to do the research yourself on individual stocks, and take Buffets advice - All the eggs in one (or a few) basket(s), and watch the basket, plus trade very infrequently?

The ISF FTSE-100 ETF is run by BlackRock.

http://uk.ishares.com/en/rc/products/ISF;jsessionid=65D1818652AD7B0F39F1AA47740F8884.isharesnet-pea01

Its TER is 0.4% p.a.

http://www.investopedia.com/terms/t/ter.asp

How low can you go?

[gf3]

The ISF FTSE-100 ETF is run by BlackRock.

Its TER is 0.4% p.a.

http://www.investopedia.com/terms/t/ter.a

If only TER was the end of the story however they don't include transaction fees

[The Spaniard]

If only TER was the end of the story however they don't include transaction fees

Please read my earlier posts detailing the Selftrade transaction fees.

[JoeDavola]

OK, so to summarize:

- I can use Selftrade to buy my £11,200 worth (the ISA limit); this will cost me £12.50 to buy, and £10.50 per quarter to hold (£42 a year), which is a charge of just under 0.4% of my initial invested amount

- there will be an additional charge of 0.4% every year on a simple FTSE 100 or 250 tracker (I'm considering the 250 tracker: http://uk.ishares.com/en/rc/products/MIDD)

So my costs in the first year would be a total of approx 0.8% of my starting investment....correct?

[SHERWICK]

OK, so to summarize:

- I can use Selftrade to buy my £11,200 worth (the ISA limit); this will cost me £12.50 to buy, and £10.50 per quarter to hold (£42 a year), which is a charge of just under 0.4% of my initial invested amount

- there will be an additional charge of 0.4% every year on a simple FTSE 100 or 250 tracker (I'm considering the 250 tracker: http://uk.ishares.com/en/rc/products/MIDD)

So my costs in the first year would be a total of approx 0.8% of my starting investment....correct?

I think so. The funds that you invest in have their own annual management fee, which applies whoever you choose for your ISA. As I said above though, there is no annual management fee at all if you buy your own FTSE high div blue chip shares.

[SHERWICK]

The ISF FTSE-100 ETF is run by BlackRock.

http://uk.ishares.com/en/rc/products/ISF;jsessionid=65D1818652AD7B0F39F1AA47740F8884.isharesnet-pea01

Its TER is 0.4% p.a.

http://www.investopedia.com/terms/t/ter.asp

How low can you go?

I think the Fidelity FTSE tracker has a ter of 0.3%..

[SHERWICK]

I think the Fidelity FTSE tracker has a ter of 0.3%..

Sorry, apparently it's 0.35% https://www.fidelity.co.uk/investor/research-funds/fund-supermarket/factsheet/fees.page?idtype=ISIN&fundid=GB00BJS8SF95&UserChannel=Direct

[The Spaniard]

OK, so to summarize:

- I can use Selftrade to buy my £11,200 worth (the ISA limit); this will cost me £12.50 to buy, and £10.50 per quarter to hold (£42 a year), which is a charge of just under 0.4% of my initial invested amount

- there will be an additional charge of 0.4% every year on a simple FTSE 100 or 250 tracker (I'm considering the 250 tracker: http://uk.ishares.com/en/rc/products/MIDD)

So my costs in the first year would be a total of approx 0.8% of my starting investment....correct?

A hypothetical optimised scenario:

Between 1 and 5 April 2014 you open an S&S ISA with Selftrade, putting in £11,520, the 2013-14 limit.

Do nothing until 1 July 2014, when you add a further £15,000.

Because the initial inactivity did not span a complete quarter (1 April to 30 June inclusive) there is no inactivity charge yet.

Early July you spend £26,520 on ISF. Dealing cost £12.50 but no inactivity charge for period 1 July to 30 September.

No further activity before 31 March 2015, hence two inactivity charges are triggered. Cost 2x £10.50 = £21.

Total costs so far £33.50, which optimally can be paid externally to the ISA itself.

From 6 April 2015, rinse and repeat:

Add £15,000 to the accumulated dividends and buy £15,000+ more ISF.

Note that the 0.4% TER reflects BlackRock's internal ISF charges. It is NOT explicitly deducted from your Selftrade account. It is manifested in ISF slightly underperforming the actual FTSE-100 over time, in both capital appreciation and dividends.

Note also the spread between the bid and offer prices for ISF, a slight loss should you sell at any time.

The only money that is directly deducted is the Selftrade dealing and inactivity charges, and optimally these are paid externally and so do not erode the ISA itself.

For further information please contact Selftrade or a broker of your choice.

This is NOT investment advice, nor do I have any connection with either Selftrade or BlackRock, other than being a satisfied customer..

[JoeDavola]

I think so. The funds that you invest in have their own annual management fee, which applies whoever you choose for your ISA. As I said above though, there is no annual management fee at all if you buy your own FTSE high div blue chip shares.

The issue would be for someone like me who knows naff all about shares knowing which ones to buy

Also the 'diversification' idea that your spreading the risk by owning a tiny part of say 100 or 250 companies.

If I knew what I was doing, I'd do what you've suggested!