Assuming you’re only investing £100 a month, it’d be a very long time before you saw a financial benefit from an ISA. (It might even be a more expensive option – some charge a fixed annual fee).

On the other hand:

1) You save paperwork with ISAs. They are ‘tax invisible’ so you don’t have to fill in self assessment forms etc.

2) You can’t get back ISA allowances you don’t use up in any particular year. So while it might not be very useful to you now, in a few years when you’re rolling in money (let’s hope) you could wish you’d used an ISA.

I have more investments outside of ISAs then in them, and it’s pain in the neck – I wish all my money was ISA-d.

If you’re in this for the long term, use one I’d say. It’s not really any more complicated to wrap your investments in an ISA than not using one, but watch the annual fees and try to find a free option. (Make sure they’re not just taking money out of any tracker income).

Two blogs I’d suggest checking out are http://monevator.com/ and http://money-watch.co.uk/ It’s possible they’d have what you’re looking for (or be able to point you in the right direction).

Now the other dilemma….. do I need a Stocks and Shares ISA even though I am a student, will it save me money? I don’t earn anything at the moment (I study) and I am most probably working for a charity full time for at least 2 years after graduation so I think I will have to resort to going on the dole. So all in all I wont have a decent income for 3+ years. Will this lack of income made it pointless to hold an ISA?

I think I read somewhere that Capital Gains tax (which I think means tax on your profit & dividends) only kicks in if you get over £9,600 in gain. That might be completely wrong though.

I have been looking on the internet pretty consistently for a week now trying to work out wether it would be good for me to do or not but I cant seem to get any answers. I think because I want to invest in Alliance Trust’s Vanguard tracker index I might as well get the tax benefits offered by there ISA’s rather than just settle for a Share dealing account.

I am not sure if all ISA’s across the board have the same rules or are they different for each company?Should I research benefits/disadvantages of Stock and Share ISA’s in loads of different companies?

As usually I have no idea. =) any help would be appreciated.

thanks
joe murray

Let’s say Option #1 is to invest £100 on each of January 1st, February 1st, and March 1st.

Option #2 is to wait and invest £300 on March 1st.

What you’re gaining with Option #2 is lower costs (due to only paying commission once). What you’re giving up with Option #2 is time in the market.

The money that would have gone in on January 1st is delayed by two months. The money that would have gone in on February 1st is delayed by one month.

All I meant is that the average delay time is 1.5 months and that being in the market for those 1.5 months is unlikely to earn a return greater than 3.33%.

Though now that I think further about it, I realize that March’s investment wouldn’t have been delayed at all, making the average delay time just 1 month…. (2+1+0)÷3=1

Short version: Yes, with a £5 fee on a £100 monthly savings, I’d wait and invest every few months rather than monthly.

I understand what you mean about the difference between the £5 creating a 5% commission on £100 monthly and the 1.67% commission on £300 for quarterly investments (the thing I was worried about is that investing quarterly might give me a less accurate ‘cost-average’ throughout the period I invest in compared to the more expensive monthly option. maybe this wont make any difference. I am not sure.

but I dont understand what you say in the second part.

“Half of the delayed money is waiting 1 month before it’s invested; half is waiting 2 months. So the average time you’re keeping the money out of the market is only 1.5 months.”

Could you clear this up?

thanks in advance
joe

Thanks for the info re: Vanguard availability in the UK.

As to your question, I personally would wait. Here’s the reasoning behind my answer:

If you invest £100 each month with a £5 fee, that’s 5% off the top. If you wait so that it’s a £5 fee per £300 investment, that’s a 1.67% commission instead. That’s a 3.33% return.

Half of the delayed money is waiting 1 month before it’s invested; half is waiting 2 months. So the average time you’re keeping the money out of the market is only 1.5 months.

In other words, you’re earning 3.33% over 1.5 months. A risk-free 3.33% return in 1.5 months is excellent.

I am also a student (aged 21) and want to invest in Vanguards FTSE all share tracker (just 0.15% annual fee)

Alliance Trust is the only platform at the moment to do this. The regular purchace fee is £5 does anyone think I should invest quarterly instead of monthly to stop this charge eating into my £100? and just invest £300 every quarter? i know this is a slight difference but over time i think it might add up.

thanks joe murray

As to T.Rowe vs. Vanguard: When you’re just starting out with a small amount to invest each month, Vanguard might not work anyway because most of their funds have a $3,000 minimum. Also, an extra 0.2% in expenses each year isn’t all that much on a small balance.

In short, T.Rowe is a very reasonable place to start out. I’d just make it a point to switch to someplace with lower expenses once you have that option.

As to how many funds to use with each company, I’m of the opinion that 3 funds is plenty for most investors. For example, with:
1. Vanguard Total Stock Market Index Fund
2. Vanguard All World Ex-US Index Fund
3. Vanguard Total Bond Market Index Fund

…you’d be extremely well diversified. And your total costs would be quite low.

Alternatively, if you can find a target retirement fund that is both low cost and that has an asset allocation that nearly matches the one you think is ideal for your situation, you could get away with just one fund.