How do I become investment literate?

[GliderRider]

Harry Flashman said:

Thanks chaps - I'm deep in the reading/research phase now, as well as trying to pick the best investment ISA: any experiences on the latter would be good. HL seems user-friendly with a wide range of investments, but fees are (relatively) high.

Harry, On HL you can compare the performance of different funds and shares. To do this:
Select a fund
Click on 'Charts and Performance'
Then using the 'Add to chart' on the right hand side, you can add funds and shares ot produce a comparative chart. I think ten is the maximum.
You can alter the time period too. Eighteen months is a good time to use.

My most recent fund buy using this method is Marlborough UK Microcap Growth. Its only made 2.05% since I bought it on 27 Dec, but at least it is ahead.

HL also let you set up a watchlist of both funds and shares in the form of a virtual portfolio, so you can see how some selections perform without committing any money to them.

Its easy to get sucked in to checking your portfolio on a daily basis and get worried by the numbers in red. This is part of life you just have to get used to. Sometimes you get shares like Hutchinson China Meditech, Fevertree and AB Dynamics which go ballistic for a bit (Yippee!), but then they drop alarmingly (Boo!) whilst they re-adjust to where they should be.

I have no experience of anyone other than HL, but I have found them very helpful and patient on the phone when answering my queries.

[Jon39]

GliderRider said:

Its only made 2.05% since I bought it on 27 Dec ....

You made me chuckle, Mr. GliderRider.
Just 14 working days and already up 2% !

Possibly joking, although sounding disappointed, but having been in this 'game' a long time, I would be very happy with that.
After all by comparison, a cash account would probably have earned just 0.002% by now.
A few weeks means nothing really, but you are ahead of the UK stock market.

Enjoy every up, and keep your fingers crossed that your downs are less than market averages. If so, you are doing well.
Think long-term, and the best of luck with your investing.

Edited by Jon39 on Tuesday 16th January 15:33

[bitchstewie]

Harry Flashman said:

Thanks chaps - I'm deep in the reading/research phase now, as well as trying to pick the best investment ISA: any experiences on the latter would be good. HL seems user-friendly with a wide range of investments, but fees are (relatively) high.

Gibbon - your reasoning is like mine and having a London flat (sadly not old person suitable - it's floors 3 and 4 of a Victorian house with no lift) seems logical for all the reasons you state. I need to work on paying off the mortgage on it using the rent I think. Trouble is, tax breaks are disappearing soon...

The monevator link is a good one. Small thing but if you're likely to add/top-up a lot pay attention to charges.

I've seen a few sites that have no annual management fee but do charge a tenner each time you buy a fund so if you're doing a monthly top-up of 3-4 funds...

[Harry Flashman]

£10 each time you buy any amount, or when you first invest?

I'll be putting money in regularly (every month) so need something that doesn't charge me every time I do!

[xeny]

Harry Flashman said:

£10 each time you buy any amount, or when you first invest?

I'll be putting money in regularly (every month) so need something that doesn't charge me every time I do!

there's a comparison tool on the page I linked to, so if you know your investment frequency and roughly how big the portfolio will be in the medium term future it should spit out some reasonable options.

Depending on how many different investments you make in a month, you may find it worth picking something that has a charge per investment, as it's cheaper than a % charge on the whole portfolio.

[BlackLabel]

Harry Flashman said:

I have met no-one who can advise on Lady F’s FATCA dual tax problem (she’s American).

It's best to seek specialist advice about this sooner rather than later - Lady F could find herself in a situation where she makes a tax free gain in the UK (for example on your primary residence) yet the IRS over the pond would still want their cut of this money. This is what happened to Boris Johnson a few years ago. It's one of the reasons so many American dual citizens who have to no intention of going to the US to live or work are giving up their US citizenship.

Why expat Americans are giving up their passports

Mr Johnson and his barrister wife Marina Wheeler bought the Furlong Road house in 1999 for £470,000. After the London property market boomed, they sold the house for £1.2million in 2009 – a £730,000 increase.In the UK, individuals do not pay capital gains tax on the sale of their first home, so Mr Johnson would not have faced a bill. However, all US citizens, including those with dual citizenship, are legally obliged to file a tax return and pay US taxes wherever they are living.

Boris Johnson among record number to renounce American citizenship in 2016. Foreign secretary had previously protested against ‘absolutely outrageous’ US tax obligations after sale of his north London home

[anonymous-user]

Harry Flashman said:

I have met no-one who can advise on Lady F’s FATCA dual tax problem (she’s American).

You definitely need to research a specialist in this area. Some institutions won't even accept a US national as a client.

Maybe JulianPH knows someone? Or if she banks with a US bank someone in there may know.

[GliderRider]

Harry Flashman said:

£10 each time you buy any amount, or when you first invest?

I'll be putting money in regularly (every month) so need something that doesn't charge me every time I do!

HL appear to charge £1.50 per stock per month for regular contributions that automatically buy shares or trusts, so it makes sense to have a regular contribution into one trust, and then make one off purchases of other stocks/trusts as and when you have the money. I generally save up and buy a minimum of £1000 at a time for my lump sums to minimise the effect of the £11.95 dealing charge.

If anyone does offer something 'free', check all their charges as they may be absorbing their loss in a higher charge elsewhere.

[ukwill]

Give your money to Terry Smith.

Sell the flat. Max out both isa’s, yearly. Keep the Aston (life needs some fun!)

[RL17]

Can invest direct into Fundsmith (Terry Smith) monthly with no fees.

HL pretty good but does charge 0.45% pa (monthly depending on value) if you invest in funds (in normal stocks & shares Vantage fund outside ISA). Regular fund savings not charged.

HL pretty good service (some are cheaper) - but info graphs comparisons and virtual portfolios all pretty good.

They also charge 0.45% pa for ISA holdings (this is way to go as tax free gains and income - wished I'd invested more that way before I retired).

Don't hang on (emotionally attachment) to losers (compared to market) and don't sell winners to easily/quickly.

With stamp duty and share dealing costs on invests (and sales) through HL into shares and investment trusts you are paying fee plus 0.5% stamp duty on purchases (plus also the spread purchase price you pay slightly higher than sale price -small commission for market makers) the costs can eat into margins so don't buy and sell lots of small holdings and/or buy and sell to frequently. (so getting in and out of share investments costs almost 3% at £1k level compared to 1% at £5k level and 0.75% at £10k level)

Regular monthly investment in some funds should work over long term.

Nothing concentrates mind like investing you own money - you learn more when invested and do learn from mistakes

Don't spread investments beyond 15-20 holdings (and build up number as you can afford it). Still have individual shares but have made most gains from funds in my experience.

Look at holdings every now and then and record or print-off detailed valuation every 3 months or so. Review but don't tinker or make too many changes. If investing outside of any ISA/SIPP as well learn about CGT and use annual £11k or so gains exemption.

[xeny]

RL17 said:

Can invest direct into Fundsmith (Terry Smith) monthly with no fees..

Certainly when I've looked, Fundsmith is 1.05% to own direct (class T shares), but if you go through a platform you can get I class shares for .95%, so with a careful choice of broker (to get decent charges) it is actually cheaper to hold indirectly, and should you wish hold other shares is obviously rather more flexible.

I like fundsmith (you'd be hard pressed not to if you hold some), but I'd be reluctant to build my entire investment strategy around "stick it in fundsmith" , even if it is at times very tempting.

[RL17]

xeny said:

RL17 said:

Can invest direct into Fundsmith (Terry Smith) monthly with no fees..

Certainly when I've looked, Fundsmith is 1.05% to own direct (class T shares), but if you go through a platform you can get I class shares for .95%, so with a careful choice of broker (to get decent charges) it is actually cheaper to hold indirectly, and should you wish hold other shares is obviously rather more flexible.

I like fundsmith (you'd be hard pressed not to if you hold some), but I'd be reluctant to build my entire investment strategy around "stick it in fundsmith" , even if it is at times very tempting.

Was referring to upfront fees - quite a few excellent funds still have an upfront charge (often reduced to nil by the platform). They are OCF charges - which is the estimated fees charged inside the fund each year for fund expenses & costs.

No upfront fee for T units (or for R units per HL site). No upfront fees is one of values (FACTSHEET Our Values section - also covers No Shorting No Hedging etc there). Charges similar for R units (a bit lower but you don't get personalised valuation booklet every six months - can trade quicker than doing it via the platform too). If I hold through HL the fund holding fee there of 0.45% pa makes it overall more expensive than direct for me.

Definitely didn't put all in there - although the T shares are up 127% (approx 22% compound pa) in 4 years & 2 months since first put some money in there!

Do some platforms limit their total annual charge for funds?

[xeny]

R (1.54% - I'd guess they're a pre RDR legacy) class are significantly more expensive to hold than T(for Terry 1.05%) or I.(.95%) - I agree there's no up front fee for any of them.

Some platforms do bulk buys to let you hold I class without meeting the £5 Million minimum holding requirement.

The cheapest buy/hold platform I know of is iWeb, £25 to open an account, £5 for a trade, no cost to hold. No nice analysis tools I think, but I'm happy doing that elsewhere for the low platform cost.

I can see the logic of not holding funds with HL, but I've had enough split ISA experience that I never want to experience it again, and I can get low enough pricing from iWeb that it's not worth going direct to Fundsmith, although I miss the annual letter in a physical format.

[Jon39]

You are discussing fees and are mentioning long-term.

I do very long-term, although not involving funds.
My fees last year totalled £30 + VAT for two equity ISAs, and zero for my direct holdings, and zero for transactions. Probably unbeatable for a seven portfolio.

The reason that I pay nothing to hold my direct investments, is because they are certificated holdings. You do pay an additional amount at purchase time, but that suits long-term, because there are no further ongoing costs.

Maybe old fashioned, but why keep paying someone else when there is no work to do?
Obviously the certificates have to be kept safely, but that has been arranged.
It is an income and growth fund. The dividend income goes directly to an account set up just for that purpose, and there is an inflow most weeks.
Quarterly payments are becoming more common now amongst big companies.

Just an idea for you, in case it is of any use to anybody.

Edited by Jon39 on Thursday 18th January 11:09

[anonymous-user]

You haven't mentioned that if and when you come to sell certificated (paper) investments the costs of dealing will be a lot higher than with electronic registration, which other people have been using for 20 years. In addition, it's difficult to manage effectively a Capital Gains Tax position with paper certificates and probably impossible to be in a tax-efficient ISA or SIPP. So there are significant cons to offset the pros.

For anyone who doesn't want to spend their time researching individual companies and monitoring company performance, which it's fair to say means most investors, paper shareholding has little to offer.

The alternative of buying Funds and keeping the electronic holdings on a low cost platform has attractions which include,

• Someone else is responsible for investment management,
• Someone else is responsible for doing the administration,
• Investments can be switched (changed) at any time without any charges,
• Your personal CGT position can be managed without any charges.

Total costs might typically work out around 0.9% p.a. which might be considered pretty good value.

[Badda]

Jon39 said:

You are discussing fees and are mentioning long-term.

I do very long-term, although not involving funds.
My fees last year totalled £30 + VAT for two equity ISAs, and zero for my direct holdings, and zero for transactions. Probably unbeatable for a seven portfolio.

The reason that I pay nothing to hold my direct investments, is because they are certificated holdings. You do pay an additional amount at purchase time, but that suits long-term, because there are no further ongoing costs.

Maybe old fashioned, but why keep paying someone else when there is no work to do?
Obviously the certificates have to be kept safely, but that has been arranged.
It is an income and growth fund. The dividend income goes directly to an account set up just for that purpose, and there is an inflow most weeks.
Quarterly payments are becoming more common now amongst big companies.

Just an idea for you, in case it is of any use to anybody.

Edited by Jon39 on Thursday 18th January 11:09

How quickly can you react in the event that something serious happens and you want to liquidate? Presume you have to post your share certs to someone?

[anonymous-user]

There has been some interesting pension discussion on here so I though I would ask on here whilst I ponder life on a weekend away.

If a business is sat on a cash pot, can it make pension contributions for officers/employees over and above their income?

eg a 200k contribution for a staff member on 30k a year?

I appreciate the employee wouldn't get tax relief, but is there anything to stop the business getting corp tax relief?

[Jockman]

desolate said:

There has been some interesting pension discussion on here so I though I would ask on here whilst I ponder life on a weekend away.

If a business is sat on a cash pot, can it make pension contributions for officers/employees over and above their income?

eg a 200k contribution for a staff member on 30k a year?

I appreciate the employee wouldn't get tax relief, but is there anything to stop the business getting corp tax relief?

Interesting question.

Yes there is no limit on pension contributions but there is for tax relief ie £40k

There is No link to Salary for Employer Contributions so their salary is irrelevant for the most part.

You can use carry forward if a pension scheme has been in place for the last 3 years, so £160k there (minus any contributions made).

Full Corp Tax Relief.

Over and above this.......hmmmm........I don't know.

[anonymous-user]

Jockman said:

Interesting question.

Yes there is no limit on pension contributions but there is for tax relief ie £40k

There is No link to Salary for Employer Contributions so their salary is irrelevant for the most part.

You can use carry forward if a pension scheme has been in place for the last 3 years, so £160k there (minus any contributions made).

Full Corp Tax Relief.

Over and above this.......hmmmm........I don't know.

Full corporation tax relief would be enough to justify in our case.

Any unused personal allowance a bonus.

Eg following the death of a person prior to 75 their pot becomes distributable tax free. So money into fund with Corp tax relief and out tax free.

Could be attractive even without the death benefit side of things.

[Jockman]

desolate said:

Jockman said:

Interesting question.

Yes there is no limit on pension contributions but there is for tax relief ie £40k

There is No link to Salary for Employer Contributions so their salary is irrelevant for the most part.

You can use carry forward if a pension scheme has been in place for the last 3 years, so £160k there (minus any contributions made).

Full Corp Tax Relief.

Over and above this.......hmmmm........I don't know.

Full corporation tax relief would be enough to justify in our case.

Any unused personal allowance a bonus.

Eg following the death of a person prior to 75 their pot becomes distributable tax free. So money into fund with Corp tax relief and out tax free.

Could be attractive even without the death benefit side of things.

I see your angle.

I can only advise on what I've actually done. Above the £160k is unchartered territory for me.

Employer contribution trumps Employee contribution essentially down to NI contributions or lack thereof.