Why not take a look at something like the Halifax Sharebuilder, which allows you to BUY (not sell) shares for £2 commission - though this is only on a set date each week. This way it makes it worth buying very small amounts of shares in individual companies and even some funds and investment trusts.

I've found it quite an effective way to build up profiltable stakes in companies, by being able to monitor share movements in companies I thought where worthwhile, and then adding small amounts when the share price seemed good.

Other banks also provide a similare service, eg, TDdirectinvesting.co.uk - they only charge £1.50 buying commission, but they only have one buying date per month, and I think this is too inflexible for me.

Hope this is helpful.

First thing to ask is what are you investing for, income or growth? Do you have cash savings? What is you timescale for investing and do you have an end goal other than profit!

If buying shares its not really worth buying less than £2000 worth as the buy cost is say £12 the sell cost £12 and the buy govt tax 0.5%, so the deal will cost you around £34 - about 1.7%.

The shares need to grow 1.7% to cover your costs, buying less than £2000 will increase your costs.

Funds - take care for total rip off funds, dont pay up front 5% ewtc by going through someone like HL etc who absorbs this.

Avoid funds with bid offer spread (although i have a couple like troy trojan and hl multi who have bid offer spread as they perform well)if you can, as this nicks 5%from you straight away.

As a rule I would not even look at funds with charges (TER) above 1.6%, and the growing fashiion is to go for trackers etc with very low charges as they invest in the same top FTSE firms as all the other funds. SWIP FTSE All share is good at low fees. ad high yeild.

The market is topside right now and heading for an almighty crash. Dont get caught buying at the top of the market, even with a long time horizon. Drip money in.

Look at the fund performance graphs on citywire etc over 5 years then 1 year then 3 months . You will see that even super dooper top funds that are supposed to be better than sliced bread may have not made a penny over 5 years., and theymax drop might be 40% or more. Is hard to find a fund that actually will make yo some money over your 20 year timescale, they will just rip you off for fees. Probably you could short list a dozen or so out of the 2000 plus funds available. Mostly they are crap.

Good luck

Thank you for your detailed replies, your experiences are invaluable. From the posts, it seems like my options are as follows:

• Shares: Invest in Halifax Sharebuilder and trade once a month and only get hit by a £1.50 buy charge instead of £11.95 - of course this has the disadvantage of only being able to invest at the set interval and I'll still have to pay £11.95 to sell. Will I also have to pay the govt tax of 0.05%? If so, I've calculated that if I were to invest £500, even with the discounted buying fee, the deal would still equate to 3.2%, investing £1000 would still result in the deal costing 1.8% so perhaps not the best route.

• Mutual funds: Look for a fund with low expense costs (TER of < 1.6% - nice rule of thumb, thanks Banjo). I've noticed many funds have an 'initial charge' of £1000, I presume this means I have to pay £1000 up front? Also, does bid offer spread only apply to ETFs?

I had a look at SWIP FTSE All share but it appears that it's only available via HL. I believe they have a £2 monthly charge which would mean paying £24 a year before taking any of the other charges into account?

Thanks for the clarification David. Being able to trade 4x instead of the 1 is certainly more desirable. I think I'll go for the ShareBuilder.

This still leaves me with the dilemma of whether to invest in individual shares or funds?

With individual shares, of course there's more risk and unless the share price goes up, it won't cover the sell costs. If I go with a fund/trust, there's arguably less risk but this seems like the more sensible option when it comes to a long term strategy. I think I'm struggling because I'm just starting out. I guess there is no concrete 100% right answer, instead, just a 'better/smarter' way of doing things.

The information you've all given is much appreciated!

If you decide to invest in funds rather than individual shares and want to keep your costs down we would recommend reading this article: http://www.guardian.co.u...-of-line-for-commission

Which? and Candid Money also have fund supermarket / broker comparisons:
http://www.which.co.uk/m...--how-much-can-you-save
http://www.candidmoney.c...to-online-share-dealing
http://www.candidmoney.c...-to-isa-discount-brokers

Hey

As someone in a similar situation (though I invest much less every month, but every now and then have a couple thousand spare to throw in)... I've been investing since my early 20s, and this is what I did:

I started off with a £1000 investment in Xstrata. Knew very little about them at the time, but it was recommended to me. I played with a virtual portfolio for a bit, too, looking at high yielding stocks and the big name players - groups like tescos, RBS, etc.

For a long time my portfolio was very flat, over the last two years (like many I guess), I've been very flat. The last 6-9 months, though, it's been a killing, throwing a 40% profit or so.

I did what many would advise at first, I had quite a diverse portfolio in a range of sectors (Tescos, ARM, Xta, ICAP, amongst others)... This was very flat profit, and my main reward was from dividends.

In the last 6 months or so, now that I feel more confident, I've broken my diversification to much smaller groups. I went with ARM, XTA, and SVT for a while, then sold out of SVT and moved that into XTA. My portfolio sits at 65% in XTA, 35% in ARM, and I've ridden one hell of a boost of late.

Too much diversification will kill you, as the 15£ commission I currently pay through rbs-sharedealing is quite alot. Certainly the only time I've gone in on speculative trades there was BP after the oil leak and Standard Chartered after their scandal recently. They paid off.

Stay confident, play the long game on shares, and dont sweat it when things dont go so well. If you can reason with yourself well enough to buy them as a long term plan originally, dont break the faith until you see news that actually changes that - ride market fluctuations and unless you have to, dont look to cash out unless you're no longer convinced of long term viability


I'm sure I'll get slaughtered for most of what I've said there, but like I said, it's worked for me, last few months have been a 30-40% skyrocket in portfolio value.

No disagreement with the info from banjofred.
My thoughts:

Your investment level is well within ISA limits - which should avoid income, and capital gains tax.

While a 'Pension' fund may seem attractive when putting ythe money away, you have to then consider the government limits and taxation loadings when you come to want to take from that fund - not just the ones you know about now, but whatever they decide to do next!

As detailed there is the current 0.5% buy cost that will get you every time you want to move from 1 share to another,
If you hold shares personally, you will have to manage the paperwork, and pay-in dividends, and do the paperwork for foriegn and UK taxation.
If you use a (bank) to hold the shares, then be careful about periodic charges calculated on the capital held.
However, you get to tell them your buy and sell wishes - on a 'now' or a 'today' basis, and not have to worry about finding/filing/sending-off/checking receipt of the certificates.
Not likely that they would re-invest the dividends without you going for at least the lower level of portfolio management.

That then leads to the sort of share dealing you will be doing - many changes as the market and individual sectors, or companies expectations change, or longer-term selections aiming for 3 to 5 years before review.
7% pa for 5 years seems OK at 0.5% BoE rate, and 3% inter-bank/inflation
But working hard you may yes MAY make 2% in each month by buying what is about to go up that month, and selling after they have risen.
1 error and you could lose years of accumulated increments and added capital investment.

There are funds that will allow you to hold substantial amounts in cash between selling and buying - but check what interest rate you will get on that cash

So - in the end it probably comes down to your trading/investment/risk stance and the effort you will put in.
And what investment management facilities you can find that fit your needs and pocked for charges.

ISA is just a 'wrapper' for the investment that will avoid tax on the investment.
You would still have to 'select' the management mode of the investment

As in - a 'managed' investment where you purchase 'bonds' or 'units' in that fund, and the managers buy and sell shares etc with the invested money
Then you get to select the sort of companies etc that the money would be used to buy -
generalised investment set, specific markets - commodities, oil, technology backs, and localations Asia, USA, EU, and return types - income from dividends, or capital value increases

Going for the ISA mode avoids much of the need to consider taxation with financial planning of when and where, and how you receive your money (and profits) back out of the investment, and into cash in your personal bank acount.

I already have a cash ISA so a S & S ISA could work hand in hand with my existing ISA. I'm with Halifax and have taken a look at their administration fees (there's an awful lot of them!) - http://www.halifax.co.uk...ing/charges/?pagetabs=1

Some stand out charges include:

Stocks & Shares ISA admin fee 0.05% per month - min £2.16 + VAT, max £8.33 + VAT (paid half-yearly)

My understanding: 0.05% of any cash I have in the ISA will be taken monthly (up to the max)

Dividend reinvestment 2%, maximum £11.95

My understanding: They take 2% of any dividends up to a max of £11.95?

On top of those charges, should I invest in a mutual fund, I'll also have the TER to pay too? Oh and Stamp Duty Tax?

I'm in this game for the long haul and don't expect an instant return. I'd like to build things slowly. On a risk scale of 1-10 were 10 is suicide, I'd say I'd like to be around a 4.