Which shares ISA?

[KatyH]

Hello,

I want to open a shares ISA and have done a bit of research and asked about. The consensus seems to be that I should do it via a discount broker to limit charges but I have absolutely no idea what funds to choose to invest in! I have tried my best to make sense of all the charts and stats but it all means very little to me.

Can anyone make any recommendations or at least guide me as to how to distinguish between them? I would probably be most comfortable with a medium risk investment.

Thanks!

[Longterm]

Hello

A great website to check out is //www.childmillionaire.com, which is all about investing for your children. The premise is to buy shares in high quality companies that pay a dividend and that increase the dividend year over year. These are so-called 'dividend aristocrats'. Or you could by a FTSE 100 or FTSE 250 exchange traded fund that tracks the index and pays dividends. Look at iShares for one. As for individual shares, I'm not a financial planner so this isn't advice but you'd be hard pressed to go wrong with Scottish and Southern Energy, Vodafone or Glaxosmithkline. Once you buy be sure to reinvest the dividends and then ignore the market.

Good luck

[mumblechum1]

Actually we have a ton of GlaxoSmithkline shares and they've done nothing for several years.

We usually buy FTSE 100 ISAs which have generally been pretty good.

[Longterm]

mumblechum1

I bought Glaxo about 18 months ago and have seen a capital gain of about 12% plus the regular dividend which have provided a pretty good return. Still, given the regulatory and patent expiry issue with pharma, these days I'd go for Scottish and Southern (SSE) - yield is about 5% and they raise the dividend every year and have forward plans to continue to do so. Plus they are a potential takeover target and as an energy generator they produce something that people have to have - I know because they supply my gas so I pay them and they pay me back in dividends.

Your option of a FTSE 100 - I assume an ETF tracker - is a good option and cuts compnay specific risk. You just have to be stoical and not panic and sell when the market crashes [2008-09] and do the opposite and load up. Easier said than done for even the most seasoned investor.

[mumblechum1]

True, the divis are good for GSK - I think we were spoiled because about 10 years ago we made around £10k per annum gain on the share price, which is now much less.

[Longterm]

Did you reinvest those dividends in more GSK shares over the decade? If so then your cost base would be quite low, your share position quite large and your dividend payments would represent a very high yield. You are making me very envious.

[mumblechum1]

DH has worked for GSK for 25 yrs so yes we do get shedloads of shares, but sadly many thousands of options have stayed underwater as the price went down for many years.

The divis do get reinvested in new purchases.

[KatyH]

Oh, some replies! Thank you for that. I think I've decided to go for a tracker but maybe also put something in a balanced fund. Was wondering about absolute return funds too. Have you any experience of them?

Also, what are the relative pros and cons between a FTSE 100 or FTSE 250 tracker? Is the 100 tracker less risky?

[HonestlyBanking]

Try ETFs (Exchange traded funds) is you want to buy and index. Absolute return funds are a con. FTSE 100 is just a measure of market capitalisation (though many of the companies are global) plus heavy concentration of risk in a few sectors. That being said FTSE 250 likely to be more volatile. You could try Vantage for trackers also. The key is get the asset allocation right (APCIMS have examples on their website) diversify and do it as cheaply as possible. Good luck.