Where I am right now

[plaguedbyfoibles]

Hi all

I have been delaying this decision for months now, but am firmly resolved to opening a Vanguard Stocks and Shares ISA this year, having expressed my uncertainty as to whether to opt for Vanguard or Freetrade.

If I so wish, I could open another Stocks and Share ISA with Freetrade the next year, but for now, I will see how I get on with Vanguard.

With that in mind, I have a few questions:

1. If I set up a Stocks and Shares ISA account with Vanguard, I presume the only fees that I will be paying are the annual platform management fee, which is deducted from my account at regular quarterly intervals, and ongoing charges (OCF), fund management fees paid to Vanguard, and that the ISA wrapper shields me from all other charges, including transaction costs (which I believe consists mostly of share dealing charges and Stamp Duty Reserve Tax, the latter of which I believe is not chargeable on ISA accounts)?
2. What should be my primary criteria when opting for a fund, say an ETF? I want to narrow it down to accumulating funds to save myself the effort of having to reinvest any returns. I presume my primary concern should be fund performance, whereas my secondary concern should be the fees.

[plaguedbyfoibles]

To add to the above list:

1. Will I be charged the annual platform fee regardless of whether or not I invest into the account? Bearing in mind the minimum investment amount is either £100 pcm or a lump sum of £500.
2. What is the philosophy behind pound cost averaging?

Thanks in advance!

EDIT:


I have answered the third question.

[mc2fool]

If I set up a Stocks and Shares ISA account with Vanguard, I presume the only fees that I will be paying are the annual platform management fee, which is deducted from my account at regular quarterly intervals, and ongoing charges (OCF), fund management fees paid to Vanguard

The latter is indirect: it comes off the performance of your funds, it's not something you pay for directly as a £ cash debit out of your account.

and that the ISA wrapper shields me from all other charges, including transaction costs (which I believe consists mostly of share dealing charges and Stamp Duty Reserve Tax, the latter of which I believe is not chargeable on ISA accounts)?

Transaction costs are also indirect, but an ISA certainly doesn't protect you from those. As for stamp duty, ISA accounts definitely do not protect you from that, however most Vanguard ETFs are domiciled in Ireland so stamp duty doesn't apply, but it's nothing to do with ISAs.

I presume my primary concern should be fund performance, whereas my secondary concern should be the fees.

LOL! Some would say that you have no control over performance but fees are something (the only thing?) that you do have control over. You should ask that question on the Investment Strategies board! You know the old saying that if you have 100 economists in a room you'll get 130 opinions? Well it's much the same with Lemon Fools on this topic!

What is the philosophy behind pound cost averaging?

There are two. The mundane one is that many (most?) people only have the ability to save a relatively small amount out of their monthly salary, and it makes sense to get that invested ASAP, so simply put in the same amount each month and buy how ever much of your chosen shares/ETFs/funds/whatever you can with it each time. The other is that it's very difficult to time the market so, if you have a lump sum and similarly invest it in dribbles over a period then you'll avoid going all in at a market peak.

However, some studies have shown that statistically, on average, as markets generally go up over the long term, it's better to bung the whole lot in in one go. Although that expectation wouldn't have helped the nerves of anyone that did so at the 2000 or 2007 peaks in the following few years! OTOH you could have £ cost averaged over the relatively flat 2018-19 and then been hit with the covid crash anyway....

[Adamski]

What should be my primary criteria when opting for a fund, say an ETF? I want to narrow it down to accumulating funds to save myself the effort of having to reinvest any returns. I presume my primary concern should be fund performance, whereas my secondary concern should be the fees.[/list]

Hi, I can tell you what I invest in. VWRL (All-World ETF) and VLS60 Lifestrategy Acc funds in an ISA or SIPP, Dist funds in an unsheltered account. You want distributing funds for outside of a tax shelter as accounting gets messy with acc funds.

[plaguedbyfoibles]

If I set up a Stocks and Shares ISA account with Vanguard, I presume the only fees that I will be paying are the annual platform management fee, which is deducted from my account at regular quarterly intervals, and ongoing charges (OCF), fund management fees paid to Vanguard

The latter is indirect: it comes off the performance of your funds, it's not something you pay for directly as a £ cash debit out of your account.

and that the ISA wrapper shields me from all other charges, including transaction costs (which I believe consists mostly of share dealing charges and Stamp Duty Reserve Tax, the latter of which I believe is not chargeable on ISA accounts)?

Transaction costs are also indirect, but an ISA certainly doesn't protect you from those. As for stamp duty, ISA accounts definitely do not protect you from that, however most Vanguard ETFs are domiciled in Ireland so stamp duty doesn't apply, but it's nothing to do with ISAs.

I presume my primary concern should be fund performance, whereas my secondary concern should be the fees.

LOL! Some would say that you have no control over performance but fees are something (the only thing?) that you do have control over. You should ask that question on the Investment Strategies board! You know the old saying that if you have 100 economists in a room you'll get 130 opinions? Well it's much the same with Lemon Fools on this topic!

What is the philosophy behind pound cost averaging?

There are two. The mundane one is that many (most?) people only have the ability to save a relatively small amount out of their monthly salary, and it makes sense to get that invested ASAP, so simply put in the same amount each month and buy how ever much of your chosen shares/ETFs/funds/whatever you can with it each time. The other is that it's very difficult to time the market so, if you have a lump sum and similarly invest it in dribbles over a period then you'll avoid going all in at a market peak.

However, some studies have shown that statistically, on average, as markets generally go up over the long term, it's better to bung the whole lot in in one go. Although that expectation wouldn't have helped the nerves of anyone that did so at the 2000 or 2007 peaks in the following few years! OTOH you could have £ cost averaged over the relatively flat 2018-19 and then been hit with the covid crash anyway....

Thanks for all this.

So I guess ongoing charges and transaction costs are indirect and will be deducted from any fund returns, and thus the only direct fees are the annual platform management fee and any fund entry charges.

It is likely that my confusion with the Stamp Duty Reserve Tax stems from the fact that the latter tax is not leviable on ETF trades in certain jurisdictions, including the UK.

So when it comes to choosing upon my funds, what criteria should I use?

Given that compound interest is my friend, as the saying goes, I'm perhaps best suited to limiting my options to accumulating funds.

And naturally, I should factor in my risk tolerance and opt for funds that cater to investors of my risk profile.