Investing (very) small amounts - is it pointless?

[whereiscaroline]

One of my regular monthly commitments has come to an end and I'd like to use the money to start investing, I think in an index fund via a stocks and shares ISA.

But I'll only have a small amount each month to invest (£100 per month or less) and I can't work out if this is pointless/going to be eaten up by fees. Also struggling to find any unbiased information online about whether it's worthwhile and how to get started. Could anyone in the know point me in the direction of some good information please?

I don't know the answer but am very interested. I have about that amount to invest too and am currently putting it in Premium Bonds.

@InfiniteSheldon hopefully someone in the know will come along soon! I did consider premium bonds but after reading this article I thought shares might be a better option.

www.moneysavingexpert.com/savings/premium-bonds

I'm putting £54/month into a pension. I think the markets are too frothy to increase it.

@lljkk I'm in my company's pension scheme and putting 8% in there, but looking for something else that is still accessible if absolutely needs be but also with long term chances of growth.

The arrogant snobs at MSE would say go for a SIPP with likes of Hargreaves, you get the lowest charges that way. Need to spend hours doing a lot of research every month and swallow some risk, of course.

Tracker fund - just follows an index and minimal charges

So in the below example, it's £9.95 for dealing. Does that mean that if I sent up a £100 pcm direct debit, they'd take £9.95 (10%!!) each time to purchase units in whatever funds I'd picked? Or £9.95 for each fund?! I may be being slow but it seems so confusing

Oh it's not let me upload the screenshot. Copy and paste....

Annual platform charge: 0.25% for under £250k, 0.1% for £250k-£1m, 0.05% for £1m-£2m, nothing above £2m
Fund manager charge example: 0.5% (passive balanced fund)
Fund dealing: £1.50 (£9.95 a trade, reducing to £4.95 if there were 10 or more trades in the previous month for ETFs)
Min ISA deposit: £500, or £25/mth if regularly saving
Transfer out fee: £25 per fund
No. of funds: 4,700
Account closure fee: £0

I don't know much about it but my DP puts about £100 a month into a Vanguard stocks and shares fund. I don't know enough about it but on his research it was the best return for those sorts of amounts with minimal fees (73p last month) with reasonably low risk. He's had it less than a year and made £72 on the £2k that is in there - started with £1k and another £100 in a month - which is a good return. He's hoping to keep it for 10 years or more though to ensure a return as there is always a risk of the stock market completely crashing (unlikely but could happen) and his money would drop dramatically.

You should try vanguard, nutmeg or moneyfarm.
Very low fees so it wouldn't eat up all of your profits.

OP yes it can be worthwhile but as you rightly say, the costs must be kept very low. These always include fund/etf ongoing charges, trade fees, platform fees plus Forex if buying into non UK underlying assets (even those denominated in GBP and that includes USD dividend payouts in an isa which can only hold GBP), potential transfer in/outs etc.

For best platform for you, monevator and Lang cats sites have best information.

I'm looking at Nutmeg in a very similar situation. I haven't worked it out yet either!

Yes it is important to understand admin fees. Thry csn est up any money you make during a given period of time you are investing for.

You need to understand the fees...

Vanguard Direct - will accept a monthly of £100. The platform fee is 0.15%. Each fund you invest in will then have a fee (OCF). For an index fund, that OCF should be quite low.
FTSE U.K. All Share Index Unit Trust currently has a OCF of 0.08%.

Cavendish Online - has a platform fee of 0.20%, an ongoing charge of 0.05% and then you have the fund charge itself (they do the Vanguard FTSE U.K. All Share Index Unit Trust currently at OCF of 0.08%).

So you can see quickly there that going direct via Vanguard will cost you less then going via Cavendish, in the case of that particular index fund.

So to answer your question, yes it is worth putting in £100 a month but choose the platform wisely. I choose a platform which I now realise is quite costly for what I am investing in. If I was starting from scratch again now, I would choose Vanguard and use that to learn about investing and then go to a different platform later if I felt the need to access different funds.

Monevator
JL Collins Stock Series: jlcollinsnh.com/stock-series/
Meaningful Money (podcast and YouTube) - a great UK based podcast about investing.

whereiscaroline where is your example from? I wouldn't be going with anything that had dealing fees. I suspect you may be looking at ETFs, so look at other things instead to keep fees low.

With HL there is a platform fee of 0.45%. Then as long as you are buying funds within the ISA not ETFs or individual shares or bonds, then you do not have dealing fees.
Looking at the Vanguard FTSE All Share index, HL has it at 0.08% OCF, so same as the other platforms previously mentioned.
HL has exit fees, something to keep in mind.

The platforms are getting better at showing the estimated costs of holding a particular fund. HL shows the estimated transaction cost. So have a look at the fund factsheets and other information available online, try to get a feel for what costs are typically involved.

Personally I am just learning about all this stuff myself but I am not worrying too much about the fees. I am focusing more on being consistent about paying money in on a regular basis and making sure that I stay out of debt (no credit card, no car loan, as few payments going out of my current account as possible).

@nannynick that's really helpful, thank you. My example was from Money Saving Expert's page as it's the only place I could find which does a sort of "dummies guide" to understanding all this... though I still don't really understand it!

What's an ETF please?

What is an ETF? Exchange Traded Fund.

This is what I think the difference is:
A mutual fund trades once per day.
An ETF trades many times in a day, possibly every second.

I personally don't have any ETFs so don't know a lot about them.

Interactive Investor Now have a regular investor ISA thats £1/trade. £25/ month minimum investment.

I used to read about ETFs online somewhere.. .MSE? Somewhere with lots of arrogant financial snobs. The info I understood from them was go to a Branch of Barclays to discuss how to invest in one.

Local Barclays bank: No clue, never heard of them, can't get any info.
Phone customer service Barclays; No clue, never heard of them.

I sometimes wonder what I was supposed to do to find out more.

@lljkk I have to ask, as you've really made me laugh. What's an "arrogant financial snob" and what's the relevance to Money Saving Expert?!

So expert that they are useless at helping folk who aren't experts.

Eg, certain triathlon forums.
Someone asks "I have a supersprint event soon, how should I taper down my training?"
Replies:
"A superprint? That's only 45 minutes, why would you taper down for that?" "That's one third of my shortest training time, nobody can taper down for that" "That's just an easy training event."
The OP might interject about here they were hoping to do the event in 70 minutes & it's a huge challenge for them.

It's like that on MSE. Someone asks: "I don't have any time to do a lot of research but I have £25k to invest. Should I talk to the bank's financial advisor?"
Replies:
"Banks never give good advice, only idiots get advice from them." "It's a fool who doesn't do their own research." "You just need to educate yourself, self-investment is super easy I only spend about 20 hours a week managing my investments" "I would put £25 k into (long complicated incomplete jargon-laden description of financial products that aren't easily available or understandable)."

(3rd one, StackExchange!)
"I have a few questions about how to run Xsoftware. It will be installed later this week by someone else, my company's IT policy is I don't have administrator privileges."
Replies:
"What kind of screwed up company do you work for?" "I would never work for anyone who didn't give me admin privileges." "You need to train yourself up in much better IT skills and go work for a decent employer who gives you administrator privileges." "The only reason you're asking this question is because you're some kind of troll; real people who use and like this software would never work without understanding all the backend aspects of how to set paths and edit the registry that the software requires upon installation (and not while in use)."

Expert heads up their own behinds.

For Hargreaves landsdown the minimum monthly investment is £25 so £100 seems a reasonable amount. The fees are less for a monthly regular savings plan (£1.5 for stocks and nothing for funds). The £9.95 is for investments that you deal outside of regular savings.

Caroline- I am wondering if a high street bank's sticks and shares ISA would be more suitable for small amounts on a regular basis. I seem to remember that when I was looking at this, it was simplest and low fees, whereas all the esoteric knowledge required to do self-management of funds, as alluded to by lljkk, really put me off.

I don't know what's on offer nowadays though, as it was about eight years ago that I was looking.

Lljkk- I feel your pain. There's really no need to be like this, is there? I'm in an 'experts' forum (private) and it's the complete opposite- people can't help each other enough, and it's such a lovely, supportive board. Lots of areas of MN also are super helpful, with many knowledge posters falling over themselves to help.

It's not surprising people remain ignorant when they're met by attitudes like those when they try to learn more!

"sticks and shares" snort! I'm sure you can guess what that was...