Author Topic: UK Investors: What index fund are you buying and how?  (Read 5588 times)

shelivesthedream

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UK Investors: What index fund are you buying and how?
« on: December 04, 2015, 02:41:55 PM »
One of the things which I've been planning to do for a long time is to work out the optimal investment vehicle to minimise both effort and management fees. Would anyone else be willing to share what they are buying and what platform they are using (and what fees they are charged!) to help me see what the options are? I'm also interested in how you chose.

I am buying the F&C FTSE All Share Tracker Fund through a Hargreaves Lansdown ISA. The fund charges me 0.4% annually and I think HL charges me an additional 0.45%. (It's kinda confusing though because I have some shares in individual companies in that account and HL may only be charging me for them.) I chose HL on the advice of my parents. I then searched for "UK index fund" and chose the one with the lowest management fee.

cerat0n1a

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Re: UK Investors: What index fund are you buying and how?
« Reply #1 on: December 04, 2015, 03:40:46 PM »
I have most of my UK investments directly in shares, don't have any ETFs or trackers inside an ISA, so someone else may have a better answer.

However, I don't think there's much to add to what is on the monevator blog. Hargreaves Lansdown do have a reputation for being at the expensive end, because they charge a %age fee on the whole amount, but I don't know if that's justified in reality.

http://monevator.com/how-to-buy-index-trackers/
http://monevator.com/find-the-best-online-broker/
http://monevator.com/low-cost-index-trackers/

daverobev

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Re: UK Investors: What index fund are you buying and how?
« Reply #2 on: December 05, 2015, 09:20:21 AM »
Vanguard, HSBC, Deutsche Bank all have nice ETFs. I would avoid a platform fee if possible.. things have changed since I opened my account with iWeb Sharedealing (Halifax... Lloyds now I suppose).

HMCX/VMID, HUKX/VUKE. VEUR. VHYL. I mean, whatever is low MER and fits your asset alloc.

frugledoc

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Re: UK Investors: What index fund are you buying and how?
« Reply #3 on: December 05, 2015, 02:18:45 PM »
I have most of my UK investments directly in shares, don't have any ETFs or trackers inside an ISA, so someone else may have a better answer.

However, I don't think there's much to add to what is on the monevator blog. Hargreaves Lansdown do have a reputation for being at the expensive end, because they charge a %age fee on the whole amount, but I don't know if that's justified in reality.

http://monevator.com/how-to-buy-index-trackers/
http://monevator.com/find-the-best-online-broker/
http://monevator.com/low-cost-index-trackers/

Hargreaves Lansdowne cap their charge at 45 per year for ETFs, shares, ITs.  It is only on the whole amount for funds.

Their platform blows away the competition.

I will only invest with them until vanguard start a UK platform

Doubleh

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Re: UK Investors: What index fund are you buying and how?
« Reply #4 on: December 05, 2015, 02:31:07 PM »
HL are certainly not the cheapest in the market and you can certainly do better than 0.4% for a ftse all share tracker. I have a number of vanguard funds, one of which is ftse all share at 0.08% which would be a worthwhile swap for you.

Since the market was shaken up over the last couple of years there no easy answer to who is the cheapest platform to invest through. If you have a smaller account then a % platform fee is probably best, you can get this down to 0.2 or 0.25%. If you have a larger stache a flat fee will be better; I use interactive investor who charge a flat 80 per year which becomes cost effective at about 40k invested. You do pay dealing fees even for funds, but get your 80 back as a credit against trading costs. At 1.50 or so for the regular investment plan that covers all of my monthly purchases. The monevator posts already mentioned give a great overview of the options.

I happen to have six separate vanguard funds for uk, Europe ex uk, us, Japan, Pacific ex Japan and emerging markets. Together these cover the same ground as the vanguard world fund but give me the ability to balance my exposure to make up for eg my wife has an old 401k that is mainly invested in s&p 500 since the other funds are crazy expensive. If you don't need that flexibility you can get all the goods with a single vanguard total world stock market fund or the life strategy 100 which is effectively the same.

I'd certainly caution you not to use only a ftse tracker (not bad in itself and I had just this for a few years) but by restricting yourself to the uk you're missing out on 90% of the world market.

Woody Viet

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Re: UK Investors: What index fund are you buying and how?
« Reply #5 on: December 07, 2015, 08:47:43 PM »
I have most of my UK investments directly in shares, don't have any ETFs or trackers inside an ISA, so someone else may have a better answer.

However, I don't think there's much to add to what is on the monevator blog. Hargreaves Lansdown do have a reputation for being at the expensive end, because they charge a %age fee on the whole amount, but I don't know if that's justified in reality.

http://monevator.com/how-to-buy-index-trackers/
http://monevator.com/find-the-best-online-broker/
http://monevator.com/low-cost-index-trackers/

This.

I've been with Hargreaves Lansdown for around 3 years now and before that a number of American brokers and I would say that HL stack up OK. The interface is nice and the customer service are reasonably knowledgeable and helpful, but if all you're doing is buying an index product, do you really need that?

If I were in your shoes I would probably go with these guys (https://svsxo.com/nisa) and buy this (https://www.vanguard.co.uk/uk/portal/detail/etf/overview?portId=9509&assetCode=EQUITY##overview). That way you avoid the NISA platform fees, any broker platform fees, halves your dealing fees, and knock the expense ratio down to 0.09%. The disadvantage is you have a broker which won't allow you to buy mutual funds (I don't consider this burdensome, but some people might).

I definitely agree with others when they say you want more international exposure. However, right now it probably won't make much of a difference as you are just getting started and you can always add an international fund in later.








FI-42

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Re: UK Investors: What index fund are you buying and how?
« Reply #6 on: December 23, 2015, 04:36:16 AM »
FWIW I've just started to invest and I've gone for the Legal and General UK Index tracker with Hargreaves Landown - purely because the cost is so low.  OCR is 0.1% with a 0.04% discount when bought through HL making the cost 0.06%.  Plus there is no initial charge. 

The Vanguard equivalent has an initial charge of 0.2% and and OCR of 0.08%.  It looks like we now how much better competition in the UK with Vanguard on the scene which is good news for all.

RobFIRE

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Re: UK Investors: What index fund are you buying and how?
« Reply #7 on: December 25, 2015, 11:49:50 AM »
I signed up with interactive investor about 3 months ago (previously had most of my money in cash at Nationwide). As said earlier, 80 per year flat fee covers both investment and ISA accounts, which creates 20 a quarter of trade credits so will cover ongoing dividend reinvestment charges and half a dozen trades a year. Though note you only get trade credits after the first quarter, so you'll pay at least one 10 trade fee at the start.

I looked at HL, but with their 0.45% fee for funds you would pay 90 a year on 20k, so any balance above that don't want a % fee platform.

I have found interactive investor to have a clear, clean website, I've transferred two ISAs to them and they've replied next day to messages through site.

In terms of investment I have Vanguard UK Investment Grade bonds Acc (0.15% charge), L&G UK Property Feeder I Acc (0.65% charge). I have my pensions elsewhere in UK & global equity stuff.

Playing with Fire UK

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Re: UK Investors: What index fund are you buying and how?
« Reply #8 on: December 28, 2015, 02:14:41 AM »
I use SelfTrade - free to buy and hold funds in an ISA as long as you buy or sell something each quarter (costs to sell). The platform is shit (limited comparison, but BestInvest is better and all internet banks apart from HSBC and FD are better), clunky and not intuitive, the customer service is fine, but not great. Make sure the text alerts are turned off as I got a bunch of messages through at 4am and was not impressed.

For my SIPP I use BestInvest which is 0.3%, I should have gone straight for a fixed fee and backed myself that I'd fill it soon enough to make the initial expense worthwhile. BestInvest are fine, not amazing, it annoys me that they won't tell me when the tax relief has gone in but insist on sending me a letter to tell me that I've paid in and tax relief will go in 'in 8 to 11 weeks.'

For simplicity and diversity I would use Vanguard Lifestrategy (or the L+G fund of fund that includes property), for cost I would use a single Global tracker (maybe throw in a UK all share tracker if you like some home bias), and a bond fund if that suits you.

Woody Viet

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Re: UK Investors: What index fund are you buying and how?
« Reply #9 on: December 30, 2015, 08:15:28 PM »
FWIW I've just started to invest and I've gone for the Legal and General UK Index tracker with Hargreaves Landown - purely because the cost is so low.  OCR is 0.1% with a 0.04% discount when bought through HL making the cost 0.06%.  Plus there is no initial charge. 

The Vanguard equivalent has an initial charge of 0.2% and and OCR of 0.08%.  It looks like we now how much better competition in the UK with Vanguard on the scene which is good news for all.

Is this a fund or an ETF? I think HL charge a 0.45% annual charge on all your fund investments.

FI-42

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Re: UK Investors: What index fund are you buying and how?
« Reply #10 on: January 01, 2016, 07:20:50 PM »
Is that true?  I thought the OCR was the whole cost of the investment?  Happy to corrected if this isn't the case.

Woody Viet

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Re: UK Investors: What index fund are you buying and how?
« Reply #11 on: January 01, 2016, 10:59:18 PM »
It's how I've always understood it, but I don't own any funds with them so I can't confirm. I think looking at the fees you've paid would be the best way to check

cerat0n1a

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Re: UK Investors: What index fund are you buying and how?
« Reply #12 on: January 02, 2016, 05:21:52 AM »
I'd always understood it to be annual %age on the total amount and this was my reason for not using Hargreaves Lansdown.

http://www.hl.co.uk/investment-services/fund-and-share-account/charges-and-interest-rates

So it looks like you're OK with ETFs, but not funds.

One factor worth considering (as your stache grows) is whether it's prudent to minimise risk of a broker failing by spreading investments across multiple accounts. I'm thinking as much about fraud, or a particular site being down when you need to access it, or some admin problem as much as the possibility of the bank/brokerage themselves going bust, where you have government protection up to 75k (and supposedly all client shareholdings are ring-fenced anyway.)

FI-42

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Re: UK Investors: What index fund are you buying and how?
« Reply #13 on: January 02, 2016, 01:24:27 PM »
Damn, you're right.  It's in an ISA but since I've only just started investing maybe I can tolerate it for the first year (15000 x 0.45% = 68.)  Once we start getting up the 60k invested or if we have more than 15k to invest in a year I'll set up another ISA for the OH.

That 75k limit is something to seriously think about.  I think you can make 10k or so capital gains tax free in a single year so moving some out of an ISA at above 100k might be wise I suppose?  That's a number of years of for us though at the moment.

cerat0n1a

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Re: UK Investors: What index fund are you buying and how?
« Reply #14 on: January 02, 2016, 02:56:39 PM »
You don't have to worry about capital gains (or income) tax on money that's in an ISA. You can transfer ISAs in whole or in part between providers although there may be fees involved. You can subscribe to an ISA with one provider for one or more years, then use a different provider.  So for example, I put new money into a high street bank's service from 2010-2012 and those investments are still there, but switched to one of the other brokers for 2013-2015 subscriptions. Just makes the admin slightly more difficult as I have to look in multiple places to keep track.

Woody Viet

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Re: UK Investors: What index fund are you buying and how?
« Reply #15 on: January 03, 2016, 04:23:02 AM »
Damn, you're right.  It's in an ISA but since I've only just started investing maybe I can tolerate it for the first year (15000 x 0.45% = 68.)  Once we start getting up the 60k invested or if we have more than 15k to invest in a year I'll set up another ISA for the OH.

That 75k limit is something to seriously think about.  I think you can make 10k or so capital gains tax free in a single year so moving some out of an ISA at above 100k might be wise I suppose?  That's a number of years of for us though at the moment.

You're right on the capital gains allowance. You and your OH get 11k this year which is separate from your personal allowance on income. Pretty sweet in all honesty and very overlooked. Monevator wrote a great article on how one of the best things about ISA's is how you don't even need to report the tax, which is a nice bit of work you can avoid!

Choosing the right broker is the kind of thing which has no right answer as every few years their rates will shuffle around and someone else will be a bit better. Right now I think the cheapest way to track the UK market is to buy a vanguard ETF at an execution only dealer (see my post above).

I would also limit myself to large cap as the small cap sector seems very overpriced compared to historic norms. On average over the past 50 odd years small cap shares have been selling at a 40% discount to large caps. Looking at MSCI's data they are now at a a 50% premium. Small cap's have until the recent past never reached such a high valuation relative to their large cousins. This is only my personal opinion but I think that the small cap premium in the UK right now is almost certainly negative and that is a strong reason to avoid them in my book. You also save a little on fees by just going with the big boys.

I think you're definitely on the right track to place such an emphasis on expenses. When it comes to ETF's and fund's there is honestly very little difference in expenses (especially Vanguard. I used ETF's while building my parents portfolio as the overall cost for buying and maintaining them was lower. Had fund's been cheaper, they would have gotten the vote). With ETF's, something to keep an eye out for is the bid-ask spread, which acts as a transaction cost. This is especially true for smaller ETF's where the spread can easily reach around 1%.

RobFIRE

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Re: UK Investors: What index fund are you buying and how?
« Reply #16 on: January 03, 2016, 06:03:28 AM »
Question above re HL fees wasn't fully answered: funds / ETFs / trackers have a % annual fee, used to be called AMC / TER now called OCF / OCR. The OCF / OCR is the total costs, fees, charges that the fund provider/manager takes per year (fund unit price reflects all these costs). However, with some providers like HL there is an additional "platform fee", in the case of HL it's 0.45% per year for all funds. But the % platform fee does not apply to ETFs, individual shares.

So your total cost for a fund with HL is OCF + 0.45%. Whereas flat-fee platforms charge 20 a quarter, or 100 a year or so. Clearly when your fund investments are 50k or more, you would want the flat fee structure not the platform % fee to minimize costs.

It may be that HL offer additional investment/trading options, so if you want to invest/trade actively or you won't have much money in funds, the HL platform fee may seem reasonable/not relevant for you.

Though to complicate matters further HL do offer a "rebate" on some funds, e.g. half of OCF is returned to you (I assume the rebate is periodically used to buy you extra units, I don't know).