What to do with my monthly savings

mattih5 · 5 April 2006 at 9:11AM

I've just graduated and have began my first professional career as a Junior Developer. I'm really enjoying my new career and the monthly income which i'm not used to what with just graduating.

I am fairly strict with what I do with my money as I want it to work for me and potentially get the maximum out of it. Since I started my career I have stuck to saving £250 each month and depositing this in a linked Plus Saver Account with Alliance & Leicester. However, I realise through research that this money could be put to work in better places.

I have two ISA's, one with Bradford & Bingley and one with Alliace and Leicester which I recently opened. I could open another ISA for the next year as £250 a month allows me to fulfill my Cash ISA allowance. Or I could put this money somewhere else (not sure where!).

Does anyone have any suggestions as to what to do my monthly savings, I only know really of ISA's. I have been considering opening a Halifax Sharebuilder Account and learning the ways of the stock market as a low rate.

Basically I want my 250 monthly savings to work as hard as they can for me.

Thanks in anticipation

al_yrpal · 5 April 2006 at 9:59AM

I'd feed it into one of these as an equity ISA. At 30-40% a year. By the time you are 30, you'll be approaching £100 grand and the gain will be tax free. Experience has taught me to review it every 3 months to make sure you are on track for that 30-40%, and swop funds when you need to.

http://www.trustnet.com/ut/funds/perf.asp?sort=29&ss=0&txtS=&txtSS=&columns=&page=0&booIMA=0&reg=all&sec=fof&ima=all&unit=all&type=all

sloughflint · 5 April 2006 at 10:03AM

If £250 is the maximumyou've got spare ie no lump sums or anything then definitely go for the tax free option, ie cash ISA first. If you find you can spare more before the end of the tax year and have used up your 3k allowance then look to open a regular saver somewhere.
You mention A &L. The plus saver interest rate isn't brilliant. If you can save more than the £250 you mentioned you could try going for a premier direct current account and then at the same time open a 10% regular saver for 1 year.

mattih5 · 5 April 2006 at 10:43AM

al_yrpal wrote:

I'd feed it into one of these as an equity ISA. At 30-40% a year. By the time you are 30, you'll be approaching £100 grand and the gain will be tax free. Experience has taught me to review it every 3 months to make sure you are on track for that 30-40%, and swop funds when you need to.

http://www.trustnet.com/ut/funds/perf.asp?sort=29&ss=0&txtS=&txtSS=&columns=&page=0&booIMA=0&reg=all&sec=fof&ima=all&unit=all&type=all

Thanks both for your replies. al_yrpal how do you mean by 30 - 40% a year, this surely isn't the reutnrs!!! What exactly does an equity ISA do in comparison to a cash ISA?

Thanks

sloughflint · 5 April 2006 at 11:16AM

Cash Isa's........guaranteed return

cheerfulcat · 5 April 2006 at 11:22AM

Hi, mattih,

Equities certainly can return 30%-40% a year - it is quite possible to get a return of 25% in a day, in directly invested shares. And several unit trusts have seen 140%+ over the last few years. However, and it's a big however, you could also lose 100%. The bigger the potential gains, the riskier the investment as a rule. Also, the last few years' performance has come off market lows; it may not be possible to get that sort of return in the future.

Having said all that, some sort of stock market exposure added to your deposit accounts will almost certainly offer better returns than cash alone. A good way to get started is tracker funds, either UTs or Exchange Traded Funds - ETFs are free of buying commission in a Squaregain ISA btw.The Sharebuilder account is good for cheap buying but you can't choose your buy price; this may or may not be a drawback. And for some peculiar reason it doesn't offer an ISA wrapper, though there is nothing to stop you building up a holding in the Sharebuilder and then bed-and-ISAing when it's large enough.

al_yrpal · 5 April 2006 at 2:58PM

mattih5 wrote:

Thanks both for your replies. al_yrpal how do you mean by 30 - 40% a year, this surely isn't the reutnrs!!! What exactly does an equity ISA do in comparison to a cash ISA?

Thanks

This means that if you invested £1000, in 12 months time that would have become £1300 or £1400, and the next year £1,820 to £1,960 tax free if its within an ISA. My £5k within a Korea fund is now £9k after 1 year. I have quite a few funds approaching that. Cash ISA's are just tax free savings at 5% or so. Its good to have a bit of money in cash through for emergencies. As you are so young you can take more risks.

An equity is a share. Funds are made up from shares perhaps 50 to 200 different shares constantly monitored, bought and sold by the fund manager. A fund of funds is when the fund buys stakes in lots of other funds that he thinks are doing particularly well. In essence he is then doing what you or I might do investing in the funds we fancy.

trumbo · 5 April 2006 at 4:41PM

bed-and-ISAing

Could someone please explain to me in 'Lamens Terms' what 'bed-and-ISAing' means.......

cheerfulcat · 5 April 2006 at 4:49PM

Could someone please explain to me in 'Lamens Terms' what 'bed-and-ISAing' means.......

Sorry for the jargon, trumbo. It means selling shares and buying them back within an ISA. The expression comes from bed-and-breakfasting, which was when you sold shares one day and bought them back the next; this crystallised the capital gain and gave a new base price for your holding. That little trick was done away with but you can still bed-and-ISA or bed-and-spouse ( sell the shares & your spouse buys the same shares in the market ).

trumbo · 5 April 2006 at 6:47PM

Cheers for the info...

mattih5 · 5 April 2006 at 7:38PM

al_yrpal wrote:

This means that if you invested £1000, in 12 months time that would have become £1300 or £1400, and the next year £1,820 to £1,960 tax free if its within an ISA. My £5k within a Korea fund is now £9k after 1 year. I have quite a few funds approaching that. Cash ISA's are just tax free savings at 5% or so. Its good to have a bit of money in cash through for emergencies. As you are so young you can take more risks.

An equity is a share. Funds are made up from shares perhaps 50 to 200 different shares constantly monitored, bought and sold by the fund manager. A fund of funds is when the fund buys stakes in lots of other funds that he thinks are doing particularly well. In essence he is then doing what you or I might do investing in the funds we fancy.

Wow, how have you managed to get a gain of nearly 50% in period of one year?

What to do with my monthly savings

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