Ask your beginners questions here 🐣

(Chris) #282

The short answer is no, it’s not a good strategy. I can’t remember the exact % but I remember a study that suggested it was a good way of losing money.

Essentially this is what traders do, buy and sell over very short periods of time. Traders have 2 massive advantages over retail investors when it comes to this:

  1. experience - they know when this works and when it doesn’t and are generally better informed than you or I on any specific stock
  2. scale - they buy and sell in the hundreds of thousands & millions. This gives them buying power to buy a lower price, maybe only a penny on each share. That penny can translate back to thousands of profit and job is done. Retail investors have no buying power, we get the price the market gives us so this strategy usually ends up badly.

With retail investing, you are usually (not always) being in the game for the long term, not short term. Short term the odds are stacked against you, quite heavily

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(Fabulous) #283

Let’s say i want to invest in the spdr s&p uk dividend aristocrats fund. The Ongoing charge is 0.30%.
My question is how do I pay this charge?

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(Alex Sherwood) #284

Great question, we’ve answered that one here - How are ETF fees collected in Freetrade? just let us know if there’s anything else you need to know :slight_smile:

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#285

So you’re saying that because there are investors with more capital/experience competing with me I’m at a disadvantage in trying to make money off buying and selling dividend stocks quickly to exploit the dividend date ? Fair enough.

What would be the best way to approach dividends with sub <1k GBP? Hold them long term? Or not to do at all? Holding index funds long term seems to be the only ‘safe’ bet. As you said, short term for low capital investor is a losing proposition.

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#286

As an alternative to picking individual shares, one way to approach dividends might be to invest in an index tracker ETF which pays dividends or an investment trust.

For example (not a recommendation): £1k in City of London Investment Trust (CTY) would pay a quarterly dividend of around £10 (dividend yield of around 4.15%). .

Some ETFs may pay a higher yield so please do your own research.

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(Jim) #287

I tried this strategy in my younger days. No.

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(Chris) #288

Indexing gives you instant diversity so your risk is lowered (not removed) so is typically a common approach. If dividends is what you crave then (assume you’re a new Investor) then I’d go with the index funds and dividend aristrocrat funds.
Once you understand how the markets work you can start to work into individual company stocks.

Jim Cramer offers some good advice, you’re first 10k should be in index funds. That gives you a safety net to make mistakes when going for individual stocks.

Hope this helps

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(Lewis) #289

How does EIS relief work?

Say I earn £60,000 and invest £5,000 in a company.

From what I understand, 30% of my investment would be tax relief. So 30% of my investment would be £1,500. Does this mean my personal allowance is essentially increased by £1,500? So I wouldn’t have to pay 40% tax on that money that I earn? Is that reflected my a tax code change or something?

Assuming the company goes bust, how does loss relief work? (What would be the most I could lose be, I tried a calculator and it came to £1,200 but I’m not 100% sure the figures I put in were correct as I don’t fully understand it)

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(Jim) #290

Seedrs have a good guide.

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(Vladislav Kozub) #291

No, because increasing your allowance would only mean tax saving of £600 (assuming higher rate) that you would have paid otherwise. Relief is an actual refund of your income tax paid in a year.

Loss relief is quite basic: 40% [your tax band] * (£5,000 [what you invested] - £1,500 [what you got as your tax relief as soon as you invested] ) = £1,400.

Once you invest £5,000, you get £1,500 immediately, regardless of your tax rate band. If the worst happens, you get 40% of the difference as a further income tax relief. Thus, you will lose 42% of your original value in the worst case scenario.

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(Lewis) #292

Thank you, that’s very helpful!

Actually makes it a lot less risky to invest if EIS is in place, glad I found out about this.

Edit: Actually have one more question, I see you can claim relief for the past tax year. Is there any benefit or reason to do this?

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(Emma (#20 😎)) #293

So I’m guessing that means it’s no use to me since I earn below the threshold of even basic tax rate?

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(Jim) #294

If you hold them for three years + and ( theoretically ) sell at a large profit no Capital Gains Tax.
ETA : I would assume that the tax relief would still need to be claimed via HMRC ( even though none is due )

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(Vladislav Kozub) #295

Imagine you paid £0 tax this year and £10,000 tax last year. You would be wise to claim against your last year’s tax.

You will not gain any relief at first, but filing an EIS3 will let you claim loss relief if you need one. Also, as @Jim_mcgrain mentioned, it lets you avoid any CGT and thus it is always beneficial to claim your benefits regardless of the income tax circumstances :slight_smile:

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(Alex Sherwood) split this topic #296

2 posts were merged into an existing topic: Android - Incompatible with all my devices

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#297

Got a few Questions -

  1. Is there any difficulty closing the ISA account? Thus stopping the payments.
  2. I keep reading about purchasing stocks and the trade happening at the end of the day. What’s the point of this? Don’t you want to strike the deal at the price you see in real time. How can we ensure we’re doing instant trades (I’ve yet to purchase anything yet).
  3. I plan investing mostly into a vanguard ETF, and playing around with a few riskier individual stock purchases. For the ETF though, should I just do it via Vanguard? Is there any risk using such a new platform to invest for retirement. A lot can change and what if Freetrade isn’t about in 30 years?

Thanks!

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(Emma (#20 😎)) #298

Point 2 is because the 4pm trade is free. If you’re investing for 5 years plus it makes no difference. For Freetrade it’s easier as they can bundle them together. If you want to have an instant trade just select instant and it’ll cost £1

All your investments are covered up to £85,000

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(Vaidas) #299

15 % is normal dividend tax unless you receive very high dividend per year in this case you already got full ISA account witch allow hide 20 000 every year from taxes , and than best way is just buy growth stocks and you not gone pay higher dividend tax or invest in retirement porfolio ( 30% is only if you not fill up form W-8BEN witch most iportant thing to do before investing and its offered by any broker in UK ) . Highers taxes only apply for some kind of stock,s like partners ships and some others . And it is many ways to escape from higher taxes like open ISA on your wife name even kids if they got 18 years , brothers , sisters, fathers open broker account in third countrys …

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(Vladislav Kozub) #300

You simply message the support team and they help you with that :slight_smile:

As Emma explained, at the point of order, you choose whether you’d like an instant transaction or an end-of-the-day one.

Once again, as Emma said, you are 100% protected for up to £85,000 in case of Freetrade’s bankruptcy.

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#301

Thanks Emma & Vlad. Happy with all those answers. I’d be doing well to make over 85,000.

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