New to investing and have some simple questions please

MyLastFiver

Hi all,

Sorry if these questions are daft - I'm confused. First the situation:

Generous relatives have given us a total of £4000 this Christmas, and I'd like to do the following with it:

£2000 in Cash ISA
£1000 into a FTSE 100 Tracker Fund
£1000 of Vodafone shares (excellent income)

Long term aims are to 1. pay for my baby son's university education 2. retire early, so I'm prepared to have half the money tied up for up to 18 years.

Other key facts:

1. We have no other savings.
2. We have £100000 outstanding on a tracker mortgage
3. We have no other interest-bearing debts but are on a debt management plan repaying outstanding unsecured borrowing, at zero interest.
4. I am a basic rate taxpayer but expect a promotion this year to push me into higher rate.
5. My wife is a full-time mum so is unwaged, apart from Child Tax Credit at the lower rate.
6. I am in a very good final salary pension.
7. My son does have a Child Trust Fund but I don't want to put any more into it as I would like to retain control of the money when he turns 18.
7. I will be able to save occasional additional amounts but cannot commit to saving a regular monthly amount at this time.
8. Due to owing them money, we cannot save/invest with Barclays, HSBC, Clydesdale, HBOS/Lloyds, Bank of Scotland, Co-Op or Prudential. :-(

So my questions are:

1. What do people think of my choice of investments?
2. Is it possible to put all three types of investment under an ISA wrapper? If so, where would I find such a product?
3. Is my poor credit history likely to see me turned down for a share-dealing account? Or will the ISA provider take care of share trades?

If you've got this far thanks for reading. Final thing - I realise that the obvious thing to do with the money would be to pay debt down, but as we're not paying interest on it, and we're paying off a good monthly chunk anyway, I would rather take this unexpected £4000 and have half as a cash emergency fund, and invest the rest for my son's future.

Thanks in anticipation

Lokolo

1. What do people think of my choice of investments?

This does not constitute as advice. My friend has invested money into Vodafone for 2 years and hasn't gained a penny in terms of value and the dividends don't cover it. Investments aren't gaurenteed.
Cash ISA isn't an investment, its a savings wrapper.

2. Is it possible to put all three types of investment under an ISA wrapper? If so, where would I find such a product?

No. Vodafone and FTSE tracker would be under Stocks and Shares ISA.

3. Is my poor credit history likely to see me turned down for a share-dealing account? Or will the ISA provider take care of share trades?

Credit history and share dealing - no effect on one another, you aren't being credited any money or anything.
The ISA provider takes care of the actual trades, you give the money, they buy.

earlgrey_3

£2000 seems to be about 2 or 3 weeks wages for you and as you've got other debts with a poor credit history on top of your £100K mortgage I assume you'd find it tricky to get further credit in an emergency.

We're all different but I'd find having so little cash in hand a little scary. My approach would be to whack it all in two cash ISAs and not think about investment until you've cleared your debts and have at least half a year's salary in savings. Then I'd look at collective investments and not individual shares until I could buy a portfolio with decent sized holdings in at least a dozen companies.

Vodafone shares are currently around half the price they were 9 years ago. They could do a whole lot better over the next 9 years... or not.

But it's your money.

jon3001

If you've zero savings then you should definitely allocate some of this money for emergencies. Usually 3-6 months expenses is recommended as a minimum. Is £2000 going to be enough taking account any unemployment/sickness insurance and the economic climate?

For an 18-year investment then stock-market exposure is reasonable. If you achieved a 7% real return on £2000 then you'd have about £6750 in today's money.

Any particular reason why you want a FTSE-100 tracker? FTSE-Allshare is more diversified and has had higher historic returns.

If you want to balance that with an equity-income investment then sticking it into a single stock (Vodafone) seems risky. A diversified equity-income fund might serve better. Invesco Perpertual Income is a popular one.

If you have funds to expand your portfolio after that you might consider adding small-company stocks and international stocks (via investment funds).

MyLastFiver

Thank you everyone for your contributions so far - lots of food for thought there. A note about the cash reserve - You're right that £2000 is less than a month's take-home but I'm in a very secure job in the public sector. It's highly unlikely (although technically possible) that I would be made redundant.

mr_fishbulb

jon3001 wrote: »

If you want to balance that with an equity-income investment then sticking it into a single stock (Vodafone) seems risky. A diversified equity-income fund might serve better.

I'd second that.

Also do you actually need the income from it? Or are you going to reinvest any dividends?