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The HfP chat thread – Saturday 3rd April

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We are running this daily chat thread on Head for Points during the coronavirus outbreak.

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Comments (226)

  • Mo says:

    I have a LISA with AJ Bell and currently a large amount of the money is sitting in cash.

    I wanted to just put it all in a global acc fund as I’ll be starting a job in finance soon and didn’t want to bother with too much faff in declaring everything.

    I was thinking either Fidelity Index World Fund Acc (0.12% annual charge) or Baillie Gifford Global Alpha Growth Acc (0.59% annual charge)

    The former aims to track MSCI World index and the latter aims to beat by 2%+ and it has done better than the fidelity one over the last 1/3/5 years and better than MSCI World over the last 1/3/5/10 years (by considerable margins)

    Charge is higher but it seems to perform better, however of course it may not continue to do so.

    Any advice or even alternative funds that can be bought on AJ Bell Youinvest?

    • Harry T says:

      Vanguard FTSE Global All Cap

    • Anuj says:

      There’s also vanguard ftse global all cap on aj bell

    • BuildBackBetter says:

      For passive funds, the above options are good.
      For active, I’d suggest BG Managed growth – 80% equities and rest in bonds / cash.

    • Mo says:

      Was considering a Vanguard fund but the global one has fees of 0.23% which is almost double that of the Fidelity one.

      The benchmarks are different FTSE Global All Cap vs MSCI World but they seem to be quite similar at least in terms of returns over the longer term. Wondering if that’s worth it.

      • Mo says:

        Also I should mention the BG Global Alpha Growth one is active, hence the higher fee, is that the one you meant @Buildbackbetter?

        • kitten says:

          I’d go a bit easy on BG next year – 18 months. Unless you think that passive investing is going to follow global markets down – ie if you think thats where global is headed – if you’ve got a new job to worry about why not move as little as possible except to passive ang global as smart people here have been suggesting. You can always review in 12 months.

        • BuildBackBetter says:

          No, BG managed growth is a different fund and slightly less risky due to bonds component.

      • AndyW says:

        The differences between global developed indices between MSCI and FTSE are not worth worrying about. Broadly it’s some smaller country classification, and other little
        bits you don’t need to concern yourself with. If you want passive, just take the cheaper fund. I don’t think anyone here can or should advise further than that, your circumstances, investment horizon, risk appetite etc are going to be different to others.

        • Mo says:

          @AndyW

          Thanks, that makes sense, the higher fee one seems a waste then, and given the uncertainty in the markets I am inclined to go with what Andy has said below about a managed fund, since the BG one seems to have performed well.

    • Eric says:

      If I currently have c.50k on Hargreaves Lansdown in a mix of active funds + mutual funds, do I really have a better option out there in terms of fees? I guess HL is beneficial because of the range of funds but trying to minimize all these cost leakage

      • Andy says:

        I have never gone with HL due to their costs – I had Charles Stanley and now Fidelity, which I picked because of their excellent range of funds. HL might have even more, but personally I haven’t found any funds I wanted to invest in not available on either CS/FI. However if you’re not just looking at mutual funds, my impression is that HL offers the most options. And the platform fee is only 0.1% higher, so 50£ per year might be worth the additional flexibility (trading fees should be considered as well, don’t know how HL compares there as funds are free)

      • Genghis says:

        Iweb has no platform fees for all inc OEICs/ UTs

    • Andy says:

      Prefer active funds with solid PMs when markets are volatile as they are likely to be in the short term

    • Genghis says:

      If you’re young and sticking with AJ Bell and maximising LISA, I’d advise ETFs to get the cap on the platform fee. Something relatively easy and accumulating like iShares MSCI ACWI ETF. But run your own numbers.

      But should you be using a LISA in the first place going forward? I’ve posted reasons I don’t like them within the past week.

      MSCI world is equivalent to FTSE Developed World (bar S Korea and Poland). No EM (which would then be FTSE All World or MSCI ACWI) No small caps (which would then be FTSE Global all cap, no MSCI equivalent available I don’t think). Understand what you’re buying.

      • PK says:

        I have my trading account at Fineco. Does anyone here use it? I would appreciate some fund recommendations on Fineco’s platform.
        Thanks.

      • Genghis says:

        Was meant to say, there are the Vanguard accumulating ETFs but the spreads on them are huge.

      • Mo says:

        @Genghis

        Thanks, just had a look through and found your comments.

        For context, I’m 23 and just graduated last summer so starting my grad job now.
        I’ve put money into the LISA the last few years by saving my student loan and my thinking was that as I’ll still be a basic rate taxpayer putting money into a LISA vs SIPP is very similar due to same uplift but if I stick with LISA for now it’s one less thing to manage.

        55 vs 60 age to withdraw seems not too big an issue, given the restriction on a pension of only first 25% being tax free.

        I am however going to max out my employer pension and plan to open a SIPP when I get to the higher rate threshold. Once I can max LISA + SIPP I plan to put the rest into a standard S&S ISA to access whenever as I do hope to retire before 55.

        All that plus a buffer of easy access savings (I’m thinking of working up to 12 months of expenses) is my plan, do you think I’m approaching it incorrectly?

        • Genghis says:

          I think you’re very much on the right track. Starting early is great – I wish I’d started as early as you!

          When you start work, try to pay into the pension scheme up to the employer match, ideally through salary sacrifice if available (so you save EE NI) and ask if they’ll pay ER NI saved too. Analyse costs of this pension scheme. If it’s v expensive, consider moving to a SIPP on a regular basis. If it’s cheap (say less than 0.4%), then just leave where it is. For reference, two employer schemes I keep charge 0.12% and 0.13% all in. But you don’t necessarily need a SIPP.

          Think about your short to medium term goals. You may want to buy a house (LISA a good vehicle but depending on when you’ll be buying depends on what you should be putting into it) / get married etc so having a reasonable amount of cash may be an idea.

          After you’ve paid into pension, got cash savings going, then I’d recommend ISAs that you can access anytime (not just at 57/58 (maybe) / 60+. If you are made redundant in your late 40s you still can’t access your pension. There’ll be less political meddling with ISAs than any other vehicle, I reckon.

          I remember seeing this flowchart from the Monevator site to Reddit, which I thought was good for those starting out.

          https://imgur.com/BfHzwr9

          Read some good books: two I’d recommend to newbies are Reset by David Sawyer and Investing Demystified by Lars Kroijer.

          Hope this helps a bit.

          • Mo says:

            Last reply went right to the bottom so will post again here

            Had to be very money conscious early on and it’s just stuck a little (despite my mum thinking I’m quite fast and loose with my money by her strict standards haha).

            Makes sense with the SIPP vs employer pension, I suppose if it’s low cost it’d make it easier to have just that than another thing to think about and declare to them

            Definitely planning on maxing my company pension, couldn’t turn down free money, just a shame its capped at a certain salary!

            I am planning to hopefully get on the property ladder just before the htb loan scheme ends, though I’ll have to consider if the new build premium is worth it as I plan to keep for ~5 years and sell around the time the gov loan starts charging interest.
            I’m planning to keep the LISA for longer term though, not the house deposit.

            For a S&S ISA, the chart mentions if you feel like you’re on track for a £1m+ pension you should put money into one, at what point do you think this should be done?

            Thanks for the resources, I’ll have to try and find those books 🙂

      • Reney says:

        sorry if this is a dumb question, AJ Bell charges £1.5 for buying funds and £9.95 for buying ETFs. If you can buy passive global balanced funds and global balanced ETFs; why would you advise investing in ETFs over funds. I have never purchased ETFs before, research tells me the cost is lower, is that what you mean by run numbers – see if long run costs beats the higher trading costs?

        • Genghis says:

          Run the numbers means just that, doing some calculations.

          One off fees are generally meaningless once you run the numbers.

          The numbers that add up are the ones you pay every year.

          So if you put £4k into a LISA which gets topped up to £5k over 10 years, assuming no growth you’ll have £50k.

          By year 10, if an ETF you’ll have paid say £100 trading fees and will be paying a £42 platform fee (fixed), every year. If an OEIC, you’ll have paid say £15 trading fees but will be paying £125 platform fee, every year. That delta only grows. You’ve obviously got the fund OCF + transaction fees on top of all of this.

          • Reney says:

            The example is super helpful. Thx

          • Genghis says:

            Whilst there’s lots of personal finance websites out there, I think there’s a gap in the market for the basics of getting started with proper solid information. I’ve been thinking of starting a basic site.

          • CH says:

            Completely agree with this. I find myself explaining some basics to my friends/colleagues, and I’m aware my knowledge about it is pretty primitive too.
            I’d love a basics site!

    • Harry T says:

      @Mo you sound like you’ve really got your head screwed on, considering you are only 23 – I wish I’d had the same mindset and insight. Genghis’ advice is always solid.

      @Genghis I would definitely be interested in reading that website, I think it’s a great idea.

      • Mo says:

        Thanks Harry, though I can’t lie I sometimes feel old already haha

        And I’d be another person definitely interested in a basics site Genghis!

  • Gavin says:

    Applied for and received Amex Plat via a 50k referral link today. Set up my online account but can’t see any reference to the signup bonus or spend countdown, is this normal?

  • Tracy says:

    Looking at booking Marriott Malta for august. If I book a 2 bed room for 4 people for cash there is an additional person fee. If I book using points I can’t see any mention of it, will it still be charged? It’s £560 for the week….

  • Greenpen says:

    When I was 23 I blew all my money on sex an’ drugs an’ rock and roll. Doesn’t do you much harm long term and it’s great fun.

    • Colin MacKinnon says:

      I blew other people’s money as well – that was even more fun!

    • Mo says:

      Clubbing and alcohol is very cheap up north!

  • BJ says:

    New W Edinburgh opening at St James Quarter in Edinburgh next year. There is aldo a Roomzzz aparthotel but don’t know when it opens. Very convenient for Waverley Station, Coach Station and Tram at York Place.

    • Harry T says:

      I am very excited for the W, BJ. I’ve had surprisingly good experiences at the two I’ve visited (London and Amsterdam). Will be a lot of fun to have a W just down the road.

  • Mo says:

    Had to be very money conscious early on and it’s just stuck a little (despite my mum thinking I’m quite fast and loose with my money by her strict standards haha).

    Makes sense with the SIPP vs employer pension, I suppose if it’s low cost it’d make it easier to have just that than another thing to think about and declare to them

    Definitely planning on maxing my company pension, couldn’t turn down free money, just a shame its capped at a certain salary!

    I am planning to hopefully get on the property ladder just before the htb loan scheme ends, though I’ll have to consider if the new build premium is worth it as I plan to keep for ~5 years and sell around the time the gov loan starts charging interest.
    I’m planning to keep the LISA for longer term though, not the house deposit.

    For a S&S ISA, the chart mentions if you feel like you’re on track for a £1m+ pension you should put money into one, at what point do you think this should be done?

    Thanks for the resources, I’ll have to try and find those books 🙂

    • Genghis says:

      There’s no right and wrong answer.

      You can project out what might happen but it’s only that, a projection.

      I’ve modelled my pension vs future lifetime allowance based on current freeze and then increasing by CPI after 2026 and I’m due to hit LTA well before retirement age, but there are too many variables: what return will you get, will you continue to be employed and contribute, what political intervention will there be, what will happen to the LTA itself and any increases etc.

      All you can control is how much you contribute.

      For the moment, I’ll continue contributing (it makes sense tax wise) and then stop contributing once get to LTA.

      • Harry T says:

        I hope the lifetime allowance gets increased, to be honest. But who knows what the future holds.

        • BJ says:

          The Future is Orange … or at least it once was.

        • kitten says:

          The LTA always looked too low even when it was launched at a much higher value. In a lifetime’s saving inflation was always going to roll up and take someone in a position to save seriously, out of its protection.

          The fact that pensions and CGT were both left out of the very recent “Tax Day” tells me unfortunately Rishi may be planning a much bigger revamp. It will be interesting to see how all the political interests are balanced with economic sense when we do see the result on these.

          • Genghis says:

            Finding a suitable framework will be challenging.
            Eg having an annual allowance for DB schemes doesn’t make sense. Having a LTA for DC schemes doesn’t make sense.

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