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  • FIRST POST
    • Curos
    • By Curos 6th Jan 18, 10:06 PM
    • 8Posts
    • 1Thanks
    Curos
    Investing strategy/advice
    • #1
    • 6th Jan 18, 10:06 PM
    Investing strategy/advice 6th Jan 18 at 10:06 PM
    Rather unoriginally I'm young (20) and am seeking advice/pearls of wisdom from those more experienced and knowledgeable than me.

    As a bit of background, I'm very fortunate to be currently living at home without having to pay any regular rent or board (other than negligible amounts if I do a midweek shop etc). I have a decent job for my age and my current net monthly pay is £1500. This figure will rise in the next three years to c.net £2500/month.

    Currently I have around £20,000 in savings that is in an array of current accounts/regular saver accounts and a H2B ISA.

    I've been reading a lot of threads on this board during the last few weeks/months and I really want to start doing 'more' with my money and start planning my future. I have a few questions/ideas that I would really appreciate feedback on:

    1.) I want to get the ball rolling on investing and plan to open a SS ISA and make monthly contributions to buy VLS 100 fund shares. I understand the risk on a basic level but am prepared to ride out corrections, huge drops etc and would hold for 15+ years - my only mitigation to 'reduce risk'/maximise reward would be to contribute monthly rather than any initial lump sum. Does this make any sense? Would it be advisable to contribute an initial £2k or so plus contribute monthly thereafter? (N.b. I would probably make £100-£200 monthly contributions)

    2.) I plan to transfer my H2B ISA to a LISA in order to save for buying a house in around 4/5 years. I'm really torn between whether I should stick to a cash LISA or get a SS LISA (but in a lower-risk fund such as VLS 20/80?). I would max out the £4k LISA allowance every year. If I went for cash LISA I would probably fund it each year when a regular saver account matured and if SS LISA probably monthly contributions. Again, any thoughts on this?

    3.) Does anyone have any suggestions/links to Excel spread sheets to track earnings, savings, spending etc? I have created my own and have tweaked it across a few months to the point that it is usable and I think offers an okay-ish projection for the next few years but I'd be really interested in trying out anything that someone with more expertise in this area has made.

    4.) Any other advice, links, food for thought that anyone wants to offer that sprang to mind when reading my general background would be great!

    I'm sorry if this post is too long. Thank you for reading this/possibly even taking the time to reply. I really will appreciate any help and I know I'm at the very beginning of this journey. The above is only my plan for the next few months and in the meantime I will educate myself and research further.

Page 1
    • chockydavid1983
    • By chockydavid1983 6th Jan 18, 10:26 PM
    • 524 Posts
    • 309 Thanks
    chockydavid1983
    • #2
    • 6th Jan 18, 10:26 PM
    • #2
    • 6th Jan 18, 10:26 PM
    Congrats, a great position to be in at 20 :-)

    1) Yes, sounds fine. Consider pension contributions too (never too early to start), especially if you are or will be shortly a higher rate tax payer as they're very tax efficient

    2) If you're looking to buy in 4/5 years, I'd stick to best rate current account/ regular savers/ HTB ISA/ LISA etc. People say the min time frame to invest in the stock market is 5 years but with regular monthly contributions, you'd have to invest for 10 years for the money to be invested for an average of 5 years

    4) I'd advise reading more about pensions and investments both in books (e.g. Smarter Investing) and websites (e.g. Monevator). Make sure you understand the risks involved and the inevitable big market crashes, especially when investing in something like VLS 100 so you know you won't be panicked into selling and crystalising losses

    Good luck
    • Curos
    • By Curos 6th Jan 18, 10:52 PM
    • 8 Posts
    • 1 Thanks
    Curos
    • #3
    • 6th Jan 18, 10:52 PM
    • #3
    • 6th Jan 18, 10:52 PM
    Congrats, a great position to be in at 20 :-)

    1) Yes, sounds fine. Consider pension contributions too (never too early to start), especially if you are or will be shortly a higher rate tax payer as they're very tax efficient

    2) If you're looking to buy in 4/5 years, I'd stick to best rate current account/ regular savers/ HTB ISA/ LISA etc. People say the min time frame to invest in the stock market is 5 years but with regular monthly contributions, you'd have to invest for 10 years for the money to be invested for an average of 5 years

    4) I'd advise reading more about pensions and investments both in books (e.g. Smarter Investing) and websites (e.g. Monevator). Make sure you understand the risks involved and the inevitable big market crashes, especially when investing in something like VLS 100 so you know you won't be panicked into selling and crystalising losses

    Good luck
    Originally posted by chockydavid1983
    Thank you! It has been hard work and will continue to be but I'm fortunate that my hard work is actually paying off (so far at least!)

    I actually did forget to mention in my OP that I am contributing to my workplace pension scheme up to the maximum amount that my employer will match - I may make additional voluntary contributions when/if I do tip the balance of becoming a higher rate tax payer.

    Thanks for the advice on the LISA point, that makes a lot of sense.

    I think I am going to read at least a few books I've seen mentioned on this forum over the next few months.
    • oz0707
    • By oz0707 7th Jan 18, 8:12 AM
    • 506 Posts
    • 137 Thanks
    oz0707
    • #4
    • 7th Jan 18, 8:12 AM
    • #4
    • 7th Jan 18, 8:12 AM
    If opening any kind of LISA I'd personally get a full 4K in before April so you get the full bonus. You may want to look into transferring htb isa to Lisa not sure which is more beneficial though?
    • Curos
    • By Curos 7th Jan 18, 11:38 AM
    • 8 Posts
    • 1 Thanks
    Curos
    • #5
    • 7th Jan 18, 11:38 AM
    • #5
    • 7th Jan 18, 11:38 AM
    Thanks oz, yes I'm looking to open the LISA asap and then transfer the H2B money into that account and top up to reach this year's 4k allowance limit.
    • ConMan
    • By ConMan 7th Jan 18, 12:10 PM
    • 33 Posts
    • 24 Thanks
    ConMan
    • #6
    • 7th Jan 18, 12:10 PM
    • #6
    • 7th Jan 18, 12:10 PM
    Hi Curos, I'm in a somewhat similar position.

    I'm 23, and recently transfered my H2B to a LISA. I've gone for the VS 40/60 - not going to buy for at least another 5 years. Will also max out my LISA allowance each year.

    Along side that, I've got £3k in P2P, which I've got in a IFISA which I contribute £25 per month; although I'm considering increasing this to £40/£50 pm.

    I also contribute to my S&S ISA on an ad-hoc basis, £5k in that in higher risk funds, as like you, intend to leave it in there for at least 15 years.

    Finally, I contribute 10% of my salary which my employer matches, and pay £100 AVC.

    I have a SIPP also, and now considering stopping my AVC's with my employer and using that £100 to put in my SIPP as the employer funds are limited and given my age, I would rather invest in high risk funds.

    One thing that I need to do is to build up an emergency cash fund. I just hate the idea of leaving cash as it is, eroding doing absolutely nothing other than losing value.

    I've only really started sorting my money out since I was 22, and my one regret is that I didn't start sooner.
    Last edited by ConMan; 07-01-2018 at 12:47 PM.
    • oz0707
    • By oz0707 7th Jan 18, 12:21 PM
    • 506 Posts
    • 137 Thanks
    oz0707
    • #7
    • 7th Jan 18, 12:21 PM
    • #7
    • 7th Jan 18, 12:21 PM
    You are both way ahead of the game don't worry! I was similar at your ages but got sidetracked into maximising earnings and let what I accumulated stagnate.

    I'd like to know myself if statistically it would be better next year to drip feed the 4k into LISA therefore averaging your 'SP' on funds or getting the 4k in april and maximising the investment period on the 1k bonus? I suppose it all depends on what the market does...
    • ConMan
    • By ConMan 7th Jan 18, 12:40 PM
    • 33 Posts
    • 24 Thanks
    ConMan
    • #8
    • 7th Jan 18, 12:40 PM
    • #8
    • 7th Jan 18, 12:40 PM
    I'd like to know myself if statistically it would be better next year to drip feed the 4k into LISA therefore averaging your 'SP' on funds or getting the 4k in april and maximising the investment period on the 1k bonus? I suppose it all depends on what the market does...
    Originally posted by oz0707
    Yeah, that's interesting. I guess for me, I won't be putting £4k straight into the LISA in April. Providing overtime is still on, I should be able to able to have the £4k completed by August. Then I can focus on my P2P and S&S from August to April 19'... maybe even save a little cash :'(
    • Curos
    • By Curos 7th Jan 18, 3:19 PM
    • 8 Posts
    • 1 Thanks
    Curos
    • #9
    • 7th Jan 18, 3:19 PM
    • #9
    • 7th Jan 18, 3:19 PM
    Hi Conman!

    Yes, I'd say we're in very similar situations.. I guess I'm currently in the position where I have a decent nest egg of cash (mostly in okay'ish interest rates regular savers) but am beginning to fear inflation eating away at it to a point where it is no longer as impressive - hence my plan to get things started on 'investing'.

    Given there's a possibility that I might want to buy a house in 4/5 years I think I will stick with opening a Cash LISA and feeding that when regular saver accounts mature.

    I contribute 7% of my salary to my pension (max I can under scheme rules, can increase another % or 2 next year) and my employer near enough matches this. I'm currently trying to find out what options I have within this scheme as currently I just pay into a default lifestyle fund but I can't see the breakdown of what this consists of or performance which is a little odd..

    I've not yet delved into P2P lending at all - was there a particular reason why you decided to get involved with that?

    With regards to you building up your cash reserve, have a look at opening a few different current accounts that offer good interest rates on fixed sums, e.g. FlexDirect is 5% on up to £2500 for a year, and then regular savers. Only hitch is switching when necessary/when the savings account matures but (for me at least) this has provided a good base to at least make sure a decent amount of my cash is earning guaranteed interest.


    And thanks Oz! Just trying to increase my knowledge to make a few somewhat informed investment decisions before maybe getting some advice from an IFA in a few years when and if I feel like the amount of money I have saved/invested warrants it.
    • ConMan
    • By ConMan 7th Jan 18, 3:39 PM
    • 33 Posts
    • 24 Thanks
    ConMan
    My pension was the same, I assume all workplace pensions will put you into a default scheme at first. I've altered this so approx 60% goes into the default, (medium risk) fund, and the other 40% is split between 2 separate high risk funds. My AVC's are split equally 50/50 between the two high risk funds, but as mentioned earlier, considering stopping this and putting it into a SIPP where I can have access to many more funds.

    P2P is a difficult one. I've had a P2P account with Zopa for a number of years, and actually, it's the first step I took into investing. I think the main reason I got into it at that point, rather than the stock market is due to the simplicity of it.

    I've only ever used a Zopa account, so I can't say for others, but for me it's a very simple website to use. Plus, when I started, Zopa covered all unpaid loans, so I wouldn't lose any money. I think that was a smart move from Zopa, as that's probably what got me into it.

    Since then the IFISA has come out, and so that helps. The protection on unpaid loans has ended now, so theoretically you can lose money, however, I've not lost a penny. However, I'm only getting around 5% returns at the moment.

    I'll keep my account with Zopa, and P2P as it's just another bit of my portfolio, and I like the idea of it. I'm only dealing in small amounts, so even if it does go a bit pear-shaped, it's no biggie.

    Would I recommend it now? With Zopa probably not. Reason is you can achieve the rates I'm getting now with savings accounts that you eluded to. No point in exposing yourself to that risk. However, for me who has been in P2P for 5 years, I'll continue as I like it.

    I think you've probably done it better than me to be honest. You've built up a pot of cash, and I'd highly recommend that you just keep some of that away as a rainy day fund. - Yes it won't earn a lot, but it's there to help in those emergencies.

    Realistically, when I buy a house, I'd like to have at least £6k in cash savings for emergencies. Given I've got at least 5 years, I'd say that's rather easy, but like you, cash sat doing nothing is not nice.
    • ValiantSon
    • By ValiantSon 7th Jan 18, 7:47 PM
    • 224 Posts
    • 203 Thanks
    ValiantSon
    Sounds like you are in a very good position, and the earlier you start saving and investing the better. A few things to consider:

    1) Look at other pension options. 7% is not a huge amount to be putting into your pension. It might be that sticking to this for the matched employer contribution is worthwhile, but consider an additional pension too, e.g. SIPP.

    2) A cash LISA may be a better option than S&S if you are expecting to want to use the money in around 5 years time. You may be fortunate with returns on investment in that timeframe, but could easily go the other way, so cash is a safer bet. Make sure that you maximise the government bonus, however, as the cash interest rates are pathetic.

    3) How much of your current income are you saving or planning to invest? Given that you seem to have almost no committed expenditure then I'd strongly suggest putting something like 70% away. This will leave you with a bit of money to enjoy yourself, but not huge amounts to spend. Nonetheless the return on investment will be massive and once you have got a mortgage and are paying all those utility bills on top you won't have nearly as much to invest. Do it now and gain the benefits of compounding.

    4) If you are going to invest in just VLS100 then do it through Vanguard's own platform which is the cheapest way. Your total cost will be 0.37% and nobody else will beat that until you have a lot more invested. Review costs each year.

    5) I'm not convinced about the benefits of drip feeding money into investments. It certainly is worth making regular investments out of your income, but if you have lump sums then it is probably best just to invest the lot straight away.

    6) Do keep a cash "rainy day" fund and don't touch it unless you lose your job. It is also worth building up a separate cash fund to pay for large ticket items like cars. (Don't buy cars on any sort of finance deal as they are a rip-off and don't buy brand new as the depreciation is massive).

    7) If you are going to use VLS100 now then look at reducing your exposure to equities over time. If it were me, at 30, say, I would probably switch to VLS80 and at 40 to VLS60.
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