Stocks & Shares ISA for beginner

[lovenaturelovelife]

I have £250pm that I would like to invest in S&S, i have no idea at this stage- how does thses ISAs work? Opened HL ISA online and was expecting a ready made investment option. I was hoping to pay a fee of £3/£5 and they will invest my money. Now i realise it's very complex to understand investments. How to understand all this?

Mine is in a managed fund. My husband is in a job where he has to declare any investments either of us hold so trading myself would generate a lot of admin for both of us (although I would like to do it). Notifying the details of the managed fund once a year is the easiest option.

Trading 212 are fantastic for newbies. No fees and lots options to choose from. You'll need to do some research on ETF's and long and short range risk!
They have a great cash isa and s&s isa
Most popular ETF:
S&P 500
All World
Nasdaq and many many more.

Invesco, vanguard, ishares all have exchange traded funds 'ETF' you can invest in on Trading 212.

Vanguard are now charging £4.pm to run and isa pension etc. under 32k which is very expensive option. So would not go with them.

For those asking this year my investments are generally 9% up and some are 17%.

I have spoken to HL for readymade isa they charge .45% platform fee and 4.85 %fund manager costs from capital. as i will be paying £250 pm . forgot to ask whether .45% on the standing order amount each month or the total amount invested each month. i will be investing £3k a year in managed fund. Can anyone shed some more light on this please

The 0.45% will also be on your fund value.
Are you sure on the 4.85%? That's far too high. A passively managed fund should be around 0.25%

@TheOneWithUnagi yes they confirmed it 4.85% which will not be in the transactions as fund manager will take out from the capital. This has made me thinking it will be lot in charges for such small investment.
I did look at Vanguard site, their website is very user friendly and easy to understand.

4.85% is annual charge

I have a tracker fund and am charged 0.15% (invest engine). That was a good deal.

so if it is £3k investment by the end of next year , without any increment it's £145.50 . Am i right?

I followed this, really simple to understand. He's also got useful videos about pensions too.

Yes correct, that's huge. Vanguard now has minimum fees of £4 per month so £48 for the same period. There are better options to both of these for you.

I have spoken to HL for readymade isa they charge .45% platform fee and 4.85 %fund manager costs from capital.

This isn't right (even hedge funds don't charge 5% fees...).

I've just looked up their ready made portfolio (for the active HL Balanced Managed option) and it's 0.85% plus the 0.45% platform fee. Honestly it's a good option for the price as you're getting a portfolio managed plus active funds.

Or the AJ Bell equivalent is 0.6-0.8% fund manager fees plus a 0.25% platform fee. Both of these are more highly regarded than the likes of Halifax or Barclays.

@summer555 Now I'm wondering have i heard it right whether they said 4.85% or .85%.

Flyhigher · Yesterday 06:49
How much have people made using these accounts? 10% or more

10.8% average over the last 4 years with Fidelity, I do move my funds around depending on what’s going on in the world.

Given the amount you're investing and your lack of experience, it is probably best to invest in 'passive' funds.

The American stock markets have a history of the best returns.

I would suggest (I am not a qualified financial adviser!) that you invest in an 'accumulation tracker'. I use this ETF (Exchange Traded Fund) by Legal & General. The fund holds shares in 473 separate North American companies based upon the value of the underlying company.

Stock code = LGUG

https://g.co/kgs/QpC6Guq

https://fundcentres.lgim.com/en/uk/institutional/fund-centre/ETF/US-Equity/

An accumulation fund automatically reinvests any dividends into the fund to increase the long term returns. There are also 'income' versions that pay a dividend. I think these are less suitable for your needs because you'd need to reinvest the dividends yourself, which will incur additional charges.

_

iWeb are a good ISA provider. There is no account opening fee. Trades are £5 and there are no ongoing annual charges/fees.

https://www.iweb-sharedealing.co.uk/our-accounts/self-select-stocks-and-shares-isa.html

I’ve been happy with MoneyFarm. I originally accessed it via a link on the Money Saving Expert website. I find the app really easy to use to track the investment.

😵‍💫😵‍💫😵‍💫😵‍💫
Those fees!!!!
My IFA who does a huge amunt of work and guidance for us doesnt charge half that...literally!

As an fyi
You can open one isa per tax year so if you want you could open one now and one in april - then in the 25 tax year you could pay into both (£125 per account) if you wantedto see how you get on,x

Please consider just opening a vanguard account. Aj bell is also good.

Passive not managed funds are what you need.

Personally I'd do vanguard and buy into "life strategy 80" fund.
It is a very very easy "beginner" s&s isas fund with good track record.
I did that then from there i used the platform which has very easy to understand info to pick other funds.

My ifa was quite impressed with it and when we looked at all the investment my dh and i had vanguard had the best risk / reward ratio.
Ie high % growth with low fees and spread risk

For comparison, it would cost you nothing to open an iWeb Stocks and Shares ISA.

If you're investing £250 p/m, then you'd pay 12x £5 transaction fees (£60) when investing your monthly contributions.

LGUG has an annual fee of 0.05%

So, you'd be paying 2% to initially invest the money and then only 0.05% as an ongoing charge no matter how long you held the ETF.

Agreeing to 4.85% annual charge will massively impact your long term returns and is something that I would never agree to.

The American market has a long term average return of around 10%. With the L&G fund you'd be getting 9.95% return. That would result in 158% profit after 10 years.
If you're paying 4.85% in fees for the same underlying investments, you'd only get 5.15% return. That would result in only 65% profit after 10 years.

*Please consider just opening a vanguard account. Aj bell is also good.

Passive not managed funds are what you need.*

I'm going to disagree. In certain sectors, a number of active funds outperform passive funds by a large margin. For example, Rockwood has achieved a 5 year return of 50% odd versus a fall of 6% for the FTSE Small Cap ex-ITs trust index. Or 100% over 5 years v 20% for the index. Have a look at Filtronic and Funding Circle's share price increase this year to illustrate the point (they're up by more than even NVIDIA).

The exception is the US where the performance of the so called Magnificent Seven tech stocks is very hard for an active fund to outperform. But they're very highly valued and I wouldn't put everything in a U.S. tracker at the moment. I was interviewing a fund manager last week and they put it as borrowing future returns. Historically the current extreme concentration has unwound and also makes US and global trackers not very well diversified at the moment.

Vanguard only really offer passive funds (though they offer a small number of actives). If you stuck with HL, or switched to AJ Bell, you could pick a couple of Vanguard passives if you chose plus some actives. Or, as I said earlier, go for one of their ready made portfolios which are their pick of the active funds.

You have to tell us which active funds are going to outperform trackers in the future, not the past.

The OP has a 10-15 year investment horizon, so a North American tracker would be a simple, low fee, option.

The current progress by, for example Google, in the AI, biochemistry and quantum computing fields suggests that they're going to be major beneficiaries/players in the next phase of the industrial/tech revolution.

I think it would be a bit foolish not to have exposure.

Active funds are good for accessing markets overlooked by trackers, such as India, Vietnam, etc, and also unlisted companies such as Space X.

The OP's monthly contributions of £250 make it difficult to recommend diversifying into those funds.

You have to tell us which active funds are going to outperform trackers in the future, not the past.

There's a bit of a double standard here as the advocates of US trackers have been recommending them based on past performance.

I'm not allowed to recommend individual funds for compliance reasons but I'd (a) use Trustnet to find out which fund managers are consistently top quartile over the last three and five years and (b) look at sectors where active management often outperforms. I'd put the U.K., emerging markets and Asia Pacific, biotech and commodities in this category.

It's not all about the upside either. One of my clients is a biotech fund manager which is a cyclical sector from an equities point of view. After the biotech sector fell out of favour post the pandemic, they tilted into larger caps and invest in a basket of companies targeting the same therapeutic area rather than trying to back one winner. They also have the specialist scientific knowledge to understand the innovation where a tracker will include the highly speculative, loss making biotech companies.

But the OP wanted advice as a beginner hence why I recommended the HL and AJ Bell ready made portfolios. They have a team of specialist analysts to pick the funds for you. But putting it ALL in a U.S. tracker at this point is not good advice for diversification reasons alone. Look at some of the big one day drops in the Mag 7 this year and you can see that investors are nervy about validations and when the current run will end.

4.85%?? That cannot be right and if it is don’t go anywhere near it.

My stocks and shares ISAs are with AJ Bell which is good value on fees. I just chose Vanguard trackers as I don’t know enough to make active investment decisions.

I have one with Invest Engine. They asked me a series of questions about risk etc and I put £2k in plus I drip in £50pm. I went for about 70% risk. Have had it 2 years and more than doubled my money despite losses early on. I have an app and keep track but other than that I do nothing - they manage it.

I found it all so complicated that I ended up with a ready made one with Monzo. Just add funds each month. I tried Santander investment hub but it was far too complicated for me to follow and I don't have the headspace at the moment. Cash account as well as an ISA was set up no idea why.

"But putting it ALL in a U.S. tracker at this point is not good advice for diversification reasons alone."

The LGUG tracker contains shares in 473 separate companies across all sectors of the American economy - tech, aerospace, commodities, retail, manufacturing, telecoms, etc. I think it's disingenuous to claim that it lacks diversity. It is certainly tech heavy, but that's because tech companies have become the most valuable.

Valuations are currently high, but monthly contributions over 15 years will iron out any bumps in the road.

Once the OP has accumulated some capital, and gained more experience, they can think about reallocating capital or contributions to more esoteric funds.

"I'd (a) use Trustnet to find out which fund managers are consistently top quartile over the last three and five years and (b) look at sectors where active management often outperforms."

If you'd done that 3 years ago, you'd have bought Baillie Gifford funds such as Scottish Mortgage, Pacific Horizon, Shin Nippon and Edinburgh Worldwide - and you'd have lost a huge amount of money vs massive growth for the North American markets.