So I had a few questions I wondered If people could help me with!
Just a background I own my own company paying myself 8k salary and taking the rest as dividends. Due to this, I have invested a lump sum once a year for just one year so far hah
I am aiming for stable growth, low risk, Just something that beats my pitiful 0.6% savings rate without having to keep an eye on it.
With this in mind, ive gone for a really simple (and im sure flawed ) plan of just picking stocks where I am either a customer or have dealings with in my day to day life, so its easier to understand their business model and how its going. In addition, I have since added some ETFs, especially interested in dividend ones.
So
people talk about low cost etfs, how do I decide if the costs are fair from the costs and charges sheet
why do some sometimes have negative costs?!
what are the best low cost etfs on freetrade
people talk about 2k dividend allowance, is this seperate from my business dividend allowance or shared ?
I have an isa, what tax do I actually save and how Can I model a prediction of this
the broader the ETF the lower the cost ⌠usually. It really just depends what youâre happy to pay. Most broad index tracking ETFs are âcheapâ <0.3% but it just depends what you want to invest in and if you believe the cost is favourable.
the costs and charges sheet is calculated on a yearly basis if I remember correctly. The transaction costs are sometimes a negative which I think is what youâre referring to, but theyâre not actually a negative cost, you wont see money appear in your account. This has something to do with how the calculation is made. the funds are required to make this document and use a specific calculation, and information is sometimes not actually very helpful. thatâs not the funds fault.
one for your accountant I think. Iâve no idea. unless someone else knows.
All the that may be applied to gains from stocks or dividends is gone. to make a model youâd have to consider how youâre investing, how often, how much etc. track those transactions and calculate your CGT. If you donât have an ISA, you pretty much have to do this so you accurately report tax and of course take into consideration anything that may alter those calculations based on how to take money from your business.
I donât think Iâve ever seen negative costs, are you sure you were looking at the right thing? Share a link if you can?
As for the best ETFs, that depends on what youâre wanting to invest in. Since youâre looking for a lower-risk fire-and-forget fund, Iâd suggest a global tracker for maximum diversity, you get a little bit of most countries and all industries. See the list above for some good candidates. If you are on Freetradeâs free package then any of the ETFs from Vanguard, iShares, and Invesco are available to you.
The dividend allowance is just one allowance for all dividends you receive, including those from your own company.
If you have an ISA, any income you get from shares held in the ISA, whether dividends or gains from selling shares, is not only not taxable, you donât even have to report it on your tax return.
Not advice, just what Iâve picked up since Iâve been reading here this month;
Canât go wrong with Vanguard All World, a nice, broad ETF that goes well for most the part. The fee is slightly higher than some people like (0.22) but it covers the developed and emerging markets, so if thereâs just one ETF you want to go for, this one is probably worth a look. The VWRP is the accumulating fund (reinvests dividends back into your holdings).
You can choose to go from there if you want to invest in other markets, places like Japan (SJPA, 0.10% fee) or if youâre happy for a little bit more risk; Emerging markets ETFS (they focus on China, India etc, potential future economic powerhouses), and offer the potential of higher gains.
But again, those are just potential additions.
You might consider breaking it up and investing per-month rather than just the one lump sum. From various discussions on here and other places, it appears more cost-effective to drip feed in over the year, but again, this is only something to consider.
Thatâs usually the way to go with stock picking - being a customer, knowing the products etc. Otherwise youâre going to have to put in lots of time to do your research and end up sucked into the trading game, which you may not want to do at all.
The higher dividend ones tend to be âaristocratsâ ETFs, if you search for that in the app youâll get some hits, some of them are locked behind a PLUS account, but if you go through the âDiscover â See All - > Stock ETFsâ on the app youâll bring up the entire list of ETFs on the app, and you can see the âHigh dividendâ Etfs there.
It is up to you whether you think the dividends they pay out are worth it though, I think many of them are just 2-3%, and some will feel it is better to invest in Accumulating ETFs if youâre here for the long term. Again, up to you, but have a look at the list on the app and youâll have lots to read up on.
In my limited experience so far 0.1-0.30 seem to be low cost. The 0.1 or 0.01% tend to be on bonds though. Anything going higher than 0.30% would make me consider backing off. And anything 1% or higher is unlikely to be an ETF or would make me ask questions as to why it is so high when the competition is cheaper.
Huh! I guess Iâve never dug beyond OCF and never noticed that level of cost breakdown. Iâm sure youâre right, itâs an accounting artifact of done kind.
I cant remember the name, but there was a podcast of report on these calculations a while ago that briefly covered them. Essentially it has something to do with how theyâre required to calculate these numbers that you can on occasion end up with a negative transaction cost. They donât actually have a negative cost, they donât get money back from the transactions but its an artefact of the mandatory requirements to repot these numbers a specific way.
The big weakness in that plan is that the company with the best product isnât necessarily the most profitable company. What you see as a customer is not the whole picture. And youâre excluding companies that sell business-to-business.
Thanks, people often quote the cost of an ETF as 1 figure (eg <0.3%) but freetrade offers âongoing chargesâ and âtransaction chargesâ are they including both in this?
Its weird as most of my ETFs are over 0.3% - 0.5% costs (eg Dividend asritocrats GBDV and nasdaq EQQQ ) but the FTSe 100 one is as low as 0.07
Which vanguard all world? I have 3 that appear and all are FTSE all world VWRL VHYL VWRP
I have freetrade plus - lots of my ETFS are over 0.3% let alone 0.2%!
I like the idea of dividends as it brings a bit of reality to it all. And as inefficient and physiological as it is, the more my app pings with dividends the more ill enjoy and want to inviest more
For quoting, highlight the text and click âquoteâ. I had trouble figuring that out myself!
The ones I always see recommended are VWRL (distribution) and VWRP (Accumulating). As you like the ping for dividends, then VWRL is the one youâd like.
theyâre all separate charges, these have to be reported/updated once a year. OCF if you see this is the ongoing charge figure isnât all charges put together. Worth pointing out that these costs arenât nexissailry the cost today. theyâre the costs last year. They cant necessarily for example know what transaction costs would be like ahead of time.
the FTSE 100 at 0.07% isnât unexpected. If you look at S&P 500 ETFs youâll see theyâre also extremely cheap. Im guessing because theyâre easy to manage and popular so costs are lower per person.
I hold more expensive ETFs BATG at 0.49%, INRG at 0.65% for example, and trusts 0.69% for SMT for example (OCF exploding transactional and incidental costs). I still consider these costs good value
I donât think there is any such list, but look for the ones from Vanguard, iShares, or Invesco. Ah, I see that you said youâre a âPlusâ customer, so youâll have access to more⌠but no, I donât think the sort of comparison table that would be useful to you exists.
Regarding your ETF list⌠personally I think of anything with an OCF of less than 0.3% as ok, and anything above that as âexpensiveâ. Narrowly-focused specialist funds like the battery one are more expensive than generic ones like S&P 500 trackers, and will be higher risk, too.
That tax is levied by the US government and an ISA will not help reduce it.
A tax treaty between the UK and USA does recognise pension schemes, so supposedly you can reclaim withholding tax if the shares are held in a SIPP, but the details of that are beyond my experience level.
