Hi guys, I was interested in starting my investment portfolio, but being young and ignorant of the stockmarket I’m not sure how to go about it.
I’ve done some research and I think a tracker fund would be a good way to start investing, but I wanted to know how I could begin this whole process.
FTR I live in the UK, so if you could try and tailor your responses to my country then I would appreciate it. Cheers.
I cannot speak to the UK aspect but I recommend that you take a look at this.
https://www.bogleheads.org/wiki/Three-fund_portfolio
That wiki should also have some advice for non-US strategies.
Note that in the US at least, these things are generally called “index funds.” And based on a Google search, Vanguard and Blackrock offer low cost ones in the UK.
You go to any brokerage service, open a share dealing account, get teh ISIN (international security identification number - a unique number assigned to every tradeable security) of the fund you want to buy, and place an order wuith your broker asking him to get specifically that ISIN. It’s very easy.
Read this and you will get a good overview.
It’s a gamble whether the one you choose will be the ‘best’, but go for the lowest management cost and you can’t go far wrong.
Does the UK maintain a distinction between brokerage services (which allow you to buy publicly-traded securities) and mutual funds (with which you invest directly, and don’t hold in a brokerage account)?
Because if they do, buying directly into an index fund (or tracker fund, I guess) might be easier and possibly cheaper for the OP than opening a brokerage account.
To be honest, I don’t know; I have a brokerage account in the UK myself, but don’t know if direct investments with the issuer of a mutual fund are possible (they are in Germany). However, even if it is possible, in my experience a brokerage account is still the better option, for the following reasons:
[ul]
[li]You have a broader choice of funds to invest in available - essentially any listed and tradef fund, not just those of the issuer you’re buying from directly.[/li][li]The funds you buy directly from the issuer are typically actively managed funds with a higher annual management fee and sometimes also an initial surcharge paid to the issuer. The ones you buy via a broker are typically passively managed index trackers with much lower fees. [/li][li]With a brokerage account, you can liquidate your investment at any time by selling them on the market (at the going price, of course). With the mutual funds you buy directly from the issuer, they will typically buy it back from you at the current price too, but there could be strings or restrictions attached to that.[/li][/ul]
With modern online-based brokerage accounts, the transaction fees are really low, so unless you invest only a very small amount where the fee is, percentag-wise, prohibitively high, I think that these small costs are outweighed by the advantages of using a broker rather than a mutual fund. But YMMV, of course.