Investing in stock market vs paying off mortgage

Trying_to_be_good

Emmie

Don't invest in anything you don't understand. Assess your attitude to risk - as was said earlier, how much are you prepared to lose, as any investment may be worthless (or may make lots of money).

As a start, I'd take out a cash ISA for each of you and your wife/partner and overpay the mortgage by the maximum £500 per month for which there is no penalty.

What is the penalty for a larger over payment? It's likely to be about 5% with Nationwide, so a £10,000 overpayment will (depending on how they work it out) cost an extra £5,000 early repayment charge, but will save you interest over the term of the mortgage.

purch

There are things like tax, risk profile and personal circumstances to consider

Yeah....but the most important thing to consider is that asset prices are deflating, and no one should be advising someone to keep hold of debt in defaltionary times.

Blah99

Different opinion. Stick your money in savings accounts for the next couple of months, and spend that time learning how financial products/systems work. Giving yourself a decent financial education is the best thing you can do, as it will help you make the right decisions (and filter out the useless IFAs who would take your money and recommend inappropriate solutions).

Unless you have massively complicated affairs there is absolutely no need to use an IFA. IFAs generally won't admit it but, 95% of the time, they get paid for doling out basic advice that anyone could figure out for themselves if they took the time to learn the basics of money management. IFAs bank on the fact that people believe they have some special savant ability, or that investing is all too complicated and difficult. It's not.

People take the time to learn to drive a car, or manage to remember reams of useless football/cricket/whatever statistics. Why not do the same for your money?

sabretoothtigger

Its harder to take a serious interest in something you have no investment in.
IFA have this as their job, can you really say you will spend hours studying boring figures that change every day. You should have a way to double check your own opinion

Gradually investing would be a good way of learning and in this market right now, it'd be a much safer choice then a lump sum.

Theres virtual share accounts you can setup with virtual money.
Or just a simple yahoo account will let you setup a portfolio with prices and amounts, following it all once with automatic updates.

Everytime you make a post on here saying something like I would have bought bt today if I had the money, you log onto yahoo and fill out £1000 of shares at the present price and see just how wise that was




None of that is real till you actually stand to lose money when you get it wrong imo.
Private investors typically buy high and sell low just following their emotions at the time, right now it'd be hard to buy high but further drops are definitly possible

Blah99

sabretoothtigger wrote: »

Its harder to take a serious interest in something you have no investment in.
IFA have this as their job, can you really say you will spend hours studying boring figures that change every day. You should have a way to double check your own opinion

If you don't have serious interest in how you're investing your hard earned money I'll be happy to take it off your hands.

It's perfectly possible to manage your own portfolio of investments with a few hours of up front work, then just an hour or 2 per week. You don't need to "study boring figures that change every day", you just need to have an appreciation of financial principles. The longer term view you take of investment, the less day to day management required.

And sure, it's not a bad thing to have someone else to check your opinion, but unless you have a grounding in financial principles how will you know the advice you get from an IFA is good and suitable? Look at the number of posts on this forum where people wrongly complain that they believe an IFA has been negligent.

Most people can't even quantify what their IFA is supposed to be doing for them. Meanwhile the IFA is taking a nice little commission for doing what, in most cases, is sweet xxxx-all with their money.

dunstonh

Look at the number of posts on this forum where people wrongly complain that they believe an IFA has been negligent.

yes. Not very many is it. The FOS recently published their stats for the year to date and showed that IFAs only accounted for 2% of complaints to the FOS despite doing more transactions than the other distribution channels. That is down on last years 4% and it has fallen year on year over the last 5 years.

The chairman of the FOS has said (about IFAs, not salesforces where he was more critical):

..it is worth saying a little about what our experience of the individual advice sector has been. It is not entirely what you might have expected if you were to believe some of the more lurid stories in the trade press.

The facts tell a very different story. Our experience is that the tabloid focus on disgruntled, confrontational, mis-selling IFAs is completely unrepresentative of the huge majority of hardworking professionals keeping their heads down and performing a valuable service for clients.

Indeed, on the whole, the Financial Ombudsman Service’s experience tells a remarkably positive story for IFAs...

Blah99

You misunderstand my post. I'm not making allegations that your profession is engaged in wholesale malpractice, which is why I said "wrongly complain". What I am saying is that many people who use an IFA don't have a clear understanding of what that IFA will actually do for them.

You yourself posted on a thread with this issue just today:
http://forums.moneysavingexpert.com/showthread.html?t=1300877

The problem is that people do not have enough of a grasp of financial topics to properly articulate what they want to an IFA, nor to fully understand the advice an IFA gives them in return. This is why people are surprised that an IFA hasn't swapped their investments out, and are shocked at the 30% fall in their NAV.

When people do spend the time to give themselves this basic financial education, they will quickly find that they don't actually need to pay comission to an IFA. These basics should really be taught in schools and offered as free classes to adults, but until they are it's everyone's individual responsibility to learn them any way they can.

As I said in another thread, it's amazing how people can remember reams of football match statistics but can't understand the interest rates on their savings. Perhaps someone should produce a "financial facts" set of trading cards, and kids can trade them in the playground like they do with those pokemon things. The big bad evil nemesis could even have a picture of Gordon Brown, with Alastair Darling as a toady sidekick...

Mtec

As an ex pro trader, 25 years.

It's an online casino, the biggest there is.

Trust me emmie as a novice you’re highly likely to lose most or all of it.
Pay off your debts and tuck anything left into a high interest a/c

dunstonh

I dont disagree with a lot of what you say here blah. However, the problem is that many people cannot be bothered to spend the time required on the basics, let lone the detail.

When you consider that over half of people seeing a tied sales rep think they are really seeing an IFA, you do have to wonder. If they cant get that right, then how do they expect to get rest right.

Part of the problem with IFAs is the range of business models and speciality areas. I was in a meeting recently with other IFA business owners (owners, partners, directors) and it is clear (and we already knew) that we all had different business models and focused on different areas of the market. The term IFA doesnt really mean anything other than an individual with a certain qualification, authorisation and access to whole of market. If you see a transactional IFA then they will do that transaction and move on. If you see a servicing IFA then they will provide servicing. If you see a mortgage IFA then you dont really want to be seeing them for investment advice (or vice versa). Some may give servicing when you request it or on certain events. Some will be pro-active and see you frequently at defined times. There is no one standard model.

It is important for the client to state what service they are after when seeking advice. The firm they are seeing may or may not offer the service they are after.

Jonbvn

Mtec wrote: »

As an ex pro trader, 25 years.

It's an online casino, the biggest there is.

Trust me emmie as a novice you’re highly likely to lose most or all of it.
Pay off your debts and tuck anything left into a high interest a/c

You couldn't possibly be telling porkies and really you're just about to do your mock O or A levels?;)