Financial advice needed

pukkapie

i currently have around £40,000 to save/invest. I expect to save this money for at least 5 years and then look to buy a property, hopefully outright.

I currently have about £17,500 in a cash ISA and the rest in now a poor interest savings acoount. I therefore want to invest in the stocks and shares market as I believe this is a good time.

My plan is to save 40% and invest 60%.

My understanding is that it will be best to save in a cash ISA and invest in unit trusts. Stocks and shares ISA seems pointless because i would not save on tax because you get 10% tax credit on dividends and I would only fall into the 10% catergory hence cancelling each other out and you have to gain over £9,000 to be get capital gains tax in a year, and i surely will not go over that amount. It is therefore better to use my tax allowance on my savings as i will get value from this, plus savings rates are better on ISA's at the moment.

Also where is the best place to get unit trusts or does it not matter? I bank with A&L and was planning to invest with them.

Any advice/corrections would be most welcome.

thanks.

jem16

pukkapie wrote: »

My understanding is that it will be best to save in a cash ISA and invest in unit trusts. Stocks and shares ISA seems pointless because i would not save on tax because you get 10% tax credit on dividends and I would only fall into the 10% catergory hence cancelling each other out and you have to gain over £9,000 to be get capital gains tax in a year, and i surely will not go over that amount. It is therefore better to use my tax allowance on my savings as i will get value from this, plus savings rates are better on ISA's at the moment.

Even utilising the full cash allowance for ISAs you will still have an allowance of £3600 that you can use in S&S ISAs.

You are correct re the dividend and tax which in your case will make no difference. As to the CGT if you don't touch your investment for 5 years it's the gain that you make then that will count - you won't get £9k times 5. It costs the same inside as outside of an ISA so you may as well use that S&S allowance.

Also where is the best place to get unit trusts or does it not matter? I bank with A&L and was planning to invest with them.

A bank would be the worst place to buy investments as they are usually limited and poor quality.

If you are going DIY then a funds supermarket like Hargreaves Lansdown would be the best place.

If you don't know enough to choose your own funds then see an IFA.

pukkapie

thanks for the response. I do not know enough to pick my own shares. i was planning on mainly a medium risk and a high risk unit trust. What is an IFA?

jem16

pukkapie wrote: »

What is an IFA?

Independent Financial Adviser.

If you are planning on investing £24,000 you want to use more than two funds.

pukkapie

how many funds would you reccommend? my understanding is that a unit trust spreads the investment accross many things that are at the risk level that you have chosen i.e. high, therefore you are not putting all your eggs in one basket

dunstonh

Jem is on the ball with you here and not much else to say.

What is an IFA?

There are different types of adviser. Banks employ sales reps that sell their own products or a limited range of products. They are sold at maximum price (max commission) and are often more expensive or cut down versions of the IFA product (never cheaper). A typical bank will have say around 5-15 investment funds for their unit trust range. IFAs will have the whole 2000 available to them.

how many funds would you reccommend?

Depends on how you are structuring your portfolio and the amount. £24k is enough to have a sector allocated portfolio and would probably look at 8-13 funds on that basis.

a fund invests in a given area and whilst it diversifies more than a single share, it doesnt give you exposure to other areas which will perform in a different way at different times (or be a variation of a theme).

pukkapie

so 10 unit trusts seems like the way to go. How can i find an independent financial advisor and would i have to pay for a meeting? i assume a meeting with the bank would be free?

jem16

pukkapie wrote: »

How can i find an independent financial advisor

Use https://www.unbiased.co.uk to search for one in your own area. Untick section 2 so that you can find all IFAs and not just those that pay to have an entry.

and would i have to pay for a meeting?

First meeting would be free as you have to be given details of the charging structure. However you will have to pay for the advice either by fee or commission.

i assume a meeting with the bank would be free?

Yes but you really want to stay clear of the bank unless you will be happy with poor quality.

pukkapie

Is there any reasoning/evidence to say that the banks would be poor quality?

thanks for the help

D1zzy

Banks will not give independant advice ,they will push their own products irrespective of whether they are the best option for you

Aegis

pukkapie wrote: »

Is there any reasoning/evidence to say that the banks would be poor quality?

thanks for the help

They usually take maximum commission, are limited to either a single provider or a very small number, offer "advice" to put large amounts of money into single funds, can't plan effectively with your entire investment situation in mind and represent most of the complaints to the Financial Ombusdman Service despite being a minority provider within the industry compared with IFAs.