I’m a new time ISA Investor, having just about settled down with a family, home, mortgage and a little cash safety net, which I’d aim to build to cover 6 months expenses which Ive read to be a sensible safety net.
I’d like to take advantage of the historically higher returns offered by investment but, having spent a week or so reading up, still very much bewildered by the options out there.
Freetrade thankfully seems fairly focused with a number of ETFs. I don’t believe it has any actively managed mutual funds. Plus no fees on trades is very attractive if I want to invest little and often.
I’d like to put away a smallish amount each month into stocks and shares with a view to having that grow, whilst also contributing to my cash savings so I have some liquidity available.
However, the information on what the ETFs offer on free trade is limited, seems to be about a Tweet Length description of what’s on offer with no analysis, although it does link to the key documents. I’d like some analysis but don’t want to spend e.g. £99 subscribing to Motley Fool (unless anyone recommends it as a good purchase?)
Would putting a regular amount into, for example, Vanguard FTSE All World Div be a sound approach?
I’d also look to make the odd individual purchase with an amount that I could afford to see diminish if it didn’t grow, e.g. BP currently crashed, but as a strong establish company is likely to rebound over the next few years?
Definitely not looking to make a living out of this, just want to see my cash work harder.
Putting in regular amounts is a sensible approach as it lowers risk, this known as ‘cost averaging’. Instead of getting today’s share price you get the average over a period of time which could be over many years. Global ETF’s are a great way to instantly get diversified exposure to the whole market.
3 whole World ETF’s on Freetrade:
• Vanguard FTSE All World Div - dividend/income stocks, unhedged 0.29% ongoing charge
• Vanguard FTSE All World - unhedged 0.22% ongoing charge
• iShares MSCI World - hedged 0.3% ongoing charge
Stocks (as well as investors) can be separated between growth & income. Income stocks pay higher dividends and are less volatile but have lower growth. These can perform better at certain times in the market cycle however and are considered more safe.
The last 2 are also broad low cost ETF’s the difference between them is mainly the hedging where iShares costs marginally more because of this. Some investors prefer not having the currency risk (and the pound has fallen recently vs the dollar), while other long term investors will prefer the lower cost and ignore currency ups and downs over the years.
In addition to the two posts above, which basically answer your question, I just want to add that if you want to be a passive investor, investing via ETFs is the way to go. You get instant diversification this way. Passive investing is best for those who don’t have the time, interest or skill to pick individual shares.
If on the other hand you understand accounting concepts, have the time to research and analyse companies and have the interest, then individual stock picking could be a good route to take. (And on the BP point, the answer depends on how you see oil doing over the next few years. And also, just because shares in BP have crashed doesn’t mean investors have done badly. This is because of dividends. Have a read of this article to understand further).
Just to be clear, there is no right answer. Both ways work. And even though it might read as such, passive investing is by no way second best. Passive investors by simply investing in index funds have done well over the years and even outperform individual stock pickers!
Thanks for the additional pointers that’s really helpful.
What I was struggling to get good information on was managed funds. If I wanted to look to invest in a managed fund, as opposed to (or possibly as well as) a passive tracker, what’s a good resource for analysis and comparison of the various funds which are available? Google throws up a huge amount of information, so it’s knowing how to pick through that.
Thanks again all. Looks like a really good community here.