- How to buy your first index trackers
- Choosing an investment platform: A nuts and bolts guide [2]
- Picking an index tracker out of the investing swamp [3]
- How to choose the best index trackers #1: Basics [4]
- How to choose the best index trackers #2: Costs [5]
- How to choose the best index trackers #3: Overlooked stuff [6]
- How to choose the best index trackers #4: ETF-only features [7]
- How to find index funds [8]
- How to find Exchange Traded Funds [9]
- How to buy and sell ETFs [10]
- How to buy and sell index tracker funds [11]
There’s a gap. A gap that exists between the last page of the investing advice books [12]
Where are these fabled funds that lead to passive investing [14] nirvana? How do you pull the trigger? “Just tell me how to buy index trackers, would you?!”
Your wish, dear reader…
I’m assuming you’ve done your research, decided upon your goals [15], your asset allocation [16], and the dollop of regular contributions you’ll make towards your masterplan. You’ve opted for the DIY investing route, and the only thing left to do is execute.
I’m also assuming you’re a passive investor who wants to stick primarily to simple index funds and Exchange Traded Funds [17] (ETFs). Because that’s my tribe.
Where to buy index trackers
Buy online. Human contact only ratchets up expense and could leave you in the hands of some slippery smoothie with a script – a script designed to fatten their bank account, rather than yours.
Choose the cheapest online broker (also known as a platform) you can find. Our broker comparison table [18] will help you pick out the right one.
[19]
Don’t go directly to the fund provider, don’t use a full-service, ‘advice’ dispensing stockbroker, and definitely don’t walk into your local bank with a bag full of used tenners.
The best brokers offer the DIY investor:
- The cheapest method of buying, selling and holding funds.
- A wide choice of funds from different providers that you can mix and match.
- Tax shields for your funds – stocks & shares ISAs and SIPPs.
- A regular investment scheme to automate drip-feeding.
- Online portfolio tools to track your investments.
- Fund search facilities.
- Easy access to your funds and paperwork.
- An execution-only service – so no advice on purchases.
There’s little practical difference between the various offerings. Hargreaves Lansdown are the one broker that most people have actually heard of but they’re expensive. They score well for customer service but you will pay a premium for it.
I’ve personally experienced four cheaper brokers and never had a problem with the customer service.
The most important thing to be aware of is you’re choosing an execution-only service. You pay low fees because you’re not getting any advice.
Also, your first choice investing platform may not carry the products you want. Always check using the site’s search tool before signing up and transferring money.
Key decision
One of the most important decisions you will make is whether you will pay your broker a flat-rate or percentage fee for their services.
A percentage fee is best for small investors who are likely to have less than £30,000 in assets because that will work out cheaper than the most competitive flat rate charge on the market.
A flat-rate fee is cheapest for investors who are heading north of that £30,000 fee mark. At this point percentage fees slice off more from your assets than the keenest flat rates out there.
You can calculate your own situation here [20]. Most brokers have chosen either a flat rate or percentage fee charging scheme and our broker comparison table [18] has split them along those lines.
Take it steady,
The Accumulator