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DIY investing on the rise as savers desert low rates

Stock markets have had a good year, and there is the usual prospect of a 'Santa rally' this month - the all-share index has risen in all but one of the past dates of December 27 as the feel-good factor drives investors.

The US market has hit all-time highs and earlier this week was up 26% on its figure at the start of 2013. Other bourses elsewhere have also risen since the start of the year - Japan 51%, Germany 23%, the FTSE-250 24% and the FTSE-100 11%.

The Chancellor, meanwhile, unveiled an Autumn Statement with little to cheer savers whose rates have halved in the past year alone. But modest savers are often in the dark about how to become novice investors.

Investing in shares through a fund or an investment trust is an easy way of getting access to a pot of shares. These investments can be held within a stocks and shares ISA where they will be free of tax. The simple way to buy funds and ISAs nowadays is through a direct-to-consumer investment platform.

These investment platforms have seen a sharp growth in users this year.

Many investors have little option but to make their own investment decisions since most banks and building societies have pulled out of giving financial advice this year following the introduction of fee-only advising. Similarly, paying for the help of an independent financial adviser who now has to charge fees may no longer be attractive.

Another factor which has given a boost to DIY investing is the amount of information available on the internet. The investment platforms themselves, which have also been growing in number, are a major source of information.

Sara Wilson, from Alliance Trust Savings in Dundee, says: "Saving for the future is more important than ever and with continued low interest rates, stock market investment is a natural consideration to secure higher returns. DIY investing can be extremely rewarding, but it also takes commitment.

"Personal plans and circumstances change over time, so it is essential to set your objectives and do your research at the outset and then review your investments periodically to help you understand whether you're on course to meet your financial goals."

Ben Yearsley, head of research at Charles Stanley Direct, based in Edinburgh, agrees: "You don't have to be that sophisticated to use a platform although you do have to be prepared to take some risk and you do need to think about your investment objectives, for example, whether you want income or capital growth from your savings."

The investment platforms provide varying levels of help and advice. Some offer research on individual funds with shortlists of those they recommend in different areas. Others suggest model portfolios, if you don't want to choose funds yourself.

The type of investments on offer also varies. Some platforms, such as Fundsnetwork and Cavendish Online, focus on investment funds while others, such as Willis Owen, Charles Stanley Direct, Alliance Trust Savings or Interactive Investor, will give you access to shares and investment trusts as well as funds.

There are wide variations in charges. Some platforms charge a percentage fee while others have fixed annual fees such as Alliance Trust Savings which charges £48 and Interactive Investor which charges £80 annually.

If you choose investment funds, compare fund charges. On some platforms a fund could carry a 1.5% initial charge, while on others the same fund might be available for a 'clean' 0.75% charge.

A useful tool to help you choose the right platform is the comparefundplatforms.com website run by financial adviser Justin Modray. You enter details of how much you want to invest, what type of investments to buy and how often you are likely to trade, and it lists the most cost-effective options. Mr Modray says platforms such as Hargreaves Lansdown and Bestinvest are more expensive but do provide a lot of guidance.

The lowest cost platform for modest investors, he says, is Charles Stanley Direct with a 0.25% annual charge, and no additional ISA charge. It also provides a Foundation Fund list of preferred funds and investment trusts in each sector, and five suggested Foundation Portfolios. The income portfolio has five funds and a starting investment of £2500.

Investors can put up to £11,520 in a stocks and shares ISA during the current tax year, or £5760 if you have already put your maximum investment into a cash ISA, and the Chancellor announced it would rise to £11,880 (£5940) next April.

Radiographer Stephen Davison, from Inverness, decided long ago that savings accounts will not do the business when it comes eventually to helping his children, now 13 and 10, fund their futures.

His first investment was in the Aberdeen technology ISA 15 years ago, and he now finds the Willis Owen platform a cost-effective and user-friendly source of guidance. He says: "Every six months they send out a statement on how your funds are performing, and what the alternatives might be."

Mr Davison is confident that equity investing will deliver long-term, whatever the political climate. "I am probably looking towards funding the kids, either university or a deposit."

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