Growth investment or GEB?

WHOSTHATGIRL_XX · 7 February 2006 at 9:09PM

hi everyone,

My husband and I have sold our flat and have £20,000 sitting in a current account with no idea what to do with it. We are not in a financial position to buy another property at the moment but really have to do something with this money before it gets frittered away.

We had a thought of putting £5000 in a mini cash isa between us and the remaining £15,000 in the Post Office Guaranteed Equity Bond but to be honest we really dont know if this would be the best idea. We hopefully will be in a position to buy another home in 5-6years and would need the money then.

Please excuse my ignorance with this question but we're really desperate for some input.

Thanks in advance x

dunstonh · 7 February 2006 at 10:52PM

We had a thought of putting £5000 in a mini cash isa between us and the remaining £15,000 in the Post Office Guaranteed Equity Bond but to be honest we really dont know if this would be the best idea.

Awful product. You wont find any of the regulars on here saying any different.

We hopefully will be in a position to buy another home in 5-6years and would need the money then.

So a fixed maturity date product really wouldnt be suitable either. Something open ended with no penalties on withdrawal would be far more suitable.

Deemy · 8 February 2006 at 3:57AM

WHOSTHATGIRL_XX wrote:

hi everyone,

My husband and I have sold our flat and have £20,000 sitting in a current account with no idea what to do with it. We are not in a financial position to buy another property at the moment but really have to do something with this money before it gets frittered away.

We had a thought of putting £5000 in a mini cash isa between us and the remaining £15,000 in the Post Office Guaranteed Equity Bond but to be honest we really dont know if this would be the best idea. We hopefully will be in a position to buy another home in 5-6years and would need the money then.

Please excuse my ignorance with this question but we're really desperate for some input.

Thanks in advance x

You can put 12k into a cash isa between you both... thats £6k now and £6k in April

The remaining £8k could go into a shares isa in your name i.e. £4k now and £4k in april

cheerfulcat · 8 February 2006 at 7:27AM

WHOSTHATGIRL_XX wrote:

We are not in a financial position to buy another property at the moment but really have to do something with this money before it gets frittered away.

Thumbs down for the GEB from me as well. If you want to tie the money up, you could look at a fixed term deposit account - some allow you to withdraw money with 60 days' notice, others penalise you with a fine of up to 60 days' interest but either way, you are discouraged from withdrawing before the term is up. You can compare accounts at moneysupermarket.com, here.

WHOSTHATGIRL_XX · 8 February 2006 at 10:24AM

Thank you all for your feedback.

I'm so pleased you pointed out that this option was perhaps not the best for us. Its back to the drawing board for us and hopefully with the help of this forum and Martins site (surprisingly it was this site that recommended Post Office Geb)we will work out what to do.

We will never be in the position of having this amount of money again and we really need it to work for us...who said having money was easy huh?

Thanks to all xx

WHOSTHATGIRL_XX · 8 February 2006 at 10:34AM

Thank you all for your feedback.

I'm so pleased you pointed out that this option was perhaps not the best for us. Its back to the drawing board for us and hopefully with the help of this forum and Martins site (surprisingly it was this site that recommended Post Office Geb)we will work out what to do.

We will never be in the position of having this amount of money again and we really need it to work for us...who said having money was easy huh?

Thanks to all xx

dunstonh · 8 February 2006 at 11:03AM

and Martins site (surprisingly it was this site that recommended Post Office Geb)we will work out what to do.

No it doesn't. Martin doesn't recommend any regulated financial services products.

Personally, I think the article on GEBs should be removed as it is out of sync with the "money saving" aspect of the board. It reads as a sales pitch from the providers and doesn't highlight the pros and cons of the alternatives sufficiently (in my opinion). Also, the article was written in Oct 2005. Every week I get bulletins on GEBS with new terms. This is an area where research is out of date every week.

Take the top selling unit trust of 5 years ago (top selling, not top performing) and a tracker fund and do it until the end of Dec 05 (instead of October, although it is likely to be September or August on that article). This gives a different timescale of just a couple of months. £5000 in those would be worth £9494 on the top selling fund and £4965 on the tracker. Just a few months difference and the figures are massively different.

GEBs are easy to sell. They have a few points, such as the guarantees that can make them sound attractive. However, when you dig deeper, they have too many negative points to make tham a viable option. Especially when you look at the alternatives available.

WHOSTHATGIRL_XX · 8 February 2006 at 11:18AM

Thanks again. I'm going to read thru what you've said and pay more attention to what I'm reading in future. I didnt notice the October date and will go and search for more up to date material. Still would like to lock away money though for the future. Sorry to be bothering you again but is there anything I could be reading or directed to that explains investments in laymans terms? AARGH!

EdInvestor · 8 February 2006 at 12:09PM

IMHO Deemy has the right idea for you, mix of cash and investment.

For the investment ISA what you could consider is putting the money in a commercial property fund.

These funds are lower risk than shares but with a return that now looks very decent compared with the forecast outlook for shares.

The funds will not be available in ISAs until this April, but after that you could put 4k in for each of you, using two different funds. The funds are run by the big insurance companies and the money is invested in office blocks, shopping centres and industrial estates.The fund earns income from the tenants' rent (which is pretty stable ) and the capital gains ( or losses!) comes from the rise (or fall!) of the value of the property itself.

exil · 8 February 2006 at 1:05PM

Well, if I had put my money into GEB instead of ISAs I'd actually be a lot better off now - since I happened to buy my ISAs just when the market started to head south in 2000.

It all depends on your priorities. If the guarantee of getting your money back is
important to you, then why not GEB?

And I'm not a Post Office salesman! And I'm not recommending GEBs either. Just the fact that other funds have done better is not necessarily a reason for rejecting them, if the guarantee is important to you personally.

cheerfulcat · 8 February 2006 at 2:47PM

Sorry to be bothering you again but is there anything I could be reading or directed to that explains investments in laymans terms? AARGH!

You're not bothering anyone

. There is a lot of information available, some of it free. You could start with Incademy and the Motley Fool; they have very good introductions to investment. Trustnet has some educational content, as has the AITC. For totally unbiased advice I can recommend a couple of books which I think are very helpful for beginners - one is Winning with Shares by Alvin Hall ( his Your Money or Your Life book is good too ), the Motley Fool UK Investment Guide is another. There are a couple of others which appear to be out of print - Be Your Own Financial Advisor and Which? Way to Save and Invest - you might be able to order them from your library.

The Motley Fool bookshop has loads of books about investing, and TMF also has a bulletin board by that name where you can get further ideas.

HTH!

Cheerfulcat

Growth investment or GEB?

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