Drip feed vs Lump Sums - ETF vs Funds (more n00b Qs)
Discussion
Excuse the n00b Qs...
I have a S&S ISA with HL discussed here.
Seems like the most effective (in terms of time effort/returns) option was to invest in tracker ETF (as low charges) which is what I've done.
I've covered: FTSE 100 (HSBC) + World (iShares MSCI) + Emerging (iShares MSCI)+ Clean Energy (Invesco) (I do also have Vanguard S&P500) but looks like a lot of overlap with the World tracker, so not sure there's much merit in keeping both so will prob move it to World.
One of the things I read is that it makes sense to drip feed the payments to smooth out peaks/troughs in the market.
With the ETFs, as they are shares, it costs money to do the transaction: £11.95/deal for 0-9, £8.95 for 10-19, £5.95 for 20+. Share annual account charges are capped at £45/yr. There is no charge for buying/selling Funds, but are charged at 0.45% annually.
I know HL is expensive so come the new financial year, I'll be likely to transfer to AJBell who seem cheaper overall.
However, if drip feeding money into these ETFs every month, seems like I'm opening myself up to a lot of charges just to buy more shares on a regular basis.
Obviously it's a trade off between upfront costs (share buying vs no cost for funds) against ongoing costs (cheaper TER for ETFs + capped £45 annual vs more expensive TER + 0.45% for funds).
Of course if I want to split the money coming in between the different ETFs, it's more charges.
With ISAs being capped at 20k/year, is there an optimum drip feed strategy to balance up the costs as a rule of thumb? Is 5k every 4 months better than £1.6k/month for example (fewer charges vs more dripping so to speak)?
Appreciate any advice. TIA
I have a S&S ISA with HL discussed here.
Seems like the most effective (in terms of time effort/returns) option was to invest in tracker ETF (as low charges) which is what I've done.
I've covered: FTSE 100 (HSBC) + World (iShares MSCI) + Emerging (iShares MSCI)+ Clean Energy (Invesco) (I do also have Vanguard S&P500) but looks like a lot of overlap with the World tracker, so not sure there's much merit in keeping both so will prob move it to World.
One of the things I read is that it makes sense to drip feed the payments to smooth out peaks/troughs in the market.
With the ETFs, as they are shares, it costs money to do the transaction: £11.95/deal for 0-9, £8.95 for 10-19, £5.95 for 20+. Share annual account charges are capped at £45/yr. There is no charge for buying/selling Funds, but are charged at 0.45% annually.
I know HL is expensive so come the new financial year, I'll be likely to transfer to AJBell who seem cheaper overall.
However, if drip feeding money into these ETFs every month, seems like I'm opening myself up to a lot of charges just to buy more shares on a regular basis.
Obviously it's a trade off between upfront costs (share buying vs no cost for funds) against ongoing costs (cheaper TER for ETFs + capped £45 annual vs more expensive TER + 0.45% for funds).
Of course if I want to split the money coming in between the different ETFs, it's more charges.
With ISAs being capped at 20k/year, is there an optimum drip feed strategy to balance up the costs as a rule of thumb? Is 5k every 4 months better than £1.6k/month for example (fewer charges vs more dripping so to speak)?
Appreciate any advice. TIA
Edited by g3org3y on Thursday 17th February 12:56
Are you sure they are classed as EFTs?
I've just had a look at the HSBC one and the dealing fees zero:
https://www.hl.co.uk/funds/fund-discounts,-prices-...
I've just had a look at the HSBC one and the dealing fees zero:
https://www.hl.co.uk/funds/fund-discounts,-prices-...
Personally I think that's too many trackers but remember with HL the buy cost is £1.50 if it's something that's covered by regular investing.
ETFs don't attract stamp duty either.
Statistically lump sums do better but psychologically I'd be uncomfortable dumping in a large lump sum right now.
ETFs don't attract stamp duty either.
Statistically lump sums do better but psychologically I'd be uncomfortable dumping in a large lump sum right now.
If I had a lump sum, then now is as good a time as any to invest given the markets already had a correction this year. I rebalanced my index trackers at the end of December and only the FTSE is up, S&P and Japan are well in the red so far which is not a pretty sight. Remember time in the market is better than timing the market.
Lump sum investing yields a better returns than drip feeding over the long term.
If you're in a position to lump it in - do so.
Lumping it in gives more of your cash time to compound than drip feeding hence the better returns - that's my understanding at least.
If your time horizon is long 5-10 years at least, don't try to time the market, just get it in there.
If you're in a position to lump it in - do so.
Lumping it in gives more of your cash time to compound than drip feeding hence the better returns - that's my understanding at least.
If your time horizon is long 5-10 years at least, don't try to time the market, just get it in there.
Edited by msport123 on Thursday 17th February 17:38
b
hstewie said:
hstewie said: Personally I think that's too many trackers but remember with HL the buy cost is £1.50 if it's something that's covered by regular investing.
ETFs don't attract stamp duty either.
Statistically lump sums do better but psychologically I'd be uncomfortable dumping in a large lump sum right now.
Wasn't aware of the regular investing option: https://www.hl.co.uk/investment-services/invest-by...ETFs don't attract stamp duty either.
Statistically lump sums do better but psychologically I'd be uncomfortable dumping in a large lump sum right now.
Will have a look, thanks.
As mentioned I may switch to AJBell come the new tax year (lower charges).
But yes, you might be right about the tracker situation - I think I got too excited to 'diversify'...
CzechItOut said:
Are you sure they are classed as EFTs?
I've just had a look at the HSBC one and the dealing fees zero:
https://www.hl.co.uk/funds/fund-discounts,-prices-...
Yes, this is the one in question: https://www.hl.co.uk/shares/shares-search-results/...I've just had a look at the HSBC one and the dealing fees zero:
https://www.hl.co.uk/funds/fund-discounts,-prices-...
drmotorsport said:
If I had a lump sum, then now is as good a time as any to invest given the markets already had a correction this year. I rebalanced my index trackers at the end of December and only the FTSE is up, S&P and Japan are well in the red so far which is not a pretty sight. Remember time in the market is better than timing the market.
msport123 said:
Lump sum investing yields a better returns than drip feeding over the long term.
If you're in a position to lump it in - do so.
Lumping it in gives more of your cash time to compound than drip feeding hence the better returns - that's my understanding at least.
If your time horizon is long 5-10 years at least, don't try to time the market, just get it in there.
Thank chaps.If you're in a position to lump it in - do so.
Lumping it in gives more of your cash time to compound than drip feeding hence the better returns - that's my understanding at least.
If your time horizon is long 5-10 years at least, don't try to time the market, just get it in there.
Edited by msport123 on Thursday 17th February 17:38
Yeah, go all in. Markets downtrending, extreme volatility, bond markets with no clue how to price in monetary policy, black swan event on the Ukraine border that may or may not be priced in. Ideal conditions to bet the farm.
Anyway, if you pick the wrong day and your portfolio sts the bed leaving you, say, 20% poorer for ever you can always repeat the experiment over thousands of entry points during a period of 100 years; that way the statistics will see you right. Oh wait!
Anyway, if you pick the wrong day and your portfolio s
ts the bed leaving you, say, 20% poorer for ever you can always repeat the experiment over thousands of entry points during a period of 100 years; that way the statistics will see you right. Oh wait!It's all down to statistics/risk.
Roughly 2/3 of the time you will be better lumping it in in one go, the other 1/3 dripping it in.
It's impossible to know which you would be better off doing at any one point in time. Dripping it in will smooth out the dips, but also the rises - it is the "lower risk" approach overall.
Only you know your own risk appetite...personally I'd be lumping it in, especially with a relatively long time horizon.
Roughly 2/3 of the time you will be better lumping it in in one go, the other 1/3 dripping it in.
It's impossible to know which you would be better off doing at any one point in time. Dripping it in will smooth out the dips, but also the rises - it is the "lower risk" approach overall.
Only you know your own risk appetite...personally I'd be lumping it in, especially with a relatively long time horizon.
Once you are ready for exposing your wealth to the volatility of the stock market you have to go for it otherwise (assuming the lump is in cash) you are just guaranteeing value reduction due to inflation.
You need to be emotionally ready and accept that there is no logical difference between these two scenarios:
1. Person 1 has £100k cash which he invests then markets drop 40%
1. Person 2 has £100k from a long term stock market savings which drops 40%
Both people had the same investment at the same time and both experienced a paper loss at the same time.
You need to be emotionally ready and accept that there is no logical difference between these two scenarios:
1. Person 1 has £100k cash which he invests then markets drop 40%
1. Person 2 has £100k from a long term stock market savings which drops 40%
Both people had the same investment at the same time and both experienced a paper loss at the same time.
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