Time to invest in a FTSE 100 tracker?
Discussion
My take on the FTSE is that there's a bit more to come on the upside, sentiment is very good but it'll be short-lived. Concerns re brexit will start to bear (even though personally I think we'll stay in) but the uncertainty will take us down in the run-up. From the charts I see 6000 as an inflexion point for another run lower eg to 5759 but longer term it doesn't look bad to me.
contango said:
FarmyardPants said:
My take on the FTSE is that there's a bit more to come on the upside, sentiment is very good but it'll be short-lived. Concerns re brexit will start to bear (even though personally I think we'll stay in) but the uncertainty will take us down in the run-up. From the charts I see 6000 as an inflexion point for another run lower eg to 5759 but longer term it doesn't look bad to me.
Very precise and such a narrow range. We saw Ftse100 briefly below 5550 last week...... As and when we do get any fear of Brexit, we are quite likely to breach 5500.... Technically we need to do quite a bit of work across many metrics to look constructive. Market has been trading mostly on what if's to the downside, Brexit could bring real "fear" to the market, it may well be a great opportunity to buy.
Scale in as you will never pick the low in any decent size, but it definitely feels like there will be better opportunities to invest below your 5750 over the next few months.
Roger Irrelevant said:
I'm going to start bunging a few hundred a month into a S&S ISA pretty soon, probably kick-start it with a few grand and invest in a UK all-co tracker with a rock bottom charge (e.g. Blackrock). This course of action has less to do with what level shares happen to be at right now as it has to do with the fact I have the money spare and probably won't need to access it for a very long time. If you start thinking that you can consistently anticipate future economic events better than the market as a whole, and thus predict the future movement of various indices, you're either a genius who should be earning billions, or wrong. I'm happy to admit that I'm not a financial genius, I know what I don't know, but I see no reason why over the long term investing in the stock market won't give a decent return.
I know you're planning to hold for the long term but what are the dealing charges on the platform you use? If putting "a few hundred" a month in, anything other than a very low charge will be a significant % of the investment each time (although not much if you buy and hold for many years). Even when there are market movements like the 2.87% change in the FTSE 100 today a charge of e.g. £11, not unusual on some platforms, for a £400 investment (4.4%) looks bad.Interesting article in last Saturday's FTMoney section "The great myth of passive investing" by Ken Fisher which stated the same thing in several ways but can be boiled down to: Buying low cost trackers is fine if you've got the nerve to hold / continue to drip feed when the markets are tumbling and not join the crowd buying on the ups and selling on the downs - he said that the stats showed that many people, despite their best intentions do just this.
I've managed to resist, but seeing substantial (well, substantial for me - a year's post-tax income) dip in the value of a portfolio over the last year or so was tough to watch!
Revisitph said:
I know you're planning to hold for the long term but what are the dealing charges on the platform you use? If putting "a few hundred" a month in, anything other than a very low charge will be a significant % of the investment each time (although not much if you buy and hold for many years). Even when there are market movements like the 2.87% change in the FTSE 100 today a charge of e.g. £11, not unusual on some platforms, for a £400 investment (4.4%) looks bad.
Interesting article in last Saturday's FTMoney section "The great myth of passive investing" by Ken Fisher which stated the same thing in several ways but can be boiled down to: Buying low cost trackers is fine if you've got the nerve to hold / continue to drip feed when the markets are tumbling and not join the crowd buying on the ups and selling on the downs - he said that the stats showed that many people, despite their best intentions do just this.
I've managed to resist, but seeing substantial (well, substantial for me - a year's post-tax income) dip in the value of a portfolio over the last year or so was tough to watch!
Interesting article in last Saturday's FTMoney section "The great myth of passive investing" by Ken Fisher which stated the same thing in several ways but can be boiled down to: Buying low cost trackers is fine if you've got the nerve to hold / continue to drip feed when the markets are tumbling and not join the crowd buying on the ups and selling on the downs - he said that the stats showed that many people, despite their best intentions do just this.
I've managed to resist, but seeing substantial (well, substantial for me - a year's post-tax income) dip in the value of a portfolio over the last year or so was tough to watch!
The charges figures that you mention (4.4% to increase your fund by £400 every month), may reflect the work by your provider, but possibly a different system may be better for you. I have no connection with this firm other using them for part of my fund, but Barclays Stockbrokers charge a maximum of £36 pa incl VAT, for a S&S ISA. When your fund builds, that becomes very fair value. Of more importance to me, their administration has always been excellent.
It is adding £400 every month to a tracker, that I presume is incurring £132 annual costs, plus perhaps additional annual fees as well.
You might have already read, that my fund has remained unchanged for years, but I think you can probably still pay money in to a Barclays Stockbroker S&S ISA without any cost. By then buying shares less often, would help reduce your costs. Say a £1200 purchase every three months, would of course be cheaper than £400 every month.
It is probably only for those of us who are very keen, but it is possible to buy shares that approximate to a tracker, without needing to have 100 companies. Sometimes about 20 can be sufficient. The FTSE 100 is weighted, so the biggest companies have the major effect on index movements. Gradually building your own 'index type' fund, means you can leave out the companies that might worry you. I have never owned any of the very cyclical mining companies, so that alone helped me to beat the market again last year.
You mentioned watching the decline last year was tough. The FTSE All-Share Index has now declined for the last 3 calendar years. However in my experience you are statistically right not to sell, because uplifts come suddenly and unexpectedly.
I now notice (my children's equity funds) that just a handful of the old remaining
privatisation shares, were enough to achieve +7.5% incl. divs. in 2015 (FTSE 100 -4.93%). Although that was the seventh consecutive annual increase, it might not continue this year. As I always say, I cannot forecast the future.
Edited by Jon39 on Wednesday 17th February 22:28
Jon39 said:
The charges figures that you mention (4.4% to increase your fund by £400 every month), may reflect the work by your provider, but possibly a different system may be better for you. I have no connection with this firm other using them for part of my fund, but Barclays Stockbrokers charge a maximum of £36 pa incl VAT, for a S&S ISA. When your fund builds, that becomes very fair value. Of more importance to me, their administration has always been excellent.
It is adding £400 every month to a tracker, that I presume is incurring £132 annual costs, plus perhaps additional annual fees as well.
You might have already read, that my fund has remained unchanged for years, but I think you can probably still pay money in to a Barclays Stockbroker S&S ISA without any cost. By then buying shares less often, would help reduce your costs. Say a £1200 purchase every three months, would of course be cheaper than £400 every month.
Edited by Jon39 on Wednesday 17th February 22:28
It would be interesting (and I'm sure someone has done it) to know what frequency one would have to drip feed to get the best results - monthly is relatively simple but may well not be the best - clearly it would be more smoothing than bundling up and investing 3x as much quarterly.
I invest on a far broader spread of indices than the 100 - and sadly, also have a large holding (for me) of Glencore and Rio, but though these have been hit hard, they're worth more than I paid originally for Xstrata and Rio and have returned some great dividends. However I look with pain at the £18,000 "B&B" trades (via my and wife's account) in Glencore which I did to use up my CGT allowance one year - said shares now worth ~£6,000! I'm not buying individual stocks at all any more, just indices and smart beta indices.
DonkeyApple said:
Here is a question:
Does everyone in the UK who uses an ISA also use up their CGT allowance each year?
If not, what is the reason for paying an annual fee for a tax shelter that is not required?
Personally it helps with my incredible LACK of self control.Does everyone in the UK who uses an ISA also use up their CGT allowance each year?
If not, what is the reason for paying an annual fee for a tax shelter that is not required?
In the wrapper, I know I shouldn't take any capital out once it is in since it would lose the (potential) tax saving.
So I don't ever do that.
If it were in a fee-free online share dealing account then I would move money back and forth, and probably end up spending more of it than I should.
Similarly the fee makes me want to max my savings to reduce the %age impact of that fee.
walm said:
Personally it helps with my incredible LACK of self control.
In the wrapper, I know I shouldn't take any capital out once it is in since it would lose the (potential) tax saving.
So I don't ever do that.
If it were in a fee-free online share dealing account then I would move money back and forth, and probably end up spending more of it than I should.
Similarly the fee makes me want to max my savings to reduce the %age impact of that fee.
That would be logical. But it's not an angle a vendor could pitch easily In the wrapper, I know I shouldn't take any capital out once it is in since it would lose the (potential) tax saving.
So I don't ever do that.
If it were in a fee-free online share dealing account then I would move money back and forth, and probably end up spending more of it than I should.
Similarly the fee makes me want to max my savings to reduce the %age impact of that fee.
We've had 20+ years of PEP/ISA vending on the back of saving tax a very large number of consumers would never have been liable for. I just wonder how far away we still are from customers asking for their 1% wrapper fees back plus a Brucie Bonus for being deceived?
DonkeyApple said:
That would be logical. But it's not an angle a vendor could pitch easily
We've had 20+ years of PEP/ISA vending on the back of saving tax a very large number of consumers would never have been liable for. I just wonder how far away we still are from customers asking for their 1% wrapper fees back plus a Brucie Bonus for being deceived?
It's hardly deception though is it? The fees are all plainly stated.We've had 20+ years of PEP/ISA vending on the back of saving tax a very large number of consumers would never have been liable for. I just wonder how far away we still are from customers asking for their 1% wrapper fees back plus a Brucie Bonus for being deceived?
Although I am relatively surprised that non-ISA accounts seem to have no fees while the ISA accounts always charge - FOR DOING EXACTLY THE SAME THING!
Surprised the market is bearing that oddity and you haven't seen one of the providers just do it for free.
DonkeyApple said:
Here is a question:
Does everyone in the UK who uses an ISA also use up their CGT allowance each year?
If not, what is the reason for paying an annual fee for a tax shelter that is not required?
For most real-world strategies - as I suspect you well know - portfolio gains are unlikely to exhibit a linear profile matching the time-limited availability of annual allowances. ISA's offer the ability to build up a decent sized pot with tax allowances that are effectively carried forward until needed. Any additional annual fees for the ISA wrapper need not be high.Does everyone in the UK who uses an ISA also use up their CGT allowance each year?
If not, what is the reason for paying an annual fee for a tax shelter that is not required?
I do look to utilise the CGT annual allowance against my non-ISA and pension wrapped investments. It all helps!
DonkeyApple said:
Here is a question:
Does everyone in the UK who uses an ISA also use up their CGT allowance each year?
If not, what is the reason for paying an annual fee for a tax shelter that is not required?
Does everyone in the UK who uses an ISA also use up their CGT allowance each year?
If not, what is the reason for paying an annual fee for a tax shelter that is not required?
The answer to your first question must be NO.
Second question - Let us assume that your investment strategy goes well, and after many years you achieve a high fund value. Let's for example call that £500,000 to 1m.
Imagine paying £30 a year (plus VAT) to keep an ISA running.
For that miniscule percentage fee, you know that you could withdraw the whole lot if you wanted to, completely tax free at any time.
Compare that to having the same fund outside an ISA.
You would probably be frightened to even consider selling your holdings, because of the enormous CGT bill, which is now charged on both GAINS and INFLATION.
You are quite right to ask why bother. In the initial years - little benefit, but later on you are certainly glad you have an ISA around your holdings.
Edited by Jon39 on Thursday 18th February 11:32
dodgydave said:
For me it's the tax-free Dividends, and account admin.
We are often told about these 'tax-free' ISA dividends, especially I have noticed by politicians.
Originally in the PEP days, your comment was correct, the dividends were tax-free.
Dividends were received by the scheme provider, then on your behalf they reclaimed the tax-credit amount, which had already been deducted from every dividend payment.
Those happy days were ended by a particular politician, who liked spending. The biggest detrimental effect since that fiscal change (total money) would not have been on the holders of PEP/ISAs, but on the vast number of pension savers.
With regard to account administration. In the early days of PEP/ISAs, much of the administration was shocking, and by big firms who we ought to have been able to trust. Those who did closely monitor their investments, would discover mistake after mistake on their accounts. Quite a few providers gave up on PEP accounts. At least in the case of the providers that I now deal with, the administration accuracy is fine now, as of course it should be when a service is being offered.
Revisitph said:
I'm not buying individual stocks at all any more, just indices and smart beta indices.
I am sorry that your recent experience, has completely put off individual holdings.
You mention three mining companies, and perhaps you possibly had a large proportion of your fund in that single sector. The eggs rule.
It might sound like 'being wise after the event', but I can honestly say that in 28 years, I have never wanted to include any of the historically cyclical miners in my fund.
There are many FTSE 100 companies that just steadily plod along, and they have been good businesses for investors. Some of them do fade or trip up on occassions, but a new board sometimes provides resuscitation. The buy and forget businesses are the best, otherwise you are always trying to guess, when to buy and sell a cyclical wizz-up, wizz down stock.
I always remember the dividend growth record. I know that when shareholders receive their dividend payments, as owners, it is just their own money in the business anyway. However, it is still satisfying when the total you eventually receive back in dividends, is more than you paid to buy your holding in the first place. That can be one mark of a good business investment.
walm said:
It's hardly deception though is it? The fees are all plainly stated.
Although I am relatively surprised that non-ISA accounts seem to have no fees while the ISA accounts always charge - FOR DOING EXACTLY THE SAME THING!
Surprised the market is bearing that oddity and you haven't seen one of the providers just do it for free.
Although I am relatively surprised that non-ISA accounts seem to have no fees while the ISA accounts always charge - FOR DOING EXACTLY THE SAME THING!
Surprised the market is bearing that oddity and you haven't seen one of the providers just do it for free.
I am not quite sure whether you are discussing dealing fees, or the annual ISA service charges.
With my many PEP/ISA moves, often when providers stopped doing these plans, one ended up with NatWest.
They now charge no annual fee at all, however there is no on-line facility.
You clearly know, but some firms charge an annual percentage without any cap at all. That could eventually lead to some big annual fees.
I now won't use anyone, unless there is a fee limit (say £30 p.a.)
I assume their actual work involvement, will depend on how many holdings a client has, not the size of those holdings.
Gassing Station | Finance | Top of Page | What's New | My Stuff