Low interest rates on savings

[teuchter]

Correct. Overpaying your mortgage by £1000 when it's 90% paid off will net you much smaller gains than overpaying by £1000 when it's 1% paid off thanks to the magic of compound interest. At some point there's a break-even where regular investments will return more for your £1000 (but do come with associated risks).

That's not quite what I mean though - I mean that if you've got 20yrs left on the mortgage, and you decide to invest for 5 years rather than pay off, and after that 5yrs your strategy has not worked because your investment has lost value, you've still got 15 years to try and sort that out by leaving the investments to hopefully recover in the long term before you come to the crunch point of actually having to pay the bank the full amount you owe them.

 

[teuchter]

So... what about choosing a platform. Various have been mentioned in this thread. Vanguard, Interactive Investor, Hargreaves Lansdowne, Nutmeg.

Is there any point in me expending effort in deciding which platform is the best bet or should I just pick one and then spend my time choosing the funds within it, instead? Are they all much the same in the end?

I think I am keen to try and pick 'ESG' stuff. Will all platforms offer that option or are some better for that than others?

 

[kabbes]

So... what about choosing a platform. Various have been mentioned in this thread. Vanguard, Interactive Investor, Hargreaves Lansdowne, Nutmeg.

Is there any point in me expending effort in deciding which platform is the best bet or should I just pick one and then spend my time choosing the funds within it, instead? Are they all much the same in the end?

I think I am keen to try and pick 'ESG' stuff. Will all platforms offer that option or are some better for that than others?

Platformwise, go cheap, big (because although your money is safe enough, which wants the hassle?) and flexible.

Cheap depends on how much you’re investing and how active your trading will be. Interactive Investor are good if you have a lot to invest because it’s a flat fee and they have a very wide range of funds to choose from (including lots of a ESG). Lower amounts and it may be worth the % charged by other platforms. Most of the big ones, like HL as well as II will offer plenty of ESG funds. You can find out before committing, in any case.

Some platforms are good with their service, like having a good app, for example. I don’t care about that but maybe it’s worth something to you,

 

[platinumsage]

So... what about choosing a platform. Various have been mentioned in this thread. Vanguard, Interactive Investor, Hargreaves Lansdowne, Nutmeg.

Is there any point in me expending effort in deciding which platform is the best bet or should I just pick one and then spend my time choosing the funds within it, instead? Are they all much the same in the end?

I think I am keen to try and pick 'ESG' stuff. Will all platforms offer that option or are some better for that than others?

Interactive Investor and Hargreaves Lansdown (and the likes of AJ Bell and iWeb) are proper platforms, you can invest basically anything you'll want to on them. The principle difference between them is the fee structure which varies considerably and means different platforms will suit different people.

Vanguard and Nutmeg only offer a limited range of choices, in the case of Vanguard their own funds, and Nutmeg a small handful of tailored solutions.

 

[strung out]

So... what about choosing a platform. Various have been mentioned in this thread. Vanguard, Interactive Investor, Hargreaves Lansdowne, Nutmeg.

Is there any point in me expending effort in deciding which platform is the best bet or should I just pick one and then spend my time choosing the funds within it, instead? Are they all much the same in the end?

I think I am keen to try and pick 'ESG' stuff. Will all platforms offer that option or are some better for that than others?

Platforms like Nutmeg are what's known as robo investors. You pick a risk level and they do all the fund selection for you. The fees are slightly higher, but I think they do have ethical options if you want.

Vanguard has some of the cheapest fees and is specifically geared towards making investing accessible without ripping you off. I think they just launched a globally diversified ESG fund. You are restricted to using only Vanguard funds, which isn't necessarily a bad, thing - their funds are good, but I don't know what other options they've got for ESGs.

Hargreaves Lansdown is the biggest and most well known UK broker, with excellent support and a good user experience. You can buy a huge number of funds, and buy shares in most publicly traded companies. It does come at a slightly higher price though. I use them because I like the mix of good user experience and reasonable fees. I do just buy Vanguard funds with them though.

Additionally, think about whether you want to invest with an ISA, SIPP, LISA or general investment account, as fees and availability may differ between providers.

 

[platinumsage]

ESG isn't platform-specific, in the same way you can buy organic food in most food shops.

 

[teuchter]

I think I want something that requires the least active intervention from me. So I think that means I will be looking at "passive tracker" funds (??).
I assume that unless I was wanting to invest more than £20k there's no reason to do it within anything other than ISA?

 

[kabbes]

Oh yeah — with Interactive Investor, your fee buys you an ISA trading account and also a non-ISA trading account, in case you have more than £20k a year to invest. Like with a bank account, you’ll just see both trading accounts listed on the same page. I’m not sure that other platforms necessarily offer that.

I’ve been with II for years and whilst their website visuals are a bit 2010 and they have no app, their actual investment platform is excellent as well as cheap.

 

[platinumsage]

I think I want something that requires the least active intervention from me. So I think that means I will be looking at "passive tracker" funds (??).
I assume that unless I was wanting to invest more than £20k there's no reason to do it within anything other than ISA?

A Vanguard ISA sounds like a good place to start. It's a simple set-up with no trading fees. Once your total investment hits £100K (and your fees therefore equal £150/year) then somewhere like Interactive Investor might start to look more attractive.

It's pretty easy to switch so I wouldn't spend too long agonizing over it now.

 

[kabbes]

I think I want something that requires the least active intervention from me. So I think that means I will be looking at "passive tracker" funds (??).
I assume that unless I was wanting to invest more than £20k there's no reason to do it within anything other than ISA?

Yes to the last question.

Neither active nor passive funds really require intervention. But passive funds also require minimal research up front because they are diversified by design.

If you want ESG passive trackers (and ETFs, which are similar), you’ll probably want to split them over multiple managers because it’s a bit more niche than, say, a FTSE All-Share tracker. For that reason only, is probably worth looking beyond the Vanguard platform. If you just want a range of different types of tracker, though, Vanguard do it all and cheaply.

 

[platinumsage]

Vanaguard offer some ESG stock funds that should be more than enough for most people starting out e.g.

ESG Developed World All Cap Equity Index Fund

 

[teuchter]

If you want ESG passive trackers (and ETFs, which are similar), you’ll probably want to split them over multiple managers because it’s a bit more niche than, say, a FTSE All-Share tracker.

I'm not sure I understand what this means.

 

[kabbes]

I'm not sure I understand what this means.

A FTSE 100 passive tracker is easy and uncontroversial to manage. You just own shares in all 100 companies in proportion to their value.

A FTSE All-Share tracker is a bit harder because that’s probably too many companies to own all of, but you can do some clever things to approximate the bottom 5% or 10% by value.

A whole-world tracker is harder still, but again, you can approximate.

It’s much harder for tracker managers to create things like “ESG” trackers because now they also have to make subjective decisions about what should even be included in the tracker in the first place. Then they have to find a way to approximate it. Vanguard might make different decisions to other managers about what should be included. For that reason, you might want to have a platform where you can pick trackers from multiple managers.

(ETFs are a bit like trackers or other funds but they operate like tradable shares rather than normal funds. It’s another way of getting exposure to what you’re interested in. Platforms like HL and II offer them as well as funds).

 

[stdP]

That's not quite what I mean though - I mean that if you've got 20yrs left on the mortgage, and you decide to invest for 5 years rather than pay off, and after that 5yrs your strategy has not worked because your investment has lost value, you've still got 15 years to try and sort that out by leaving the investments to hopefully recover in the long term before you come to the crunch point of actually having to pay the bank the full amount you owe them.

Not really, because if you'd put the money in to the mortgage instead you'd have been paying much less in terms of interest over those five years and would have paid off your mortgage sooner too. If you lose a bet, you can't make another bet on the assumption that it'll win this time. S'why putting money on the mortgage overpayments is a sure thing whilst any stock investment can be risky.

 

[platinumsage]

It’s much harder for tracker managers to create things like “ESG” trackers because now they also have to make subjective decisions about what should even be included in the tracker in the first place. Then they have to find a way to approximate it. Vanguard might make different decisions to other managers about what should be included. For that reason, you might want to have a platform where you can pick trackers from multiple managers.

Not so much. Trackers by definition track an index, so the fund managers don't do anything substantive apart from pick an index to track (without delving into tracking error). It's the index people who make the decisions on what to include in ESG indices. The index people are basically a duopoly of FTSE and MSCI, and there is typically not much difference between them, apart from stuff like whether South Korea is an emerging market or a developed one.

I don't see any reason for a novice investor to juggle funds from multiple managers solely because they want to restrict themselves to ESG funds.

 

[teuchter]

A FTSE 100 passive tracker is easy and uncontroversial to manage. You just own shares in all 100 companies in proportion to their value.

A FTSE All-Share tracker is a bit harder because that’s probably too many companies to own all of, but you can do some clever things to approximate the bottom 5% or 10% by value.

A whole-world tracker is harder still, but again, you can approximate.

It’s much harder for tracker managers to create things like “ESG” trackers because now they also have to make subjective decisions about what should even be included in the tracker in the first place. Then they have to find a way to approximate it. Vanguard might make different decisions to other managers about what should be included. For that reason, you might want to have a platform where you can pick trackers from multiple managers.

(ETFs are a bit like trackers or other funds but they operate like tradable shares rather than normal funds. It’s another way of getting exposure to what you’re interested in. Platforms like HL and II offer them as well as funds).

Thank you (honestly) for the explanation.

But reading this kind of stuff and trying to understand it just makes me feel like the life force is draining out of me.

If I look at the Nutmeg website I can quickly find this, for example.

Socially Responsible Investing (SRI) - Open Today | Nutmeg - Nutmeg

Invest in a socially responsible (SRI) portfolio, built for environmental, social and governance (ESG) criteria. Know where you stand with ESG scoring.

www.nutmeg.com

I can see basically what it is, use a slider to see what kind of effect the risk level has on returns historically, and type in an amount to invest and see exactly what fee results from that. This appeals to me.

I'm going to try looking at the Vanguard and Interactive Investor sites and see to what extent doing so makes me want to throw all my money in the sea and live in a cave somewhere.

 

[teuchter]

If I look at Vanguard...

Vanguard Asset Management | Personal Investing in the UK

www.vanguardinvestor.co.uk

It tells me I can pick a "Life strategy fund (Keep investing simple with a ready-made fund portfolio that spreads your investments around the world.)"
That sounds like what I want... but there seems to be no ESG / ETF option.

Therefore I have to look at "Build your own portfolio (Choose from over 75 individual funds – including ETFs, active funds and index funds.)"
Now I am given a list of 75 funds which I can narrow down to 22 if I filter by ETF, Index rather than Active, and other choices left as the defaults (Asset class? Who knows)

So am I supposed to pick a few of these, using my essentially zero knowledge of, and interest in, the stock market?

Doesn't feel right to me.

 

[teuchter]

And now Interactive Investor

They have "model portfolios" including an "ethical growth" one

Insight and Ideas - ii

We bring you impartial, expert intelligence from our specialists, so you can make better investment choices.

www.ii.co.uk

But I don't think this is equivalent to the Nutmeg thing, because it just seems to be a kind of recommended portfolio.

Please note: these are "model" portfolios only: they are not directly managed by ii on behalf of its customers. ii customers wishing to manage their own portfolios in line with these models should follow the suggested switches and rebalancing by logging in and transacting on their own account. The model portfolios do not take into account your circumstances and do not constitute a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised investment adviser.

So, I would have to pay attention to it and each year or more frequently, check up on things and make changes if I wanted to continue following their recommended mix.

It's not something I just choose and then forget about for three or five years, right?

 

[bimble]

I've dropped the ball a bit on this, because i also find it a very unhappy mix of alienating and stressful and boring. I did open an account on Vanguard and put a token money into one of those passive tracker funds, chosen more or less at random, a global one, but i do need to study a bit more before, sometime between this weekend and the middle of May i shall become rich, sort of, beyond someone else's wildest dreams.

 

[kabbes]

And now Interactive Investor

They have "model portfolios" including an "ethical growth" one

Insight and Ideas - ii

We bring you impartial, expert intelligence from our specialists, so you can make better investment choices.

www.ii.co.uk

But I don't think this is equivalent to the Nutmeg thing, because it just seems to be a kind of recommended portfolio.

So, I would have to pay attention to it and each year or more frequently, check up on things and make changes if I wanted to continue following their recommended mix.

It's not something I just choose and then forget about for three or five years, right?

No, you would absolutely buy into their model fund and then forget about it for five years. That’s the whole point.

Yes, their recommendation changes over time. But the point is that at the time you invest, this is the model they recommend. You don’t chop and change, because then you’re losing the advantage of smoothing over the ups and downs over the long term

 

[kabbes]

By the way, there’s nothing stopping you buying the ii model portfolio via a different platform, if there’s another one you find cheaper or otherwise preferable.

 

[teuchter]

No, you would absolutely buy into their model fund and then forget about it for five years. That’s the whole point.

Yes, their recommendation changes over time. But the point is that at the time you invest, this is the model they recommend. You don’t chop and change, because then you’re losing the advantage of smoothing over the ups and downs over the long term

Hrm, but then why do they say

ii customers wishing to manage their own portfolios in line with these models should follow the suggested switches and rebalancing by logging in and transacting on their own account.

 

[teuchter]

i also find it a very unhappy mix of alienating and stressful and boring.

I wondered if there should be a thread on this specifically. It seems like it's not uncommon for people to have this reaction to financial stuff.

 

[teuchter]

Vanaguard offer some ESG stock funds that should be more than enough for most people starting out e.g.

ESG Developed World All Cap Equity Index Fund

So... would it be sensible to simply invest in just this single fund, rather than several funds including this? Does the nature of this kind of fund (passively indexed?) mean that it doesn't amount to putting all of one's eggs in one basket?

 

[bimble]

I wondered if there should be a thread on this specifically. It seems like it's not uncommon for people to have this reaction to financial stuff.

Yes, I am very interested in this. Some of it will be down to our personal idiosyncratic issues (in my case some feelings of guilt at my relative good fortune plus difficulties around being an adult and planning more than a week ahead) .
But i think also that money is the last remaining real taboo, at least in the uk, people are far more willing to talk about their sexual proclivities than for instance ask someone what they get paid / have in savings, its deeply fraught and shrouded in secrecy and avoidance for reasons that i am very curious about.

 

[kabbes]

Yes, I am very interested in this. Some of it will be down to our personal idiosyncratic issues (in my case some feelings of guilt at my relative good fortune plus difficulties around being an adult and planning more than a week ahead) .
But i think also that money is the last remaining real taboo, at least in the uk, people are far more willing to talk about their sexual proclivities than for instance ask someone what they get paid / have in savings, its deeply fraught and shrouded in secrecy and avoidance for reasons that i am very curious about.

That’s why I’m doing my best to bust the taboo ss straightforwardly as possible!

 

[kabbes]

Hrm, but then why do they say

Because you can’t do anything in financial circles without caveating the fuck out of it. They’re warning you that if you want your portfolio to remain the same as their ongoing recommendation, you’ll need to do the work to keep it that way.

 

[baldrick]

Oh yeah — with Interactive Investor, your fee buys you an ISA trading account and also a non-ISA trading account, in case you have more than £20k a year to invest. Like with a bank account, you’ll just see both trading accounts listed on the same page. I’m not sure that other platforms necessarily offer that.

I’ve been with II for years and whilst their website visuals are a bit 2010 and they have no app, their actual investment platform is excellent as well as cheap.

They do have an app, I don't know where you have got that from. I used it to buy additional funds the other day!

I will say, when I signed up to ii I had less than zero idea what I was doing. I had no idea whether it was good value and actually no idea that 'good value' was a thing I should have been considering when getting a stocks and shares ISA. I don't think it's the cheapest one out there but it has everything you could want.

 

[kabbes]

Okay, they don’t have an app that is worth the effort of downloading it.

 

[platinumsage]

So... would it be sensible to simply invest in just this single fund, rather than several funds including this? Does the nature of this kind of fund (passively indexed?) mean that it doesn't amount to putting all of one's eggs in one basket?

That one fund is enough for your stocks allocation, it contains over 4000 companies in multiple countries so certainly isn’t all your eggs in one basket.

What it doesn’t have and what the Lifestrategy you funds mention above contain is any allocation to bonds. Whether you need or want a proportion of bonds in your portfolio is something the Nutmug risk questionnaire is designed to determine.

Perhaps you should start with Nutmug and then you can always switch to a different platform at a later date if you find you have acquired the confidence to do so.