Maynard Paton writes about his family's largest investment.
There are three of us here -- me, my wife and my young son -- and we all hold this investment. We reckon it's a great all-round home for our long-term money.
The investment in question is the iShares FTSE 100
(LSE: ISF)
, an exchange-traded fund (ETF) that tracks the FTSE 100 index.
We like ETFs because they are simple, flexible and cheap. They're simple because they just track a particular index up and down, and you can buy or sell them as you would an ordinary share through a normal stock broker.
In addition, annual charges are generally less than 0.75% and at present can be as low as 0.3%. Oh, and they're all free from stamp duty, too!
Launched in 2000, the iShares FTSE 100 was the first ETF established for British investors and it remains our favourite today. However, new tax rules introduced this year (don't ask) have prompted a few other providers to launch similar funds.
For instance, we now can now purchase the Lyxor ETF FTSE 100
(LSE: L100)
or the db x-trackers FTSE 100 ETF
(LSE: XUKX)
. Both of these ETFs have lower annual charges than our iShares FTSE 100 -- 0.3% versus 0.4% -- so I must admit we're thinking of switching at least part of our holding to one of the newcomers.
Both Lyxor and db x-trackers offer ETFs based on the FTSE 250 and All-Share indices as well. But at the moment we prefer the FTSE 100's slightly higher dividend income and greater dependence on mega-cap businesses such as BP
(LSE: BP.)
, Royal Bank of Scotland
(LSE: RBS)
and Vodafone
(LSE: VOD)
.
There are plenty of other ETFs to choose from. These days you can buy into a bevy of indices based on property, overseas markets, dividends and commodities. But we're not rushing to track any of these. Some follow areas we're not familiar with, while others seem to have been launched because the relevant index or strategy has done very well of late. We'd far rather stick to what we know and a time-tested performer such as the FTSE 100 index is good enough for us.
I think the Motley Fool's Share Dealing service is as smart a way as any to start buying ETFs. It too is simple, flexible and cheap. In particular, the innovative ShareBuilder facility -- which invests on four set days a month -- would seem ideal for investors wanting to drip-feed their money into the market.
The normal commission is a very low £1.50 per purchase, but until the end of the year, there's no charge at all! (When you come to sell, the commission is £10.) The Fool's Share Dealing FAQs explain the realities of buying ETFs in more detail.
So that's our largest investment, the iShares FTSE 100. It won't turn us into Rockefellers, though if stock-market history is any guide it should make us a bit more than a savings account over time.
