Small sum of money to invest - Help please

[Amnesia180]

Hi All...

I recently had just over £3k in my bank. I decided to start renting a flat etc... but now I'm left with £1600.

I don't know where to invest it, or who to invest it with. My money is currently sitting in a Lloyds Online Savings account earning very little interest.

I could put a minimum of around £60 in a month and keep adding to it that way.

Any suggestions or advice would be much appreciated!

I'm also thinking of adding a couple of hundred pounds to Premium Bonds aswell.

Thanks in advance,
Dan

[dunstonh]

How do you want to invest?
What risk do you want to take with the money?
How long are you looking at?

Typically, with this amount you would use a MINI Stocks and Shares ISA and pick a fund (it would have to be one or two with this amount) that suits your risk profile.

[Amnesia180]

Thanks for the reply.

Well, I'm not looking to risk too much... as I don't really know what I'm doing yet.

I am hoping to get some short term results (nothing massively huge!) but it's more for the long term when I start looking for housing etc.

My goal is just to build on my finances... without the risk of losing it ALL!

Thanks,
Amnesia

[Amnesia180]

*bump*

Any more advice on this?

[meggles]

risk & reward are roughly inversely proportional. ie- the most you are willing to risk, the more £ you may make. however, this comes with risk.

£1600.
is there a possibility that you'll need this money over the next 12-24 months?
have you used your Isa allowance this year?
if you lost 50% of this in the next 12 months, would you be distraught? would that be a problem financially?

[jamesd]

Can you delay your house purchase by several years if the markets drop just before you want to buy? If not, and if your plan is to buy within the next five years, you might look at regular saver accounts.

If you do think that you have the flexibility to accept a possible loss if you need to withdraw the money when the markets are down, first read Ok then - How do I choose a S&S ISA (http://forums.moneysavingexpert.com/showthread.html?t=416337) to get an idea of what a sector allocation is and how you can buy and sell funds within a stocks and shares mini or maxi ISA. There's an example there of a sector allocation for risk level 5 that may suit your objectives.

[Amnesia180]

Thanks for your replies.

I don't have an ISA at all. £1600 is all I have left now. I did have over double that - but I recently moved out into rented accomodation and bought furniture, TVs etc etc...

Before I invest, would it be wise to take a mini ISA? or use a regular savings account for now to build on the amount of cash that I have?

Another factor is my job, I may be looking to change job in January, which means I'll lose my company car... so I'll have one of those to buy as well as insurance and petrol costs.

So my thoughts are (as already said) keep building on that £1600 until I have some more money and then look at S&S?

Thanks again
Amnesia

[CLAPTON]

you need to have some cash savings before you even consider investing in stocks and shares.
put the money in a mini cash ISA and add the regular savings amounts too until you have used up your 3000 ISA allowance for this year.

[Amnesia180]

With a mini cash ISA can I put money in as often as I like? (up to the total value of £3000?)
Then how long does it have to sit before I can withdraw money (if I need to?).

I'll go research some good min cash ISA out ther!

Thanks again.
Amnesia

[Dithering Dad]

With a cash ISA, you can take the money out whenever and as often as you like, without penaties. You can't put the money back in though if you have already saved up to the £3000 maximum.

If I were you, I would calculate how much it costs to run your life over the course of a month (i.e. bills such as rent, council tax, food, utilities, going out, etc.) and them multiply this by three. Save this much money into a cash ISA as your emergency savings before you even think of investing.

[Amnesia180]

When you say work out how much I spend, and multiply by three. That would come to more money than I have left over.

[Dithering Dad]

When you say work out how much I spend, and multiply by three. That would come to more money than I have left over.

All you're doing when you multiply by three is working out how much money you need to cover you for three month's worth of being unemployed. Once you've saved this much up in a cash ISA you can then look at other investments. So say you're paid £1000 per month and have £100 left at the end of the month for savings you would need to save £2700 in your cash ISA as emergency savings (£900 x 3).

Depending on your job security and how easy it is to pick up a new job in your industry you may want to increase the three month's figure. For example, I am a contractor and so work on a temporary basis where I could have periods of unemployment to cover me between contracts. I therefore put away enough money to pay for my household bills and such for a period of 6 months.

[Amnesia180]

Thanks for clearing that up. It's really helped.

Well, according to this - I will need just short of £1500 to cover me for 3 months. It would be closer to £2000 including food bills etc.

So, I'm not far off my target.

I've worked out I could get around £200 per month (if I put my mind to it) into the ISA. Meaning I could put £1000 into the ISA now... (save £600 in my regular saver for now) and in 10 months time have the full £3000 in there.

Now, just to decide what ISA to take... the NS&I seems the best, however - it doesn't take too kindly to transfers I believe?

[sparklymessygirl]

Hi Amnesia,

I have the NS&I ISA.
It is correct that this ISA does not take transfers in from pre-existing ISAs but I don't think (from reading your post - may be wrong) you have one so that shouldn't worry you.
I transfered a pre-existing ISA into a better performing one and then for this tax year (i.e. for new money) opened a NS&I ISA.
Why not put the whole £1600 into the ISA? - you can get it out at any time.

Sparkly

[Amnesia180]

After doing some more research it turns out there are some savings accounts that also offer a 6.3% or even 8% in some cases!

Would these be better for me than a mini ISA?

[Amnesia180]

Hi Amnesia,

I have the NS&I ISA.
It is correct that this ISA does not take transfers in from pre-existing ISAs but I don't think (from reading your post - may be wrong) you have one so that shouldn't worry you.
I transfered a pre-existing ISA into a better performing one and then for this tax year (i.e. for new money) opened a NS&I ISA.
Why not put the whole £1600 into the ISA? - you can get it out at any time.

Sparkly

Yes, I think I will put the whole £1600 into it... and in 8 months I will have hit the £3k limit.

Say I get £3k in my first year.. I'd be allowed a further £3k for my second year - does this mean I could have a total (potentially) of £6k in one ISA account? Or does it mean I'd need a different mini ISA for the second allowance of £3k?

Hope that makes sense :-)

And yes, I think I'll be going for the NS&I - I have the minimum £1000 to put in, and I don't have any other ISA... Do they charge to transfer money to a different ISA (for instance if I want to change next year?) and do they have any catches I should be made aware of?

Thanks,
Amnesia

[jem16]

After doing some more research it turns out there are some savings accounts that also offer a 6.3% or even 8% in some cases!

6.3% is certainly achievable but then you have to deduct tax at 20% or 40% if higher rate taxpayer. That brings it down to 5.04% and 3.78%.

The 8% would not be achievable on most savings accounts. It tends to only be regular savers and then you are limited to around £250 per month and cannot put in a lump sum. This reduces the overall interest rate per annum.

Would these be better for me than a mini ISA?

Unlikely. The ISA is a tax-free savings account. So you will get the full 6.3% if you chosse the NS&I ISA.

[jem16]

Yes, I think I will put the whole £1600 into it... and in 8 months I will have hit the £3k limit.

Say I get £3k in my first year.. I'd be allowed a further £3k for my second year - does this mean I could have a total (potentially) of £6k in one ISA account? Or does it mean I'd need a different mini ISA for the second allowance of £3k?

Yes you can put another £3k into your ISA on 6th April 2008. You can have a different ISA if you wish but there is no need, especially if you are already in the top paying ISA.

Hope that makes sense :-)

And yes, I think I'll be going for the NS&I - I have the minimum £1000 to put in, and I don't have any other ISA... Do they charge to transfer money to a different ISA (for instance if I want to change next year?) and do they have any catches I should be made aware of?

Thanks,
Amnesia

No catches, no penalties and no charges.

Just keep an eye on the interest rate and transfer if you want to. The only problem you will have is finding an ISA that will accept transfers.

[Amnesia180]

Unlikely. The ISA is a tax-free savings account. So you will get the full 6.3% if you chosse the NS&I ISA.
Doh!! The tax-free savings account in the title explains it all.
Apologies :-)

Can you apply online? I've compared to other ISA accounts and I match the £1k minimum for this one, and don't have other ISA so don't need to worry about the transfer. Seems like an ideal starter account for me.

Thanks for all the help!

[jem16]

Doh!! The tax-free savings account in the title explains it all.
Apologies :-)

Can you apply online? I've compared to other ISA accounts and I match the £1k minimum for this one, and don't have other ISA so don't need to worry about the transfer. Seems like an ideal starter account for me.

Thanks for all the help!

Yes you can apply online. Go here;

http://www.nsandi.com/products/disa/applynow.jsp?invest-now-button=Invest+now%A0%A0%3E%3E

[Amnesia180]

Yes you can put another £6k into your ISA on 6th April 2008. You can have a different ISA if you wish but there is no need, especially if you are already in the top paying ISA.

Another £6k?
Sorry, I don't think I explained myself properly.

2007 - ISA 1 has £3k in it.
2008 - ISA 1 still has £3k in it. I have another allowance so put another £3k into it. Now I have £6k in ISA 1.
2009 - I find interest rates have changed etc. I open ISA 2 - Can I transfer all £6k from ISA 1 into ISA 2 and still be allowed a further £3k for my 3rd year?

Or will I have to keep the £6k in ISA 1 to continue getting the interest.



The only problem you will have is finding an ISA that will accept transfers.
But the interest rate at the moment seems pretty good. And like you said, most ISA don't accept transfers (at top paying rates) so I'm not really losing out.

Thanks again.

[jem16]

Another £6k?

Sorry that was my fault - a typo. I meant you can put in another £3k giving £6k altogether plus interest gained from year one.


Sorry, I don't think I explained myself properly.

2007 - ISA 1 has £3k in it.
2008 - ISA 1 still has £3k in it. I have another allowance so put another £3k into it. Now I have £6k in ISA 1.

This is correct


2009 - I find interest rates have changed etc. I open ISA 2 - Can I transfer all £6k from ISA 1 into ISA 2 and still be allowed a further £3k for my 3rd year?

Yes you can, provided it accepts transfers in.

Or will I have to keep the £6k in ISA 1 to continue getting the interest.

No you don't. If you transfer you will get the interest rate of wherever you are transferring to.



But the interest rate at the moment seems pretty good. And like you said, most ISA don't accept transfers (at top paying rates) so I'm not really losing out.

Thanks again.

So far it is. However the NS&I ISA is only guaranteed to stay 0.55% above the base rate until at least 5th April 2008. This may or may not change so just keep an eye on it.

[Stavros]

Say I get £3k in my first year.. I'd be allowed a further £3k for my second year - does this mean I could have a total (potentially) of £6k in one ISA account? Or does it mean I'd need a different mini ISA for the second allowance of £3k?

Hope that makes sense :-)



Hi, you can put in £3000 each tax year (April to April) so for example,On 6th April 2006 you put 3k in an account that pays say 5% (you can get much better) for the tax year 2006/7 Your account in april 2007 stands at £3150 (with the interest) in April 2007 you put in a further £3000 making your Isa £6150. Then in April 2008 your Isa stands at £6337.50 (or there-abouts) In April 2008 the rules change because of the latest budget, you are able to put in a an inceased amount of £3600 making your ISa worth £9937.50p as at April 2008. This will be worth with the 5% interest at April 2009 at £10,405 (roughly), I think my maths are correct, but remember this has been calulated at 5%, a lot of Isa's are now 6% plus. So on my figures of an investment over 3 years of £9,600 your ISA will be worth £10,405 giving you an interest profit on those 3 years of £805

[Amnesia180]

Excellent!! Thanks everyone.
Amnesia

[Amnesia180]

Last thing regarding this (i promise) it says minimum further deposit - £250. Does this mean it wants a regular £250? Or does it just mean that I have to deposit at least £250 whenever I make a deposit?

[Aegis]

Last thing regarding this (i promise) it says minimum further deposit - £250. Does this mean it wants a regular £250? Or does it just mean that I have to deposit at least £250 whenever I make a deposit?
Judging by the wording, I'd say the latter

[Amnesia180]

Okay, are there any other savers out there matching NS&I that don't need such a high amount every time? It just means I need to save a couple of months before being able to deposit anything. But I get paid weekly so it will take a while.

My friend has a nationwide ISA and can contribute as much or as little as she likes.