Low cost, easy investments for newbie

[raybarrow]

Hi Folks,

Discussed starting daughter, 26, on investment trail. She is sees the sense of doing it but doesn't want the 'hassle' of maintaining it. We live three hours away so we/she can't just pop round to 'just sort this out'. I know we can Zoom or Jitsi but but that's not very practical for doing things online at the same time. Of course I being 74 may not have all my marbles in the future.

She has a full time job, not high powered, at Aberystwyth University, rents a four bedroom house for £150 A MONTH! Student house and she is the remaining tenant. Long story but good for her finances. House is up for sale so it will be a financial shock in the not to distant future. She is frugal, has savings and ISA and is financially ok, being potentially homeless notwithstanding (although she does seem to fall on her feet). As long as she can look after her horse, eat, have a roof over her head and get out she is happy. How many of us can say that. Although the future keeps rolling on.

We are looking for a low cost, easy to manage type of investment, passive trackers, life stratergy funds seem to be the obvious choice. Something she can put money in, maybe regularly, and ignore for for the most part. I use Interactive Investors for my shares ISA etc but the fees would be too expensive for her. So we are looking for low cost Fund Managers that will do want she wants online.

As an aside she banks with TSB and they have an investment branch called Wealthily. Whilst it looks expensive and not particurlary suitable, the interactive website showing how investment styles and types can affect perormance I found really simple to understand.
https://invest.wealthify.com/CreatePlan

Her pension should be ok being the University, but I must check that with her.

Any comments, suggestions would be helpful.
Ray.

[wanderer]

Dodl by AJ Bell is cheap and if you look at the "themed" investments then you will find the usual vanguard/HSBC tracker funds etc.

[CliffEdge]

So many questions come to mind: hopefully an expert will be along soon.

[Hariseldon58]

Might I suggest two options.

One is F&C Investment Trust, FCIT, do a regular saving option, say HL , regular investment account is free, charges £1.50 per monthly trade. They offer cheap reinvestment of income. https://www.hl.co.uk/investment-services/invest-by-direct-debit its a global investment trust, yes it costs a little more than a world tracker but that's generally made up by the gearing/discount, it will respond sensibly to any weird market conditions, you could invest in it for decades without looking at it.

Second option could be one of the ROBO ADVISORS eg moneyfarm. They invest in ETFs you choose a risk level, its reasonably priced for smaller accounts, it provides a decent app and ongoing asset allocation / commentary if she was interested.

I have a substantial portfolio but if everything in the equity space was in FCIT I wouldn't be unhappy. I have a holding with MoneyFarm just because I was interested in how the model works ( I have the highest risk level 7 which is about 90% equities) so far its doing ok, they move the allocation around from time to time, not sure I agree with their moves but the results are ok.

I started in the late 80's with investment trust savings schemes, including FCIT, I did very well with them and retired in my late 40's on the proceeds of regular savings and investments.Happy customer

[Kantwebefriends]

It's also worth considering what sort of tax shelter she might use. If she expects to want to buy a house one day a Lifetime ISA might be attractive.

If she wants more flexibility then she might prefer an ordinary Stocks and Shares ISA. There's no reason not to have both.

I'd guess that if she fancies investing in a Vanguard fund it might be cheap and convenient to use a Vanguard ISA.

[DM94]

If your daughter looking for simple but effective investing then the US would be an obvious choice.

Open a Vanguard stocks & shares ISA and pay into their S&P 500 ETF every month. It's a boring investment but highly effective over the long run, that's the beauty of it. Total yearly fee would be 0.22% (account fee (0.15%) + ETF fee (0.07%)), buy and sell twice per day at fixed times without dealing fees, or buy and sell whenever you want with a £7.50 dealing fee.

If she wanted to be more efficient, buy the same ETF within a Trading212 ISA which would avoid the account fee and dealing fees entirely - the only cost would be the ETF fee.

[CliffEdge]

Why would she want to invest?

[Kantwebefriends]

I see that Vanguard don't offer a Lifetime ISA. MSE surveys the providers here:
https://www.moneysavingexpert.com/savin ... time-isas/

If she goes for an ordinary S&S ISA at Vanguard she'd presumably have to choose between using "funds" and using ETFs. There's recent advice here:
https://monevator.com/etfs-vs-index-funds-differences/

[mc2fool]

We are looking for a low cost, easy to manage type of investment, passive trackers, life stratergy funds seem to be the obvious choice. Something she can put money in, maybe regularly, and ignore for for the most part. I use Interactive Investors for my shares ISA etc but the fees would be too expensive for her. So we are looking for low cost Fund Managers that will do want she wants online.

Well it sounds like you've almost already decided the investment; either a Vanguard LifeStrategy fund (the 100% equity one at her age) or a global tracker (e.g. VWRL).

It also sounds like the amounts involved would be small. If you/she decided on only a Vanguard investment then she can open a Vanguard ISA which will cost her an annual fee of 0.15% of the value of the holding(s), and has no dealing fees (unless you want to deal an ETF "live").

Alternatively, an IWeb ISA will cost her £100 up front and £5 per deal but has no annual fee at all. You can do the arithmetic to figure which will work out cheaper for her, when and for how much.

[nmdhqbc]

not used it myself but it seems like InvestEngine is free when you select the portfolio yourself and has an automation option. ETF's only by the looks of it. seems like a low cost way of automatically investing in an ISA (no signs of a LISA) with VWRL for example. seems like the perfect broker for the remit you laid out if the automation works as we envisage it to.

[raybarrow]

Hi Folks,

Why would she want to invest?

Fair question. Short answer. She has seen that I have invested for many years, retired early, no debts, mortgage free for a long time and am very comfortable financially. Didn't have a high powered job but it was ok with a good old type pension. I'm not an avid investor playing the market every day, more of a plodder but time in investing is your friend so start young.

There isn't really a long answer without going into boring detail.

Thanks for the suggestions. Very helpful. I was thinking along those line but didn't know any recommended places for of low cost investments. Time to go web browsing.

Ray.

[CliffEdge]

Does she need to save up for a deposit on a house or flat? Is that the priority? Sounds like a Lisa would be worth considering.
Equity funds are intended very long term.
Seems to me there are two components. 1 long term equity to get her familiar and knowledgeable with investment. Maybe a couple of hundred a year. And 2. Short term savings for a property deposit, maybe a cash Lisa or ISA or something.

[Wuffle]

It strikes me that we are missing the obvious.
I would skip the 'is she saving for a deposit?' business, just give her the deposit and she gets a mortgage.
Contacts within the university should keep her in tenants to fill the extra bedrooms (almost nobody declares this stuff).
It is long term, leveraged, tax efficient.
It isn't like she doesn't need somewhere to live.
Sometimes you just need to be brave.

W.

[raybarrow]

Hi,

It strikes me that we are missing the obvious.
I would skip the 'is she saving for a deposit?' business, just give her the deposit and she gets a mortgage.
Contacts within the university should keep her in tenants to fill the extra bedrooms (almost nobody declares this stuff).
It is long term, leveraged, tax efficient.
It isn't like she doesn't need somewhere to live.
Sometimes you just need to be brave.

We did offer to buy/provide a deposit (delete as approriate) for the house she is a tenant in at the moment. Whilst the house is fine the location is 'awkward' for her long term. Which is fine, her choice. I think, when she is ready, we will be helping her to get started with whatever she decides. Parents can only advise, assist, etc. When the house she is tenanting in finally does goes for sale (they don't seem to be rushing at it - I think the price is too high) that will direct her thoughts a little more.

Cheers,
Ray.

[airbus330]

Since someone mentioned robo-advisers, I'll chuck Wealthify into the ring. Last year they were offering a free £40 if you invested a couple of hundred and left it there for 6 months, So, as I like free money I did that and have been quite impressed by the performance. Charges are cheapish, but the best thing is the user interface which is really clear and logical. Makes Aviva look stoneage. They regularly write to you and say their reasoning behind what the algorithmic investment changes have been and even with a small investment you can see each sell and purchase done. Its a little bit hard to compare performance as I had chosen the super conservative option but changed to the most adventurous option in March after the fall in bonds, just in time for the equity correction, but as we speak the fund is at break even. Charges are 0.7% in total. I'm recommending it to one of my own kids for regular savings.

[JohnW]

as I had chosen the super conservative option but changed to the most adventurous option in March after the fall in bonds, just in time for the equity correction, but as we speak the fund is at break even.

There’s a bit of research on chopping and changing your pooled investment funds; on average it’s harmful to returns. Dalbar reports on it regularly. JPMorgan’s Q3 2022 quarterly ‘Guide to the Markets’, on page 63 shows that over the last 20 years the average fund investor got 3.6%/year return while a boring 60/40 fund that wasn’t messed with returned 7.4%/year. And Vanguard’s Research report 2018 ‘Here today, gone tomorrow: The impact of economic surprises on asset returns’ tells the same story.
Probably better to not recommend your approach to your kids.

[tjh290633]

as I had chosen the super conservative option but changed to the most adventurous option in March after the fall in bonds, just in time for the equity correction, but as we speak the fund is at break even.

There’s a bit of research on chopping and changing your pooled investment funds; on average it’s harmful to returns. Dalbar reports on it regularly. JPMorgan’s Q3 2022 quarterly ‘Guide to the Markets’, on page 63 shows that over the last 20 years the average fund investor got 3.6%/year return while a boring 60/40 fund that wasn’t messed with returned 7.4%/year. And Vanguard’s Research report 2018 ‘Here today, gone tomorrow: The impact of economic surprises on asset returns’ tells the same story.
Probably better to not recommend your approach to your kids.

You have reminded me of the Johnson-Fry Worst Performing Fund exercise. It came unstuck with the Japanese problems of the 1990s, when the theory failed.

TJH

[richfool]

Might I suggest two options.

One is F&C Investment Trust, FCIT, do a regular saving option, say HL , regular investment account is free, charges £1.50 per monthly trade. They offer cheap reinvestment of income. https://www.hl.co.uk/investment-services/invest-by-direct-debit its a global investment trust, yes it costs a little more than a world tracker but that's generally made up by the gearing/discount, it will respond sensibly to any weird market conditions, you could invest in it for decades without looking at it.

Second option could be one of the ROBO ADVISORS eg moneyfarm. They invest in ETFs you choose a risk level, its reasonably priced for smaller accounts, it provides a decent app and ongoing asset allocation / commentary if she was interested.

I have a substantial portfolio but if everything in the equity space was in FCIT I wouldn't be unhappy. I have a holding with MoneyFarm just because I was interested in how the model works ( I have the highest risk level 7 which is about 90% equities) so far its doing ok, they move the allocation around from time to time, not sure I agree with their moves but the results are ok.

I started in the late 80's with investment trust savings schemes, including FCIT, I did very well with them and retired in my late 40's on the proceeds of regular savings and investments.Happy customer

I've been following this thread with interest, as I have been trying to encourage my step-daughter to start a pension and an ISA.

Hariseldon58, I'm very much in tune with your suggestion of investing in FCIT over a long term. I wasn't familiar with the HL regular investment scheme you referred to and was impressed by the low monthly trading charge of £1.50, which I interpreted as applying to a fixed single trade each month (I assume no option to buy into 2 or 3 trusts), so I went looking to see if there were any other charges. I found that HL do charge a 0.45% annual admin fee. In comparison, Jarvis X-O charge a £5.95 trading fee, per trade, but no other fees, and iWeb charge a similar trading fee, but with a one-off (now) £100 opening fee.

[BullDog]

Might I suggest two options.

One is F&C Investment Trust, FCIT, do a regular saving option, say HL , regular investment account is free, charges £1.50 per monthly trade. They offer cheap reinvestment of income. https://www.hl.co.uk/investment-services/invest-by-direct-debit its a global investment trust, yes it costs a little more than a world tracker but that's generally made up by the gearing/discount, it will respond sensibly to any weird market conditions, you could invest in it for decades without looking at it.

Second option could be one of the ROBO ADVISORS eg moneyfarm. They invest in ETFs you choose a risk level, its reasonably priced for smaller accounts, it provides a decent app and ongoing asset allocation / commentary if she was interested.

I have a substantial portfolio but if everything in the equity space was in FCIT I wouldn't be unhappy. I have a holding with MoneyFarm just because I was interested in how the model works ( I have the highest risk level 7 which is about 90% equities) so far its doing ok, they move the allocation around from time to time, not sure I agree with their moves but the results are ok.

I started in the late 80's with investment trust savings schemes, including FCIT, I did very well with them and retired in my late 40's on the proceeds of regular savings and investments.Happy customer

I've been following this thread with interest, as I have been trying to encourage my step-daughter to start a pension and an ISA.

Hariseldon58, I'm very much in tune with your suggestion of investing in FCIT over a long term. I wasn't familiar with the HL regular investment scheme you referred to and was impressed by the low monthly trading charge of £1.50, which I interpreted as applying to a fixed single trade each month (I assume no option to buy into 2 or 3 trusts), so I went looking to see if there were any other charges. I found that HL do charge a 0.45% annual admin fee. In comparison, Jarvis X-O charge a £5.95 trading fee, per trade, but no other fees, and iWeb charge a similar trading fee, but with a one-off (now) £100 opening fee.

I think you already know this, but Interactive Investor have free monthly investment. But there is a low monthly fee as well. Perhaps starting from scratch with nothing, not the very cheapest option.

[EthicsGradient]

Might I suggest two options.

One is F&C Investment Trust, FCIT, do a regular saving option, say HL , regular investment account is free, charges £1.50 per monthly trade. They offer cheap reinvestment of income. https://www.hl.co.uk/investment-services/invest-by-direct-debit its a global investment trust, yes it costs a little more than a world tracker but that's generally made up by the gearing/discount, it will respond sensibly to any weird market conditions, you could invest in it for decades without looking at it.

Second option could be one of the ROBO ADVISORS eg moneyfarm. They invest in ETFs you choose a risk level, its reasonably priced for smaller accounts, it provides a decent app and ongoing asset allocation / commentary if she was interested.

I have a substantial portfolio but if everything in the equity space was in FCIT I wouldn't be unhappy. I have a holding with MoneyFarm just because I was interested in how the model works ( I have the highest risk level 7 which is about 90% equities) so far its doing ok, they move the allocation around from time to time, not sure I agree with their moves but the results are ok.

I started in the late 80's with investment trust savings schemes, including FCIT, I did very well with them and retired in my late 40's on the proceeds of regular savings and investments.Happy customer

I've been following this thread with interest, as I have been trying to encourage my step-daughter to start a pension and an ISA.

Hariseldon58, I'm very much in tune with your suggestion of investing in FCIT over a long term. I wasn't familiar with the HL regular investment scheme you referred to and was impressed by the low monthly trading charge of £1.50, which I interpreted as applying to a fixed single trade each month (I assume no option to buy into 2 or 3 trusts), so I went looking to see if there were any other charges. I found that HL do charge a 0.45% annual admin fee. In comparison, Jarvis X-O charge a £5.95 trading fee, per trade, but no other fees, and iWeb charge a similar trading fee, but with a one-off (now) £100 opening fee.

HL's admin fee of 0.45% is capped, for ITs (and shares and ETFs) at £45/year. If you are investing each month, then a trading fee of £5.95 is £4.45 per month more expensive, so that will be more over the year. iWeb's £5 charge per trade is £42 more per year, but with the opening fee, they'll work out more expensive too, unless you run it for decades (and fees are bound to change in that time).

The Fidelity ISA is also capped at £45 for ITs, shares and ETFs, but their charge is 0.35%, so it is cheaper in the years before you hit the cap. £1.50 for regular trading, again.

https://www.fidelity.co.uk/stocks-and-s ... /#tab-link