Novice investment fund

tony863 wrote: »

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.

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!

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

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

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