Can anyone help with these questions?

[CardigansOfTheGalaxy]

I’ve been doing a bit of reading and am finding investing very confusing, so I’m hoping someone can give me some useful steers. I’m early 50s and self employed.

What I have:
A small-ish personal pension (by a lot of people’s standards), worth about £40K.
About £20k in premium bonds, but that’s where I save for my tax bill, so it’s not really not really a lump sum to just ignore.
About £8k in a cash ISA with Moneybox earning 5.19%.
About £3k in a S&S ISA with Wealthify.

The Wealthify account says a growth of £131.82, and an all time return of -5.32%. I don’t know what these numbers mean, I don’t understand how I’ve gained £131.82 but the growth is negative. And google is surprisingly unhelpful!

There is about 13 years left on the mortgage, no car loans, no other debt.

My questions:
Should I find a better S&S ISA, and how do I do that? I looked at the Vanguard website and didn’t understand it at all.
Is having both a cash and a S&S ISA the right thing to do?
Should I try to pay off the mortgage earlier rather than trying to save?

Thanks in advance for your thoughts!

There are 2 separate aspects to a S&S ISA.

One is the platform you are with. The fees charged by the platform will affect your overall return, but the platform does not have any effect on the performance of the ISA.

The other is what S&S , funds trusts etc the ISA is invested in. This is the main factor in performance. So look at that before thinking about moving platform.

Is having both a cash and a S&S ISA the right thing to do?

Maybe. Depends on why you have them.

Should I try to pay off the mortgage earlier rather than trying to save?

Again, maybe. Can you get a higher return from savings/investments than your mortgage rate?

Thanks for replying, I do love a Binturong.

I have both types of ISA for no other reason than I read somewhere that it was a good idea. Maybe I thought a S&S one had the potential to possibly make more money. (I’m reluctant to use the word return as clearly I don’t know what it means! )

The other is what S&S , funds trusts etc the ISA is invested in. This is the main factor in performance. So look at that before thinking about moving platform. Sorry to sound like an idiot, but where do I find this information? I understand that a S&S ISA that is being managed by a person rather than a robot has higher charges, but is that all I’m looking at? So maybe I’d pay higher fees with, for example, Vanguard, but then I could potentially get more back?

Our mortgage rate is 4.3% I think, so yes, the savings rate on the cash ISA is higher, but obviously we’re talking very different sums of money.

What fund is your S&S ISA in ? There are well over 2000 in the market to choose from.

I understand that a S&S ISA that is being managed by a person rather than a robot has higher charges, but is that all I’m looking at?

The ISA isn't managed by anyone at all. The funds within it may be (generally in increasing order of cost) passive, robot managed or actively managed by a person.

There are 3 fees to look at. The platform holding fee - this is a yearly chatge and can be a flat rate or percentage of the amount invested. And it may be tiered or capped if you have larger amounts invested.

The platform fees for buying and selling different types of investment. If you just plan to buy one thing and hang onto it this fee doesn't matter too much.

Then there is the fund fee. An annual charge and almost always a fixed percentage.

The first 2 will be somewhere in the general fees information on the platform website, and you'll find comparison tables for the major platforms on sites like Monevator.

The fund fee will be buried in the explanatory documents for each fund.

Cash savings - whether in an ISA or not - are 'safer' in that they don't fluctuate in value. But they usually fall behind inflation, so tou lose money over the long term.

Stocks and shares investments are 'risky' in that they are volatile. They can be up 10% this week and down 30% the next. So they aren't good for any money you might need to spend it the short term or at short notice - because you may need to take it out just when the market has fallen. But in the longer term they tend (provided you have a good spread - shares in a single company may not) to grow much more, and well ahead of inflation.

I'm not familiar with Wealthify, but if you go into it and look at the ISA it should have a list of what investments you hold inside the ISA wrapper. This may be their own bundles of funds - possibly called something like 'target retirement 80' or 'wealth builder 60-40', or it could be individual funds called things like 'Fidelity global all cap class I accumulation'.

Edit to the above: "The ISA isn't managed by anyone at all."

This may not be correct for Wealthify - having had a quick look they look more like a financial advisor, who pick the funds for you, than a DIY investment platform like Vanguard.

Same basic principles apply to the types of fee, but the platform fee is probably higher than a DIY one.

Their platform fee is 0.6%. They seem.not.to be transparent about the buying and selling fees.

For comparison AJ Bell is 0.25% platform.fee, Fidelity is between 0.2 and 0.35% depending what you have invested. Some of the newer ones like Trading 121 or Invest Engine currently have no platform fee at all.

Vanguard has a limited range of investments, so won't suit everyone, but it is a good example of clarity about the various fees: https://www.vanguardinvestor.co.uk/what-we-offer/fees-explained

Thanks for all of this. It’s rather complicated to the newbie, and I appreciate you providing detail and explanations. All I’m trying to do (like most people) is to make the most of what money I have.

It sounds to me like a good idea - if I’m in for 5 years plus - to look at a S&S ISA that would hopefully do better than the Wealthify one.

I had a look in the Wealthify app, and the name they give the plan is ‘Ethical Confident Plan’. They list the typical investments from this plan, which is the screenshot here.

That's a Multi manager, multi-asset fund with 53% in Bonds & 47% in Equities, so around a low-medium risk......say 4 out of 10. Some decent fund in there like the Royal london Sustainable Leaders, Rathbone Etical Corporate Bond & the Edentree fund.

I assume you are an ethical investor 😃.

Thanks for the insight Biggaybear. I’m sure I could do better, but I try to make the ethical choice when buying stuff if I’m presented with one.

Thanks for that info on charges, Bingturong. I think given my lack of experience I’d be best off choosing a managed fund and it does look from that link that Vanguard would be cheaper than Wealthify. What I don’t know of course is whether Vanguard are better at investing. Are there performance lists of companies? I’m aware that with the small amounts I’m talking about there may not be a huge financial difference in the outcome.

That's a lot of bonds! (They are less volatile, but tend to have much poorer growth.) And that sort of hodgepodge of funds looks unnecessary. There's a global one, so the individual regional ones will create overlap.

Ethical funds to tend to cost a bit more - personally I'm willing to pay the premium, but that's a personal decision.

You don't necessarily need an actively managed service. Regular buying and selling adds costs. A lot of the DIY platforms have some 'standard packages' that give you a range of funds - and bonds if you want - to match your risk level, but on a set-and-forget basis so the ongoing costs are lower.

What I don’t know of course is whether Vanguard are better at investing.

Studies show that active fund managers don't beat the market over the long term (and when tested on picking individual stocks, cats did better than stockbrokers). A passive index tracker is the market - it won't do better, but it won't do worse, which an active manager might.

Why wouldn't you look at AJBell who have been voted Best by Which magazine quite a few years in a row

Depends if its a full tracker or not. A full tracker replicating the whole sector will do what the sector does (minus fees). A partial tracker might do better or it might do worse.

Go onto Trustnet & pick a sector. Then look at the funds in that sector. 9 times out of 10 the top fund is not a tracker. In fact, in most sectors the top 10 funds are not trackers. In my 30 year experience an active fund outperforms a passive fund.

How long have you had the S&S ISA? I've had £6k in a vanguard one for around 2 years and have currently gained around £700. I find it very easy to use even though I'm a bit clueless about investing too.

If you want a manged fund, AJ Bell has a 'responsible' one - annual fund fee 0.65%, platform fee 0.25%. Vanguard has 3 'SustainableLife' ones with different bond:equity proportions - annual fund fee 0.48%, platform fee 0.15%

I’ve had it for a couple of years, but I didn’t start with a lump sum, I’ve been drip feeding it every month. When you say you find Vanguard easy to use, are you doing a DIY thing, one of their Life Strategy Funds, or something else?

Thanks for this. That list is a sample to give an idea of what they invest in, I think the ‘Confident’ level that I chose is maybe 50/50 bonds and stocks (I know I should know this).

I’ll have a look at those standard packages, I definitely don’t have the skill or knowledge to go totally DIY, I don’t think.