First timer £10,000 to save/invest, totally bewildered!

Jay_Wiseman · 21 March 2005 at 4:24PM

Hi,

Ive come here in an attempt to seek some advice as I am completely overwhelmed and confused as to what I should do, theres so many saving/invstment options listed here and Im quite frankly drowning in confusion. Really hope somepne can help.

Right I'm a 23 yr old graduate who has £10,000 to save or invest. This money is basically the starting block for a new business venture which I hope to start within a year or so, Im currently developing the idea (business plan etc) and seeking possible investors into the business, as I will need a fair bit more than £10k to start. Anyways, in the mean time im really confused as to what to do with the £10k I have, I dont think I will need it for business purposes for about 10-12 months and know its silly just sitting in my bank.

Ive been looking to prehaps put the money into an isa as Im told this is a recommended route for a first time saver/investor, though am so confused as to whether this is the right route?

On my understanding I would need to be quite quick as Im only allowed to put 7k in before the 5th april? and then the remaidin 3k I have after this? Hope this is correct?

Can someone please advise me what to do and at which kind of isa (or not) I should be looking at, I obvioulsy want a good return and aslo have the possiblility to withdraw cash to fund my business startup further down the line.

Many thanks in advance, hope someone can give me a few tips or recommendations as to what to do.

Thanks again.

Jay.

(not sure if ive posted in the correct area, Im not concrete on going for an isa so thought it would be better to post in this section as opposed to the dedicated ISA section.)

yorkshire_ria · 21 March 2005 at 7:59PM

Hi

As you expect to need the money in a year, a cash ISA is best - straightforward & your capital's safe. You need to be prepared to invest for the longer term, up to 5 years for stocks & shares ones.

You can put max £3k in a cash ISA per tax year but as we're nearly there, at the moment you can invest £3k now & a further £3k after 6 April. The fixed rate ones tend to have penalties if you need to pull your money out before the end of the rate fix. Variable rate cash ISAs tend to be more flexible on when you can get your cash out. Barclays mini cash ISA is totally flexible allowing withdrawals without penalty. You can find higher rates but beware you might be worse off overall if you need to cash it in within the term.

With the rest, if you want to fix your interest return look at fixed rate savings bonds. Alternatively, e-savings accounts abound.

Hope this helps

Jay_Wiseman · 21 March 2005 at 8:10PM

hi,

thanks very much for your help, ive done a bit more research and am gonna plump for the Alliance and Leicester Direct ISA account (http://www.moneysupermarket.com/ISA/IsasDetails.asp?IsasID=2912&Amount=1) it seems competitive and allows me to manage it online. Im gonna have to be quick though as you can now only open an A&L isa account instore now (as its close to the deadline). Though I will only be able to invest 6k until this time next year, I may get my partner to open her own ISA up and allow her to invest the remainding 4k (yes i can trust her

).

Thanks again.

Daft_Monkey · 21 March 2005 at 11:23PM

Jay,
Keep in mind that if you wish to transfer your ISA from Alliance & Leicester to a different provider, you will incur a charge of £25...
In your particular case this might not be a problem as you will be taking the money out within a year.
First direct offers a mini cash ISA at 6.25% fixed until the 6th of October 2005 and at 4.35% thereafter. This might be a better account for you if you withdraw the money within the year. I think however, if you request to withdraw money you can either transfer it to another First Direct account or request a cheque.
Before you decide on any ISA, read their terms and conditions very carefully and have a look at the ISA section of this forum. Many providers include several catches under their headline rates, A&L for example a £25 transfer to another ISA fee and FD a very low interest of 4.35% after the introductory period.
I have no personal experience with either Alliance & Leicester or First Direct, so I can't tell you if they are any good, customer service wise.

Jay_Wiseman · 22 March 2005 at 12:31PM

Hi, thanks for the advice, I did look at the First Direct isa as well but Im a little confused. Could I simply transfer the cash from the first direct isa into a new isa account after month 8? I know theres strict rules about opening more than one isa a year so not sure how the process works? Could I simply open up another isa (i.e. the appliance an leicester direct isa) in say october and transfer the funds over? Would this be allowed as Id have two isas open?

Sorry for being a pain.;)

monki_man · 22 March 2005 at 1:23PM

I would set up an e-isa with FD then in october then transfer it to abbey postar, unless there a better isa rate at that time.

Jay_Wiseman · 22 March 2005 at 1:28PM

yes that what i think im gonna do, just wondering how the process works? Do I simply open up a new isa with i.e. abbey in oct then get first direct to transfer the total ammount over? I know theres regulations about how many ISA's you can have and was a bit worried because wouldnt this mean Id have two open at once, Is this allowed or do I have to shut the first direct one before opening one up with i.e abbey?

Daft_Monkey · 22 March 2005 at 8:35PM

Well, the process in general works like this:
You go to the new provider and ask them to transfer your ISA from the old one. They in most cases provide you with an ISA transfer form (sometimes the application form for a new ISA includes the option to transfer). The transfer can take up to 30 days. However, prior to the transfer, you should consult both providers as their transfer procedures may differ slightly. Their staff should be able to advise you on their individual procedures/requirements. Make sure you read the T&Cs very carefully before applying for an ISA, and keep an eye for hidden penalties/charges. If in doubt ask the provider for clarifications. A starting point will be to check if the ISA adheres to the CAT standard, although sometimes non CAT standard ISAs might offer better returns, it all depends on your circumstances and flexibility.

And yes, you are correct, you can only have one "active" mini cash ISA in any one year.

Jay_Wiseman · 22 March 2005 at 10:02PM

ok many thanks for the help. ill plump for the first direct ISA and transfer over to a different ISA in october.

deemy2004 · 26 March 2005 at 9:34PM

yeh do the ISA now £3k and ISA after 5th April £3k for £6k tax free, you could fix the other £4k in a higher paying bond ready for April 2006

First timer £10,000 to save/invest, totally bewildered!

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