Should I get a stock and share investment isa?
Discussion
Hi,
Sorry if this has been asked a thousand times but I've done a search and haven't found any threads with the answers I'm looking for.
I currently have £5k that I am contemplating putting in a S&S ISA but it seems like all the text on the site is persuading you to NOT invest by saying things like "you must be prepared to risk your money" and "you could get less back than you put in". So my main questions are, based on £5k of investment, what's the worse that could happen? Could I see my money go down to zero after the first month or are we talking more typical losses of £100-£500 a month? I know that returns are "dependant on market performance" but lets say that the money is invested well, what is a typical monthly return on this sum? How do you even know that you are getting what your money has actually earned? Sorry if anything I've said makes me sound naive, but I just want to see what the general consensus is from people more in the know than me...
Sorry if this has been asked a thousand times but I've done a search and haven't found any threads with the answers I'm looking for.
I currently have £5k that I am contemplating putting in a S&S ISA but it seems like all the text on the site is persuading you to NOT invest by saying things like "you must be prepared to risk your money" and "you could get less back than you put in". So my main questions are, based on £5k of investment, what's the worse that could happen? Could I see my money go down to zero after the first month or are we talking more typical losses of £100-£500 a month? I know that returns are "dependant on market performance" but lets say that the money is invested well, what is a typical monthly return on this sum? How do you even know that you are getting what your money has actually earned? Sorry if anything I've said makes me sound naive, but I just want to see what the general consensus is from people more in the know than me...
It basically depends on what you invest in, within the S&S ISA. The ISA itself is just a "wrapper", a means on investing an amount of money without paying tax on any returns from that investment. So if you'd done this some while back and bought Lloyds shares, you'd have had a good return and wouldn't have to pay tax on it. On the down side, if you'd invested in a poorly-performing share or fund, you could potentially have lost it all. But not because it's an ISA, just because it's the nature of investing as opposed to saving.
Losses take two forms - one is that you have shares in a business that liquidates and the shares are worth nothing, the other is that your investment is down in value when you need to sell it. That's why such investments aren't recommended if you need quick access to the cash - if you want to sell, you need to be able to wait until the value is high.
You don't really get a monthly return with this type of investment. Again, depending on exactly what you invest in within the ISA, you might get dividends paid (typically every six or twelve months), and if you do you can choose to have that money returned to you, or re-invested in the fund (income or accumulation, this is known as). But a company that pays a great dividend one time, might pay a rubbish one (or none at all) next time, depending on what kind of a year they've had.
Losses take two forms - one is that you have shares in a business that liquidates and the shares are worth nothing, the other is that your investment is down in value when you need to sell it. That's why such investments aren't recommended if you need quick access to the cash - if you want to sell, you need to be able to wait until the value is high.
You don't really get a monthly return with this type of investment. Again, depending on exactly what you invest in within the ISA, you might get dividends paid (typically every six or twelve months), and if you do you can choose to have that money returned to you, or re-invested in the fund (income or accumulation, this is known as). But a company that pays a great dividend one time, might pay a rubbish one (or none at all) next time, depending on what kind of a year they've had.
Edited by droopsnoot on Friday 2nd August 11:43
It sounds like you might need to do a little research. I'd suggest Investors Chronicle and MotleyFool.co.uk ( useful podcast weekly to listen to if thats your thing )
While doing this look for a fund like a Abolute Return fund or Income fund that is recommended and drip feed into that £500 pcm perhaps. Perhaps a FTSE-100 tracker so what you would be doing is diversifying risk and also leaving it in the hands of a fund manager.
Some people don't like them but if you aren't sure about stock picking at first then pick an area that you think you like like Income UK shares or MidCap companies and find a well regarded fund from Trustnet or the Hargeaves Lansdown 150 that is in that area and drip feed some in?
Thats my 2p.
While doing this look for a fund like a Abolute Return fund or Income fund that is recommended and drip feed into that £500 pcm perhaps. Perhaps a FTSE-100 tracker so what you would be doing is diversifying risk and also leaving it in the hands of a fund manager.
Some people don't like them but if you aren't sure about stock picking at first then pick an area that you think you like like Income UK shares or MidCap companies and find a well regarded fund from Trustnet or the Hargeaves Lansdown 150 that is in that area and drip feed some in?
Thats my 2p.
A FTSE-100 Tracker isn't fund managed, it exposes you to the ups and downs of the FTSE-100, the fees on trackers are generally low when compared to true managed funds.
Managed funds are supposed to try and beat a benchmark, if it's a large-cap UK equities fund, this benchmark may be the FTSE-100. Sometimes they will beat the benchmark sometimes they will not.
If you are thinking of self-selecting, ask yourself:
- How much time have I got to research?
- Have I got the means (Internet/Telephone) to watch and/or get out of my position at any time during the day if I had to?
- Do I need access to this money in the medium/long-term?
Managed funds are supposed to try and beat a benchmark, if it's a large-cap UK equities fund, this benchmark may be the FTSE-100. Sometimes they will beat the benchmark sometimes they will not.
If you are thinking of self-selecting, ask yourself:
- How much time have I got to research?
- Have I got the means (Internet/Telephone) to watch and/or get out of my position at any time during the day if I had to?
- Do I need access to this money in the medium/long-term?
As a person whom has used a self select ISA for the last 5 years years I will share some of my experiences.
Lots of different asset classes can be held in an ISA, it doesn't have to be just shares.
Typically from least risky to most risky you have:
Gilts (government loans)
Funds of corporate bonds (company loans)
Corporate bonds
Funds of UK equities
Funds of foreign equities
UK equities
The gilts and bonds tend to pay more interest than growth and the equities tend to pay more growth than interest.
If you need the money to be available in a short term period (inside 1 to 2 years) then have a decent amount in gilts and bonds as the amount you get back is less likely to be hit by random movement in the market.
My wife's ISA is just a simple FTSE100 tracker fund and she pays in £150 per month, plus extra when she is feeling flush. Note that the FTSE 100 total return (includes dividend payments ) has paid on average about 9% per year over the last decade.
I buy into direct share holdings, which is the most risky way to run an ISA. Before doing anything like this, buy, read and understand one or more books on share investing and understand that there are many ways to play the market and much of the hit and miss is finding the way that works for you (which is not the same as for the person teaching you). I spent 3 years under performing standard trackers till I hit a system/style that works for me and this year I am on about a 28% return since January (the market is on about 15%). Next year I may suck.
So...
ISAs are good, they are the best legal tax dodge the government has created for Joe Public to use.
Go in with your eyes wide open and be willing to learn.
Most investing is a long term game, trying to hunt quick profit is risky/difficult.
Do not be hasty to buy direct equities until you are happy that you will not lose sleep over the money.
A little and often into a good cheap tracker will build you a very nice nest egg in the long run.
Good luck with whatever you do.
Lots of different asset classes can be held in an ISA, it doesn't have to be just shares.
Typically from least risky to most risky you have:
Gilts (government loans)
Funds of corporate bonds (company loans)
Corporate bonds
Funds of UK equities
Funds of foreign equities
UK equities
The gilts and bonds tend to pay more interest than growth and the equities tend to pay more growth than interest.
If you need the money to be available in a short term period (inside 1 to 2 years) then have a decent amount in gilts and bonds as the amount you get back is less likely to be hit by random movement in the market.
My wife's ISA is just a simple FTSE100 tracker fund and she pays in £150 per month, plus extra when she is feeling flush. Note that the FTSE 100 total return (includes dividend payments ) has paid on average about 9% per year over the last decade.
I buy into direct share holdings, which is the most risky way to run an ISA. Before doing anything like this, buy, read and understand one or more books on share investing and understand that there are many ways to play the market and much of the hit and miss is finding the way that works for you (which is not the same as for the person teaching you). I spent 3 years under performing standard trackers till I hit a system/style that works for me and this year I am on about a 28% return since January (the market is on about 15%). Next year I may suck.
So...
ISAs are good, they are the best legal tax dodge the government has created for Joe Public to use.
Go in with your eyes wide open and be willing to learn.
Most investing is a long term game, trying to hunt quick profit is risky/difficult.
Do not be hasty to buy direct equities until you are happy that you will not lose sleep over the money.
A little and often into a good cheap tracker will build you a very nice nest egg in the long run.
Good luck with whatever you do.
Edited by JPBailey on Friday 2nd August 18:00
Thought I would post seeing as I came to open a similar thread. I have 5-10k to invest in a S&S ISA. The same for the wife.
I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
shotgunfacelift said:
Thought I would post seeing as I came to open a similar thread. I have 5-10k to invest in a S&S ISA. The same for the wife.
I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
A FTSE 100 Tracker is much the same as any other and should all reap very similar rewards. Having said that, as alluded to earlier there are two types. One type that just follows the FTSE 100 Index as closely as it can and a second that will follow the FTSE 100 plus dividends (known as a total return). I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
The fees on a standard FTSE 100 tracker should always be low, I'd say 0.25% is about the going rate. At the end of the day all the managers of the fund have to do is work out how much to hold of each share in the FTSE, a computer will do this for them, they may also dip their toe in the futures market as well.
When you research trackers, you should see a graphical comparison of the fund against the FTSE 100... They should track one another quite closely.
With £5-£10k, I'd be looking at more than a FTSE 100 tracker.
greggers said:
shotgunfacelift said:
Thought I would post seeing as I came to open a similar thread. I have 5-10k to invest in a S&S ISA. The same for the wife.
I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
A FTSE 100 Tracker is much the same as any other and should all reap very similar rewards. Having said that, as alluded to earlier there are two types. One type that just follows the FTSE 100 Index as closely as it can and a second that will follow the FTSE 100 plus dividends (known as a total return). I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
The fees on a standard FTSE 100 tracker should always be low, I'd say 0.25% is about the going rate. At the end of the day all the managers of the fund have to do is work out how much to hold of each share in the FTSE, a computer will do this for them, they may also dip their toe in the futures market as well.
When you research trackers, you should see a graphical comparison of the fund against the FTSE 100... They should track one another quite closely.
With £5-£10k, I'd be looking at more than a FTSE 100 tracker.
Having said that I am very open to ideas that challenge this with justification.
shotgunfacelift said:
greggers said:
shotgunfacelift said:
Thought I would post seeing as I came to open a similar thread. I have 5-10k to invest in a S&S ISA. The same for the wife.
I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
A FTSE 100 Tracker is much the same as any other and should all reap very similar rewards. Having said that, as alluded to earlier there are two types. One type that just follows the FTSE 100 Index as closely as it can and a second that will follow the FTSE 100 plus dividends (known as a total return). I have identified the kind that I think would be ideal for me personally, I'm 26, and don't need access to the money for the foreseeable future, so I guess I can afford to go into it as a long term investment.
I have found a fund that tracks the FTSE 100 has 0% investment fee and 0.25% management fee so seems pretty competitive. However I found this on my own on the internet, and don't have access to resources that 'professional' investors use.
I don't suppose it would be beneficial to spread the investment over 2-3 FTSE tracker funds as they are all the same exposure/risk/reward surely? I just lack the experience to cherry pick the funds.
Is it worth just reading up and doing lots of research before I go forward, or would it be better to go and see a financial advisor and do it through them? If so how much can I expect to pay them for their services? Lame question but I have never done anything like this before.
The fees on a standard FTSE 100 tracker should always be low, I'd say 0.25% is about the going rate. At the end of the day all the managers of the fund have to do is work out how much to hold of each share in the FTSE, a computer will do this for them, they may also dip their toe in the futures market as well.
When you research trackers, you should see a graphical comparison of the fund against the FTSE 100... They should track one another quite closely.
With £5-£10k, I'd be looking at more than a FTSE 100 tracker.
Having said that I am very open to ideas that challenge this with justification.
One extra point, the FTSE100 tends to track how the world economy is performing rather than the UK economy as most of the big money companies make the majority of their money outside of the UK. The FTSE All share trackers have a higher UK economy bias as they include smaller UK only companies.
Sounds like you want growth with minimal risk. I would look at this - http://www.hl.co.uk/funds/multi-manager-funds/hl-m...
A tracker when the FTSE is within 5% of its all time high.
To take a tracker out now even a drip fed one is (to me) nuts, surely your upside for the next couple of years is minimal.
I last took out a tracker in 2009 and had a great ride pulling out too early in 2010 but in 2009 the market was at least 25% off its all time high so had room to grow on established ground.
Of course the FTSE may break all records month after month but in reality it grows, slips, grows slips i would get in on the next big slip whenever that may be.
To take a tracker out now even a drip fed one is (to me) nuts, surely your upside for the next couple of years is minimal.
I last took out a tracker in 2009 and had a great ride pulling out too early in 2010 but in 2009 the market was at least 25% off its all time high so had room to grow on established ground.
Of course the FTSE may break all records month after month but in reality it grows, slips, grows slips i would get in on the next big slip whenever that may be.
DSLiverpool said:
A tracker when the FTSE is within 5% of its all time high.
To take a tracker out now even a drip fed one is (to me) nuts, surely your upside for the next couple of years is minimal.
I last took out a tracker in 2009 and had a great ride pulling out too early in 2010 but in 2009 the market was at least 25% off its all time high so had room to grow on established ground.
Of course the FTSE may break all records month after month but in reality it grows, slips, grows slips i would get in on the next big slip whenever that may be.
Agreed, I don't see the logic of going for a FTSE tracker at this point...wait for a drop.To take a tracker out now even a drip fed one is (to me) nuts, surely your upside for the next couple of years is minimal.
I last took out a tracker in 2009 and had a great ride pulling out too early in 2010 but in 2009 the market was at least 25% off its all time high so had room to grow on established ground.
Of course the FTSE may break all records month after month but in reality it grows, slips, grows slips i would get in on the next big slip whenever that may be.
bad company said:
Sounds like you want growth with minimal risk. I would look at this - http://www.hl.co.uk/funds/multi-manager-funds/hl-m...
minimal risk maybe.. growth perhaps not. You are paying 1.78% annually which means even if this tracks the market you are 1.78% underwater each year. Given 75% of fund manager in any year fail to beat the market and over 5 years less than one percent have beaten the market what you are suggesting is guaranteed to underperform the market.Why would you do this?
ringram said:
minimal risk maybe.. growth perhaps not. You are paying 1.78% annually which means even if this tracks the market you are 1.78% underwater each year. Given 75% of fund manager in any year fail to beat the market and over 5 years less than one percent have beaten the market what you are suggesting is guaranteed to underperform the market.
Why would you do this?
This one is a 'fund of funds' which should minimise risk. The track record of the Hargreaves funds is excellent. OK you can buy the shares\bonds and do it yourself but I doubt that the op wants to do this.Why would you do this?
I hold HL managed income funds which have increased by 28% since 2010 which is not bad. I also manage my own portfolio of shares.
Share dividends then please...
Very very roughly (as I know dividends can vary) but what would you expect to see in terms of yearly dividends per £1000 worth of shares held, in a large bank or oil company?
Maybe use BP or Shell as an example for me?
If I can look this information up somewhere I'd appreciate you showing me!
Very very roughly (as I know dividends can vary) but what would you expect to see in terms of yearly dividends per £1000 worth of shares held, in a large bank or oil company?
Maybe use BP or Shell as an example for me?
If I can look this information up somewhere I'd appreciate you showing me!
texasjohn said:
Share dividends then please...
Very very roughly (as I know dividends can vary) but what would you expect to see in terms of yearly dividends per £1000 worth of shares held, in a large bank or oil company?
Maybe use BP or Shell as an example for me?
If I can look this information up somewhere I'd appreciate you showing me!
http://www.moneyobserver.com/portfolio/dogs-footsie-2013-portfolio best dividend payers with best value share priceVery very roughly (as I know dividends can vary) but what would you expect to see in terms of yearly dividends per £1000 worth of shares held, in a large bank or oil company?
Maybe use BP or Shell as an example for me?
If I can look this information up somewhere I'd appreciate you showing me!
bad company said:
This one is a 'fund of funds' which should minimise risk. The track record of the Hargreaves funds is excellent. OK you can buy the shares\bonds and do it yourself but I doubt that the op wants to do this.
I hold HL managed income funds which have increased by 28% since 2010 which is not bad. I also manage my own portfolio of shares.
Whichever way you wrap it up they will still fail to outperform the market. If you accept that and are happy paying a few bp for this then fine. I hold HL managed income funds which have increased by 28% since 2010 which is not bad. I also manage my own portfolio of shares.
For more info on an alternative approach you might want to do some reading over here http://monevator.com/category/investing/passive-in...
I spoke to H&L and contrary to their published propaganda they do not offer impartial advice. I was told in no uncertain terms that I was not suitable to receive their advice as their advice would only recommend their funds. My holdings told them all they needed to know to tell me that. As a broker they are fine. But I would not take any advice from them.
texasjohn said:
Share dividends then please...
Very very roughly (as I know dividends can vary) but what would you expect to see in terms of yearly dividends per £1000 worth of shares held, in a large bank or oil company?
Maybe use BP or Shell as an example for me?
If I can look this information up somewhere I'd appreciate you showing me!
The yield on individual shares can be found in the Times, Telegraph or FT every day. I should work on an average of say 3.5 to 4%.Very very roughly (as I know dividends can vary) but what would you expect to see in terms of yearly dividends per £1000 worth of shares held, in a large bank or oil company?
Maybe use BP or Shell as an example for me?
If I can look this information up somewhere I'd appreciate you showing me!
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