How does one compare index-tracking ISAs?

[fivemack]

The aim is, in the further reckless pursuit of responsible frugality, to put £100 monthly into an index-tracking ISA. I presume that I can do this despite having put £3000 into a mini cash ISA this tax year.

So I google for 'index-tracking ISAs', and get the impression that these are less well-catalogued by independent sources than cash ISAs; fool.co.uk has a list of index-tracking ISAs consisting entirely of sponsored links. Google is a little better, and I come up with a few fund-management companies and grovel around further.

M&G Index Tracker A	0.30% annual charge	Tracks FTSE All-Share; "dividend type: distributing"; "regular saving scheme: yes"
L&G UK Index	0.53% annual charge	Tracks FTSE All-Share; doesn't say anything about dividends
Fidelity Moneybuilder UK Index Fund	0.1% management charge	Tracks FTSE All-Share; doesn't say anything about dividends; minimum investment "500, top-up 250"

This would seem to be an easy decision, so I must be missing something. I can't work out what 'dividend type: distributing' means: obviously I want dividends to be reinvested.

On a third hand, given how the pricing of computers and cameras has historically behaved just after I finally decide to buy them, and how the pricing of equities has historically behaved just after I lose confidence and sell everything, maybe I should stay in cash until the unprecedentedly well-correlated set of handbaskets that seem to be making up the international markets proceed up the roller-coaster


to that place where all handbaskets are proverbially destined.

Comments

[arnhem.livejournal.com]

The cashier in the Cambridge B.S. today was trying to entice me into something that doesn't appear to be listed on their web site, and so presumably is another financial service provider's product that they're pushing (annoyingly, I didn't check the advertising bumph I was shown closely enough, so don't know whose it was).

It claimed to be a 3 year ISA-able bond (no withdrawal in that period; you can transfer to it from an ISA, and on maturity back to an ISA) with a 10% guaranteed rate tax-free, but FTSE-tracking as well (and mutterings of "up to 30%" associated with that).

I don't think I'd particularly care if it never went above 10%, to be honest (although I suppose that base rates could easily go there in the next three years, so perhaps it's not even quite as good a deal as it appears).

[arnhem.livejournal.com]

Ah, a bit of googling suggests that, even if it's not the same thing, it's probably indistinguishable from this.

[arnhem.livejournal.com]

At which point this motley fool article is probably worth a quick skim.

I've also seen a bunch of criticisms of the more general category of index-tracking bonds, suggesting that you have to look very carefully at the small print (things like five year bonds where the start ftse rate is the average in the first year, and the end ftse rate is the average in the last year, magically giving you a five year bond that measures four years of ftse growth ...). Admittedly that's a problem that's specific to bonds, rather than the more general tracking products ...

As far as I can tell, bonds have the advantage of being (I was told) do-able within the cash half of the ISA thing ...

[fivemack.livejournal.com]

That deal pays 10% over the three years, not 10% a year; 3.2% annually is deeply unexciting, especially since, as you say, cash is likely to be paying 6% by the autumn.

30% over the three years in the event of the stock market going up perhaps a further 50% from where it is now, which is about 9% annually, doesn't really impress me.

Thanks for the Motley Fool link; I tried to figure out how this kind of offer works in terms of atomic financial instruments several years ago, but knew neither enough financial terms nor enough financial people to work out the answer. It looks like a way of arbitraging the difficulty that mortals have in trading options and bonds.

[arnhem.livejournal.com]

Goodness, I read it even less carefully than I'd thought I'd done (but I did have a little voice going "that's implausibly good for a safe bet" in the back of my head 8-) ).

The motley fool link is good, isn't it? I don't mind financial institutions getting their slice, but it's nice to understand the mechanisms they use.