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  • FIRST POST
    • tony863
    • By tony863 7th Oct 17, 9:54 PM
    • 334Posts
    • 102Thanks
    tony863
    Novice investment fund
    • #1
    • 7th Oct 17, 9:54 PM
    Novice investment fund 7th Oct 17 at 9:54 PM
    Hi all,

    I'm 38, working full time, paying into a public sector pension and have 6 months insurance on my wages in the event of needing to take time off work.

    I have no debt and currently have approx £5k premium bonds and £6k just sat in a sub account in my standard Barclays account. I don't think it earns any interest whatsoever.

    I currently pay £150pm into my premium bonds account but don't miss it and wonder whether I should transfer a chunk of my money (£3k maybe?) into an investment fund and then use the £150pm to top it up.

    I've had a quick look at Nutmeg.com and I've seen that lots of people on here to for the vanguard LS 60 or 80. I'm looking at investing longer term (10 to 15years).

    I don't know much about these funds and I don't want to learn tbh. I'm willing to risk my money and understand I can lose more than I put in.

    All things considered, I'm thinking of the VLS60 but wondered if anyone else had any advice or comments to offer?
Page 1
    • jimjames
    • By jimjames 7th Oct 17, 9:59 PM
    • 12,105 Posts
    • 10,561 Thanks
    jimjames
    • #2
    • 7th Oct 17, 9:59 PM
    • #2
    • 7th Oct 17, 9:59 PM
    I have no debt and currently have approx £5k premium bonds and £6k just sat in a sub account in my standard Barclays account. I don't think it earns any interest whatsoever.
    Originally posted by tony863
    That is something you should sort asap as you're on a money saving site! You could get 3-5% on that money, so up to £300 per year. Worth a bit of effort!
    Remember the saying: if it looks too good to be true it almost certainly is.
    • tony863
    • By tony863 7th Oct 17, 10:05 PM
    • 334 Posts
    • 102 Thanks
    tony863
    • #3
    • 7th Oct 17, 10:05 PM
    • #3
    • 7th Oct 17, 10:05 PM
    That is something you should sort asap as you're on a money saving site! You could get 3-5% on that money, so up to £300 per year. Worth a bit of effort!
    Originally posted by jimjames
    Hence the reason for this post
    • Alexland
    • By Alexland 7th Oct 17, 11:11 PM
    • 451 Posts
    • 268 Thanks
    Alexland
    • #4
    • 7th Oct 17, 11:11 PM
    • #4
    • 7th Oct 17, 11:11 PM
    Hi Tony

    Personally I wouldn't pay the insurance on your job (who knows it might not pay out or you might need the money for another reason) but keep around £5k to £10k in cash depending on your minimum outgoings getting a 5% return with products such as Nationwide Flex Direct (first year only sadly) and the regular savers associated with bank accounts such as HSBC, M&S, First Direct, Santander 123 or Nationwide again. You might end up with 4 bank accounts check the conditions carefully but it works for me. You might even get some bonuses for switching.

    The trick with 1 year regular savers is to have them each 3, 4 or 6 months offset (depending on how many providers you get going at once) so there is always enough in the accounts in total. If you start them all at the same time then they all mature at the same time which is sub optimal.

    When they mature open another one immediately making a 1st month contribution. Then move the remaining 11 month + interest lump sum into an investment account for the long term.

    Both Nutmeg and Vanguard offer fixed allocation shares vs bond ratios in 20% increments. I have accounts with both and Nutmeg is very easy to operate and Vanguard is a bit harder but still easy enough. They are both a lot simpler than share dealing accounts. In both cases the fees are deducted automatically so you don't need to worry about maintaining a cash balance.

    Nutmeg's fixed allocation level 3 (out of 5) is equivalent to VLS60. Nutmeg rebalance when the ratio has moved 6% but Vanguard probably rebalance more frequently. Nutmeg cost 0.62% total (0.45% + 0.17%) and Vanguard are 0.37% total (0.15% + 0.22%).

    As such for a S&S ISA then Vanguard would be cheaper.

    However as Vanguard don't do Lifetime ISAs (if you are saving for your first home or can wait until age 60) to get the government 25% bonus then Nutmeg would be a good LISA choice. Or so would buying VLS in an AJ Bell LISA (0.25% + 0.22% plus £1.50 per fund trade) but it's more complicated platform.

    You need to invest long term to reduce the chances of crystallising losses when the market valuations are low - the below article has a great graph:

    https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

    Ps I don't understand your comment about loosing more than you put in. For these types of investments (VLS is an OEIC and Nutmeg use ETFs) your losses are limited by the amount invested.

    Hope this helps,
    Alex
    Last edited by Alexland; 11-10-2017 at 11:00 PM. Reason: Nutmeg ETF fee has reduced to 0.17
    • dunstonh
    • By dunstonh 7th Oct 17, 11:46 PM
    • 89,851 Posts
    • 55,457 Thanks
    dunstonh
    • #5
    • 7th Oct 17, 11:46 PM
    • #5
    • 7th Oct 17, 11:46 PM
    And Nutmeg have just published this years accounts and their loses have gone up again (as they have every year since they started) and the directors have said they will likely have to go capital raising again to continue trading.

    https://www.ftadviser.com/your-industry/2017/10/02/nutmeg-losses-soar-to-9-3m/
    Last edited by dunstonh; 08-10-2017 at 11:34 AM.
    • Alexland
    • By Alexland 8th Oct 17, 6:41 AM
    • 451 Posts
    • 268 Thanks
    Alexland
    • #6
    • 8th Oct 17, 6:41 AM
    • #6
    • 8th Oct 17, 6:41 AM
    Yes but with such rapid customer expansion in the past 2 years you would expect losses to increase. I doubt Vanguard are anywhere near covering their costs from their UK platform launch yet either.

    Even if Nutmeg funding ran out, and no more was available, the customer base would be sufficiently valuable to be bought. Their customer age profiles, volumes and assets under management are starting to look very attractive. I question if the shareholders get their investment back but that's not a customer issue.

    Alex
    Last edited by Alexland; 08-10-2017 at 7:55 AM.
    • tony863
    • By tony863 8th Oct 17, 9:54 AM
    • 334 Posts
    • 102 Thanks
    tony863
    • #7
    • 8th Oct 17, 9:54 AM
    • #7
    • 8th Oct 17, 9:54 AM
    Thanks for the replies, especially the lengthy reply from Alex.

    I don't want to mess around with opening and closing bank accounts to make a few hundred quid a year. I know it sounds irresponsible but I'm looking to find something that I can just drop my money into and then come back in 15 years time to find that it's made me some half decent interest.

    I already own my own home so I don't need to save for a deposit and my insurance scheme at work is pretty cheap in any event (approx £12 per month). This is more the case that I tend to save anything left over from my wages on a monthly basis and every few months I transfer it into another account.

    I normally have around £200 to £500 left over and might transfer £1k to £2k every few months until it gets to a sizeable amount. Last time I emptied it, I paid £6k for a family holiday to Mexico!

    I won't miss the money but I realise that I'm missing an opportunity by simply leaving it sat there doing nothing.

    I'm thinking of doing £2k Nutmeg and £2k VLS 60% with £100 per month going into each. Any thoughts?
    • Alexland
    • By Alexland 8th Oct 17, 12:09 PM
    • 451 Posts
    • 268 Thanks
    Alexland
    • #8
    • 8th Oct 17, 12:09 PM
    • #8
    • 8th Oct 17, 12:09 PM
    Hi Tony

    If you are 38 now and investing for 15 years if you were willing to wait a further 6 - 7 years to withdraw at 60 the LISA would be perfect? You could use the 25% government bonus to go to Mexico again?

    Alex
    Last edited by Alexland; 08-10-2017 at 12:20 PM.
    • Eco Miser
    • By Eco Miser 8th Oct 17, 12:36 PM
    • 3,091 Posts
    • 2,857 Thanks
    Eco Miser
    • #9
    • 8th Oct 17, 12:36 PM
    • #9
    • 8th Oct 17, 12:36 PM
    I don't want to mess around with opening and closing bank accounts to make a few hundred quid a year. I know it sounds irresponsible but I'm looking to find something that I can just drop my money into and then come back in 15 years time to find that it's made me some half decent interest.
    Originally posted by tony863
    There's nothing that will make half decent interest over 15 years.
    There are things that will make a more than decent return, but as a combination of dividends and capital growth, not interest. Vanguard, and maybe Nutmeg, and many other funds will do this.
    That's long term.

    You should also be looking to make money from your short-term and medium-term cash holdings, and that's where interest paying bank accounts, of various types, come in.
    Once you've go online banking set up, opening further accounts, such a a new Regular Saver every year, just takes a few minutes, a hundred pounds for 5 minutes work is a pretty good pay-rate.

    The best paying current account (Nationwide) only lasts a year, but the other good accounts last indefinitely, and have been going for years.
    Eco Miser
    Saving money for well over half a century
    • tony863
    • By tony863 8th Oct 17, 6:31 PM
    • 334 Posts
    • 102 Thanks
    tony863
    Hi Tony

    If you are 38 now and investing for 15 years if you were willing to wait a further 6 - 7 years to withdraw at 60 the LISA would be perfect? You could use the 25% government bonus to go to Mexico again?

    Alex
    Originally posted by Alexland
    Absolutely. I don't mind just leaving it until I'm 60, I just said 15 years as I was trying to get across the point that I'm prepared to leave it for a long time.

    Is the LISA a better option than the funds? Is there an example calculator available that estimates a return? I might be getting it wrong but I'm assuming a LISA is no risk whatsoever and therefore the return is not nearly as good as it could be with Nutmeg or VLS?
    • tony863
    • By tony863 8th Oct 17, 6:35 PM
    • 334 Posts
    • 102 Thanks
    tony863
    There's nothing that will make half decent interest over 15 years.
    There are things that will make a more than decent return, but as a combination of dividends and capital growth, not interest.

    You should also be looking to make money from your short-term and medium-term cash holdings.
    Originally posted by Eco Miser
    Apologies.... Wrong choice of word...I meant return or any other word that describes me gaining more than I put in.

    I'll consider the high interest accounts but I don't really fancy the faff. A few minutes work on top of my normal daily life is too much hassle at the moment.
    • Eco Miser
    • By Eco Miser 8th Oct 17, 6:37 PM
    • 3,091 Posts
    • 2,857 Thanks
    Eco Miser
    Is the LISA a better option than the funds? Is there an example calculator available that estimates a return? I might be getting it wrong but I'm assuming a LISA is no risk whatsoever and therefore the return is not nearly as good as it could be with Nutmeg or VLS?
    Originally posted by tony863
    A LISA could be in cash, and therefore virtually no risk, but it could also be in funds, and exactly the same risk as an ordinary ISA (but you've got 25% bonus from the government, and it's almost locked in until you're 60).
    Eco Miser
    Saving money for well over half a century
    • tony863
    • By tony863 8th Oct 17, 7:15 PM
    • 334 Posts
    • 102 Thanks
    tony863
    A LISA could be in cash, and therefore virtually no risk, but it could also be in funds, and exactly the same risk as an ordinary ISA (but you've got 25% bonus from the government, and it's almost locked in until you're 60).
    Originally posted by Eco Miser
    Thanks for this. Would there be one that you'd recommend for my needs?
    • Alexland
    • By Alexland 8th Oct 17, 7:39 PM
    • 451 Posts
    • 268 Thanks
    Alexland
    Hi,

    A cash LISA would be a terrible way to save for 20+ years as the low interest rate would not keep up with inflation and the government bonus would be erroded.

    Nutmeg do a stocks and shares Lifetime ISA and it works exactly the same as their ISA (auto investing in ETF funds) except you can only contribute up to £4000 per tax year and the government will add a 25% bonus (so up to £1000 per year). You can put the money in this tax year and the bonus will be paid early next tax year. From next tax year the bonus will be paid within about a month of contributing. Nutmeg will automatically invest the contribution and bonus. You can keep contributing each tax year until your 50th birthday and then leave invested for another 10 years before you get access to the money from your 60th birthday.

    We each have a Nutmeg LISA and although it's very early days (they only launched this tax year) we are currently up over £100 each but that's mainly due to the weak pound rather than investment returns. A few weeks ago we were down nearly £50 each. I am going to use mine at 60 to help my son with a house deposit and to continue feeding my pension while retired.

    Note - technically you can withdraw a proportion earlier than your 60th if required but you loose the government bonus and pay a small penalty so it's best to consider the money locked away. That also stops you making the classic behavioural mistake of withdrawing the money when market valuations are low. If the value drops its best to just have confidence it is diversified and remember the shares should at least follow inflation and your dividend reinvestment is getting better value so leave it alone to recover and grow.

    Alex
    Last edited by Alexland; 08-10-2017 at 8:11 PM.
    • tony863
    • By tony863 8th Oct 17, 11:01 PM
    • 334 Posts
    • 102 Thanks
    tony863
    Hi,

    A cash LISA would be a terrible way to save for 20+ years as the low interest rate would not keep up with inflation and the government bonus would be erroded.

    Nutmeg do a stocks and shares Lifetime ISA and it works exactly the same as their ISA (auto investing in ETF funds) except you can only contribute up to £4000 per tax year and the government will add a 25% bonus (so up to £1000 per year). You can put the money in this tax year and the bonus will be paid early next tax year. From next tax year the bonus will be paid within about a month of contributing. Nutmeg will automatically invest the contribution and bonus. You can keep contributing each tax year until your 50th birthday and then leave invested for another 10 years before you get access to the money from your 60th birthday.

    We each have a Nutmeg LISA and although it's very early days (they only launched this tax year) we are currently up over £100 each but that's mainly due to the weak pound rather than investment returns. A few weeks ago we were down nearly £50 each. I am going to use mine at 60 to help my son with a house deposit and to continue feeding my pension while retired.

    Note - technically you can withdraw a proportion earlier than your 60th if required but you loose the government bonus and pay a small penalty so it's best to consider the money locked away. That also stops you making the classic behavioural mistake of withdrawing the money when market valuations are low. If the value drops its best to just have confidence it is diversified and remember the shares should at least follow inflation and your dividend reinvestment is getting better value so leave it alone to recover and grow.

    Alex
    Originally posted by Alexland
    Thanks for this again Alex,

    So is the Nutmeg LISA the same as doing the VLS60 or the Nutmeg share fund? Like I said before, I'm looking at doing £4k in with £200 pm into one account..... Or £2k into 2 accounts and £100 pm into each.

    I like the idea of the Nutmeg LISA but wonder whether I should put it all into one or split it down?
    • dunstonh
    • By dunstonh 8th Oct 17, 11:08 PM
    • 89,851 Posts
    • 55,457 Thanks
    dunstonh
    So is the Nutmeg LISA the same as doing the VLS60
    No. VLS60 is an investment fund. you choose the fund. Nutmeg is a portfolio of ETFs that you have no control over.
    • Alexland
    • By Alexland 8th Oct 17, 11:20 PM
    • 451 Posts
    • 268 Thanks
    Alexland
    Nutmeg's fixed allocation 60% shares ETF portfolio should perform about the same as the VLS60 fund. They won't quite match as there are differences in the asset allocation and rebalancing but is unclear which would perform better and the fund fees are similar.

    If you are inclined to withdraw some before 60 it might be best to put half in a Vanguard ISA and half (up to £4k per tax year) in a Nutmeg LISA. This would also help ensure you stay near the FSCS compensation limit which presumably will eventually rise with some inflation.

    According to the Nutmeg calculator if you are 38 and put £2k a year into a LISA (and get a 25% bonus) until 50 you will have contributed £24k so gained a £6k government bonus so a total of £30k invested. At 5% compound investment return this would mean the account could be worth £61,747 (or £39,940 after deducting inflation) at 60 which sounds reasonable.

    If you kept your Vanguard ISA until 60 it would be worth about 14% less because of the lack of LISA bonus (-20%) but the overall Vanguard fees are 0.25% lower (+6%).

    Alex.
    Last edited by Alexland; 11-10-2017 at 11:19 PM.
    • hels234
    • By hels234 9th Oct 17, 1:00 PM
    • 140 Posts
    • 70 Thanks
    hels234
    Hi, If you have a public sector pension is an AVC available? I'm local gov't and pay into an AVC which is taken before tax from my salary and then I choose a number of funds to invest it into (its with prudential). I also have a LISA for when I turn 60 and also an ISA (S&S) just in case I need the money back out before 60.
    • tony863
    • By tony863 9th Oct 17, 8:44 PM
    • 334 Posts
    • 102 Thanks
    tony863
    Nutmeg's fixed allocation 60% shares ETF portfolio should perform about the same as the VLS60 fund. They won't quite match as there are differences in the asset allocation and rebalancing but is unclear which would perform better and the fund fees are similar.

    If you are inclined to withdraw some before 60 it might be best to put half in a Vanguard ISA and half (up to £4k per tax year) in a Nutmeg LISA. This would also help ensure you stay near the FSCS compensation limit which presumably will eventually rise with some inflation.

    According to the Nutmeg calculator if you are 38 and put £2k a year into a LISA (and get a 25% bonus) until 50 you will have contributed £24k so gained a £6k government bonus so a total of £30k invested. At 5% compound investment return this would mean the account could be worth £61,747 (or £39,940 after deducting inflation) at 60 which sounds reasonable.

    If you kept your Vanguard ISA until 60 it would be worth about 13% less because of the lack of LISA bonus (-20%) but the Vanguard platform fees are 0.30% lower (+7%).

    Alex.
    Originally posted by Alexland
    I think I'm more confused now

    Can I ask which you think is the better option? Or which you would choose?

    1. £2k VLS 60plus £100pm
    2. £2k nutmeg plus £100pm
    3. £4k one of the above plus £200 pm
    • tony863
    • By tony863 9th Oct 17, 8:45 PM
    • 334 Posts
    • 102 Thanks
    tony863
    Hi, If you have a public sector pension is an AVC available? I'm local gov't and pay into an AVC which is taken before tax from my salary and then I choose a number of funds to invest it into (its with prudential). I also have a LISA for when I turn 60 and also an ISA (S&S) just in case I need the money back out before 60.
    Originally posted by hels234
    Not that I know of I'm afraid.
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