Portfolio and platform review

[Karacticus]

Good morning.

I am a first time poster looking for some general opinion on my portfolio but also I am considering whether my current trading platform is optimal?

I have owned a number of index funds for around the last seven or eight years I think, maybe more. My strategy was initially small monthly additions, with a view to a long term position. I stopped paying in a while back due to increased outgoings, but would like to restart monthly purchases. I am hoping to build a pot as a bonus to my pension, which I can take in about nine years time. I am fortunate that it is a decent pension so I am not reliant on my returns but would like to use some or all of it to eventually help my two children with housing or whatever in ten to fifteen years time.

I am happy with low cost index funds which have served me well so far but having had these for many years, is it reasonable to stick or should I consider any changes? Appreciate this is not financial advice!

Details:

Baillie Gifford INV BG Positive Change B ACC - 20%
Fidelity Invst FSD Fidelity Index UK P ACC - 35%
Fidelity Invst FSD Fidelity Index US P ACC - 25%
JPMorgan Fund ICVC JPM EMG MKTS C Net ACC - 10%
Vanguard Lifestrat Vanguard Lifest 100% EQ ACC - 10%

Value approx £24k (tax cost £19k)

I am using Charles Stanley Direct and have no issues with them and a monthly cost of about £6.40.

My monthly investments would probably be around £250. So, in theory, fifty quid a month into each fund.

I am not an expert so am just looking for a flavour of does this look a reasonably sensible and balanced position? Any funds that stand out? Or ones to consider to swap out for the next ten years or so? Not interested in high risk but would just like to continue with some reaonable growth in returns.

I am 43 years old.

Thanks

Karacticus

[monabri]

Can the same funds be bought in iWeb (no monthly charges)?

How much does each of the £50 purchases cost using your current platform? (trading cost might be a high % of each £50 per investment)

The allocation to the UK market at 35% would be too high unless you are expecting the UK to prosper in the next 10 years ( you will perhaps be one of a limited number of folk who would take this view imho). A World Tracker would hold <5% UK.

I wonder what others think about the % allocated to EM? Is 10% too high?

It might be easier to simply buy a World Tracker putting the full £250 pm into it.

[Urbandreamer]

Details:

Baillie Gifford INV BG Positive Change B ACC - 20%
Fidelity Invst FSD Fidelity Index UK P ACC - 35%
Fidelity Invst FSD Fidelity Index US P ACC - 25%
JPMorgan Fund ICVC JPM EMG MKTS C Net ACC - 10%
Vanguard Lifestrat Vanguard Lifest 100% EQ ACC - 10%

Value approx £24k (tax cost £19k)

I am using Charles Stanley Direct and have no issues with them and a monthly cost of about £6.40.

My monthly investments would probably be around £250. So, in theory, fifty quid a month into each fund.

I am not an expert so am just looking for a flavour of does this look a reasonably sensible and balanced position? Any funds that stand out? Or ones to consider to swap out for the next ten years or so? Not interested in high risk but would just like to continue with some reaonable growth in returns.

I am 43 years old.

Thanks

Karacticus

The thing that immediately strikes me is that you have a UK focused fund that also invests world wide in Lifestragegy. You then have UK, US and emerging market funds. Why? Surely the Lifestrategy fund is intended to do most of that for you.

Ok, the other funds change the balance, but if a different balance was your intent, why Lifestrategy?

Your platform fees are fairly cheap, though you don't mention costs to invest. Possibly you don't pay, investing in funds.

I'd recommend investigating Investment trusts. A lot of them are cheap at the moment (sold at a discount to their value). I'd also suggest that you think about risk. Look at the five year charts of your funds and consider how they fell by about 1/3ed in 2020.
https://en.wikipedia.org/wiki/2020_stock_market_crash
You are likely to see such a crash at least a couple of times in the future. Obviously not for the same reasons. Given that fact, you might consider a small holding in something a bit more "risky".

I bought Pershing Square Holdings Ltd back in Jan. It was cheap at the time and has a good track record.
https://www.theaic.co.uk/companydata/pe ... erformance
It's less cheap now.
That wasn't a tip, but an example and link to research.

[Karacticus]

Can the same funds be bought in iWeb (no monthly charges)?

How much does each of the £50 purchases cost using your current platform? (trading cost might be a high % of each £50 per investment)

The allocation to the UK market at 35% would be too high unless you are expecting the UK to prosper in the next 10 years ( you will perhaps be one of a limited number of folk who would take this view imho). A World Tracker would hold <5% UK.

I wonder what others think about the % allocated to EM? Is 10% too high?

It might be easier to simply buy a World Tracker putting the full £250 pm into it.

Thanks for your reply. Trading costs on my account are zero so it is just the monthly charges. I agree with the UK market exposure, so will consider this and other comments. I will look at potentially something like the Fidelity World Index to potentially consolidate some of my overlapping funds.

I have looked at iWeb and they seem to charge a £5 dealing charge which would cost me more.

[Karacticus]

[The thing that immediately strikes me is that you have a UK focused fund that also invests world wide in Lifestragegy. You then have UK, US and emerging market funds. Why? Surely the Lifestrategy fund is intended to do most of that for you.

Ok, the other funds change the balance, but if a different balance was your intent, why Lifestrategy?

Your platform fees are fairly cheap, though you don't mention costs to invest. Possibly you don't pay, investing in funds.]

Thanks. To be honest, I have tried to have a balanced portfolio across some different areas to balance risk but I get what you're saying and this was why I posted. I am thinking of consolidating the various funds into perhaps a single Index World Fund like Fidelity - the fees seem pretty low and no dealing charge - and then retaining my Lifestrategy equities fund. Would 50:50 be reasonable?

Or would 50:40 and then 10 into something with higher risk make sense. The Pershing Holdings fund is available on my platform but it does seem to say anything about fees. Do you mean this would be a higher risk option, or that it could consolidate my other funds which overlap somewhat?

Thanks for both your thoughts.

[Urbandreamer]

The Pershing Holdings fund is available on my platform but it does seem to say anything about fees. Do you mean this would be a higher risk option, or that it could consolidate my other funds which overlap somewhat?

Thanks for both your thoughts.

It's an actively managed trust that invests in the US. So charges are not cheap in comparison to many index trackers. Well in excess of 1% and possibly significantly higher if it performs well. Though they recently reduced their performance fees. You do not directly pay such fees, they are reflected in the NAV (net asset value).

I provided it as a example of a more active/risk on approach using an Investment Trust. It's returns are based upon the managers making good choices.
I could have picked half a dozen other examples

FWIW Lifestrategy is also an active fund, but with low fees. This is because they compose their fund from geographical index funds with little thought or research into trying to outperform any given index. There is a UK bias to the fund compared to a world tracker.

I hunted out this video for you comparing Lifestrategy, a world tracker and Fundsmith.
https://www.youtube.com/watch?v=YylOKtx3fYU
They are all funds however, so a decision to avoid Investment Trusts is implicit in the comparison.

[tjh290633]

Like a previous poster, my inclination would be for investment trusts, rather than funds. I have an aversion to trackers, when you consider that the FTSE100 is little higher now than it was at the start of 2000.

Regarding your investment method, if you were being charged a trading fee it would be most uneconomical. Rather than make 5 small investments each month, I would make one and cycle through the holdings in sequence. Doing it in alternate months at £500 a go would be even better.

Rather than looking for the lowest charges, I would prefer to look for the best total return after fees. Ideally choose a share which outstrips the index. Also remember that a share with a higher yield can often do better than those with lower yields. That's because more is reinvested from the dividends.

When the time comes to draw income, that is when higher yield shares come into their own. Ideally dividends should grow faster than inflation.

TJH

[monabri]

Are your costs based on 0.35% x circa £24k ?

https://www.charles-stanley.co.uk/about ... tform-fees

(That's the £6 to £7 CURRENT Fee per month).

However, as the fund grows (hopefully) and you continue to add £250 /month then you might end up with a fund worth £60k+ or more at the end of the next 10 years. Then you would be paying £17.50 per month. Over a longer period (15 years say) the costs increase further.

(£17.50 per month (and increasing with C Stanley as the fund builds) versus £5 / m flat rate = an extra £150 per year) ..even at £150 per year for years 11 to 15 that's extra money for you!

With iWeb you could pay £5 per month to buy something like a HSBC World Tracker (£250 / month) and the fees to hold on the platform would be zero.


I believe the funds you hold could be transferred to iWeb as they are not "exotic."

edit: you certainly would not want to use CS for buying Gilts! I wonder if you would be paying £11.50 per trade for Investment Trusts?

[Karacticus]

Thanks, all. This has been really helpful so far!

I will give iWeb a better look then - yep, totally see how that would be cheaper if I cycle my purchases. I will also give the trusts a serious look as well - I have watched that YouTube clip, which was a great help.

My remaining concern - and I don't understand it well enough - is that I have my current investments in a stocks and shares ISA. What would happen if I moved all of my investments into, say, iWeb? The ISA allowance is £20k so how does that work? Or do I need to move £20k now and the remainder after the 1st April? I've never really understood whether you need different wrappers as you go past the various £20k increments, or is it simply you have one ISA and can only put £20k a year into before tax becomes an issue? So a £60k pot built over many years would be okay?

Sorry, I feel like I should know this but I have always wondered.

[Alaric]

The ISA allowance is £20k so how does that work? .

That's new money invested each tax year. The accumulated funds from previous years can be moved regardless of the amount. What you do is open an ISA with a new provider. That doesn't have to have any new money in it. You then ask the "new" provider to contact the "old" provider(s) and transfer across all or some of the existing assets.

There are stories that some successful investors have built up ISA funds of over a million.

[Urbandreamer]

Thanks, all. This has been really helpful so far!

I will give iWeb a better look then - yep, totally see how that would be cheaper if I cycle my purchases. I will also give the trusts a serious look as well - I have watched that YouTube clip, which was a great help.

My remaining concern - and I don't understand it well enough - is that I have my current investments in a stocks and shares ISA. What would happen if I moved all of my investments into, say, iWeb? The ISA allowance is £20k so how does that work? Or do I need to move £20k now and the remainder after the 1st April? I've never really understood whether you need different wrappers as you go past the various £20k increments, or is it simply you have one ISA and can only put £20k a year into before tax becomes an issue? So a £60k pot built over many years would be okay?

Sorry, I feel like I should know this but I have always wondered.

The "gotcha" with respect to moving ISA's is to attempt to do it yourself. What you do is speak to your new provider and they do it all for you.

I believe that you can move partial amounts but you can also move the entire amount. The ISA allowance is upon how much you can contribute per year, not previous contributions.
You have always been able to use more than one provider, I use three. However you could only contribute to one in any year in the past. That is changing and you will be able to contribute to multiple providers in the future. Allowing for example you to use one that is cheap for shares, investment trusts and etf's and another that will maintain a dollar based currency account for dealing with US shares. Or one that follows one investment policy and another following a different one. For example one for high yield and another for growth.

That's possibly a bit more complicated than you want or need, but it's nice to know that the option exists.

[Karacticus]

Thanks, all. This has been really helpful so far!

I will give iWeb a better look then - yep, totally see how that would be cheaper if I cycle my purchases. I will also give the trusts a serious look as well - I have watched that YouTube clip, which was a great help.

My remaining concern - and I don't understand it well enough - is that I have my current investments in a stocks and shares ISA. What would happen if I moved all of my investments into, say, iWeb? The ISA allowance is £20k so how does that work? Or do I need to move £20k now and the remainder after the 1st April? I've never really understood whether you need different wrappers as you go past the various £20k increments, or is it simply you have one ISA and can only put £20k a year into before tax becomes an issue? So a £60k pot built over many years would be okay?

Sorry, I feel like I should know this but I have always wondered.

The "gotcha" with respect to moving ISA's is to attempt to do it yourself. What you do is speak to your new provider and they do it all for you.

I believe that you can move partial amounts but you can also move the entire amount. The ISA allowance is upon how much you can contribute per year, not previous contributions.
You have always been able to use more than one provider, I use three. However you could only contribute to one in any year in the past. That is changing and you will be able to contribute to multiple providers in the future. Allowing for example you to use one that is cheap for shares, investment trusts and etf's and another that will maintain a dollar based currency account for dealing with US shares. Or one that follows one investment policy and another following a different one. For example one for high yield and another for growth.

That's possibly a bit more complicated than you want or need, but it's nice to know that the option exists.

Thank you (and Alaric). Would not have even considered this! Lots to think about!

[doug2500]

CSD can work out very cheaply.

Don't buy funds, buy ITs and stocks and trade once a month for 11.95 and there's no further charges. Iweb would be 5 so still cheaper. But you can get a free SIPP from CSD as well in this scenario.

[monabri]

If you do decide to open an account with iWeb you can do it for free if you sign up before 30 June 2024.

Once you have your iWeb account you log on and initiate a transfer request by filling in the iWeb transfer request form. I note that iWeb recognises Charles Stanley Direct so they can do the transfer more readily - that's a Brucie Bonus!

https://share-dealing.iwebsharedealing. ... 06461633d1





I wouldn't bank on the 5 week window!!

[Arborbridge]

I would agree with TJH - trade not every month in small amounts but every few months to keep the percentage of broker fees down. Also look at brokers that have cheap dealing days such as Halifax.

I'd also consider an "all world" ETF which has low fees and drip into that - eg Vanguard funds such as VWRP or VEVE( Developed econonies only).

I haven't lost the drip feeding habit - I've been doing it since 1986!

Arb.

[JohnW]

I have an aversion to trackers, when you consider that the FTSE100 is little higher now than it was at the start of 2000.
TJH

Timely comment. The FTSE100 index is a price index, not a total return index. It tells you about the price of its components over the last 20 years, but nothing about the dividends which along with price movement accounts for the total return. https://www.ifa.com/articles/how_high_i ... 0_or_96000

[Karacticus]

I've learned a lot this weekend, which is great! Appreciate there is not 'one way' and there are different views out there. The passive relatively safe index funds have done me well so far.

My conclusions are:

- To open a new brokerage account, probably iWeb as suggested and move my ISA across.
- Prior to that, to consolidate my holdings into an all-world fund/trust as my my main position. Drip into that monthly/bi-monthly. Something like HSBC all-world index or JP Morgan Global Growth and Income.

Is there any benefit to having a world index fund and a world trust? Or is the point to consider trusts instead of funds?

What would these options look like?

1/ 90% JP Morgan Global Growth Trust
10% Emerging markets

2/ 50% JP Morgan Global Growth Trust
50% HSBC All-world Index Fund

3/ 100% JP Morgan Global Growth Trust (because it is all-world and includes EM) and essentially covers the same as HSBC?

Or have I missed the point and should include exposure elsewhere? I should add I like the idea of simplicity so fewer holdings appeals to me with the ease of knowing where the monthly/bi-monthly investments are going.

If I set this up in CSD, I assume they can be pulled across to Iweb or would I need to turn them to cash first?

Thanks again and sorry for the multiple stupid questions!

[Karacticus]

I would agree with TJH - trade not every month in small amounts but every few months to keep the percentage of broker fees down. Also look at brokers that have cheap dealing days such as Halifax.

I'd also consider an "all world" ETF which has low fees and drip into that - eg Vanguard funds such as VWRP or VEVE( Developed econonies only).

I haven't lost the drip feeding habit - I've been doing it since 1986!

Arb.

Thanks, Arb. Why developed economies only? Is it not worth having a small exposure to emerging markets?

[Arborbridge]

I have an aversion to trackers, when you consider that the FTSE100 is little higher now than it was at the start of 2000.
TJH

Timely comment. The FTSE100 index is a price index, not a total return index. It tells you about the price of its components over the last 20 years, but nothing about the dividends which along with price movement accounts for the total return. https://www.ifa.com/articles/how_high_i ... 0_or_96000

But an investment in something like VUKE does pay a dividend.

[Urbandreamer]

Is there any benefit to having a world index fund and a world trust? Or is the point to consider trusts instead of funds?

They are often very different things. There is no concept of a passive Investment trust so a world trust just means that investments are not limited to a geographical area. The fees "tend" to be higher, but often the returns are as well. The structure lends itself to illiquid investments.

Take another favorite of mine Scottish Mortgage. It's not limited to investing in Scotland but invests worldwide. It's fees are actually very cheap at 0.34% but low fees are not the point.

They began by raising money for rubber plantations at the dawn of the motor car era (who would have guessed the amount of tyres required). Hence the name of the trust.
Now they have a range of high tech investments from drug companies to companies in the EV industry. A very significant number of their holdings are private companies and hard to value. Of recent times that has depressed the share price. The value and performance of such private companies can never be part of an index tracker.

It could be described as not for widows or orphans.

As I said, a very different beast from a world index tracker.

Here is a good video on that trust.
https://www.youtube.com/watch?v=Zv_8PKFyXVM

Of course many would prefer a index tracker. A quick word of warning though, ignore arguments about fees UNLESS you know what the fees are. There are index trackers that charge more than Scottish mortgage, does that make SMT more appropriate?

I actually suggested that you research and consider investment trusts. I didn't claim that they were right for you. That is for you to decide.