OEICs and ISAs

[EmilyGilmore]

Morning all,

I used to be a regular visitor to the old Fool boards (mostly property) and I was shocked to find they'd vanished! Lovely to find this forum though and I must say, it feels pleasantly familiar.

My husband and I have most of our capital invested in property with a decent chunk in cash savings. We have been gifted a large sum by his parents as they wish to reduce their IHT liability and although we will be adding to our property portfolio, a good six-figure sum will be going into equity investments as a means of balancing things.

I have a few questions that I hope Fools can help with and I'll break them down into separate posts rather than one massive multi-part one...

Firstly, are the tracker funds that I can invest in as ISAs, OEICs by another name?

Secondly, if we put our ISA allowances into tracker funds then with funds above those allowances, can we put them into the same type of investment (or even the same funds) then move them into an ISA wrapper in subsequent years?

Thank you. And it's nice to be back.

[Urbandreamer]

Firstly, are the tracker funds that I can invest in as ISAs, OEICs by another name?

Well there are pleanty of options. As you say OEICS and Unit Trusts do trackers. There is also this new thing called an ETF (Exchange Traded Fund) which tracks an index. All the above can be held in an ISA, (Individual Savings Account) which is a tax wrapper that could also contain Investment trusts or indeed shares in companies that own pasty shops etc.

I recommend investing in a copy of the MoneyObserver magazeen. They have tables in the back that list the choices of Funds, ETF's etc.

If I were to assume that you had £100k and wished to invest it in XYZ tracker then "you" could invest £20k for yourself in an ISA and £50k in an account with the same platform. Your husband could do the same. Next april you could transfer a further £20k worth of the tracker from the normal account to the ISA for a nominal fee (there does have to be a sale and purchase but fees would be reduced). After 3 years it would all be in a tax wrapper, free from CGT and dividend tax.

NOTE I'm answering your question, not offering advice. I personally have three ISA's, eggs and baskets as the saying goes. You can do that as long as only one recieves contributions in any given year.

Other alternatives, again not advice. You could take the same money, buy the same thing, but use a SIPP (Self Invested Pension Plan) tax wrapper. You would need to consider taxable income, age/ability to access the funds, yearly limits on contributions and the lifetime allowance. However you could also benefit that the money would (currently) be exempt from IHT when you die. You can have a SIPP in addition to any other pension, limits allowing.

I would advise avoiding VCT's and EIS's, not because there is anything wrong with them, but because they are a bit esoteric and you would need to do considerable research.

[EmilyGilmore]

Thanks Urbandreamer - that's really helpful.

I agree re eggs and baskets - I think the thing to do would be to build up a portfolio of funds rather than put everything into the same one or even the same sector that it's tracking.

Back in the day, we invested in managed funds via an IFA and it was infuriating to see the fees that disappeared even when the fund was losing money - paying someone for making me money is fine, paying them more than a token amount even when they don't seems harsh. That's why most of our investments are in property. I like property, I understand it, I enjoy renovating and I even - unlike a lot of landlords - like the people-aspect of providing a really great service to our tenants. But we need to diversify I think and I refuse to pay some jumped-up IFA to look after our money. We have three post-grad degrees - surely we should be able to do this ourselves!

Thanks again - have a great day.

[Urbandreamer]

But we need to diversify I think and I refuse to pay some jumped-up IFA to look after our money. We have three post-grad degrees - surely we should be able to do this ourselves!

Quite right, and very much in the spirit of the old TMF.

It has actually become increadibly easy to invest, with something for everyone.

Those who like to do so can research individual shares and often buy and sell them via a phone app.
Those who take a more macro view can buy cheap ETF's or even cheap portmateau funds that are managed at X% fixed interest Y% trackers.
Those who don't quite know what they want can consult a "robot" adviser who will help chose a risk appropriate portfolio.

A far cry for when I started. Back then you either found a IFA/wealth manager or had to know someone who used a private client stockbroker.

[Chrysalis]

welcome back, Emily! I recommend that, as well as the good advice you will get from fools, you check out monevator.com, in particular the passive investing pages, where you will find pretty much everything you need to teach yourself how to set up a simple investment portfolio of low cost tracker funds.
Yes, you should be able to invest in the same funds outside of an ISA and gradually transfer in (though you have to sell and transfer the cash, rather than the funds themselves - some brokers will do this at low cost - bed and ISA). But you have £20k ISA allowance each per year. You might also want to think about sheltering some in a SIPP - different tax treatment, pros and cons.

[StepOne]

You should look at iWeb Sharedealing for your platform. They do normal sharedealing accounts and ISAs with no annual fee, and also SIPPs with a flat-rate £180 per year admin charge, which is pretty low for a six-figure SIPP.

StepOne