please advise on savings strategy

homersimpson_3

friend payed off mortgage and wants advice on how best to save his money. has works pension and paying added years. has current account, regular savings, plus saver & isa with a&l and just applied for online saver. wages paid into a&l but also has paltry amounts with nationwide and first direct. has 590 monthly to save but 150 goes into b&b, 50 into a&l. regular saver so 390 really spare. regular saver with a&l set up at time he was targeting all money towards mortgage & so only agreed to pay 50 per month. has 4000 stooze pot sitting in plus saver account. has interest free overdraft of few hundred pounds. isa full for this year but 2000 of this stoozed money. happy with internet accounts. how he can make the most of his money?

Jarlawuk

You can put up to £250 into the A&L regular saver and earn 10% on that, I opened mine up with a regular deposit of £50 but I put £250 in the first month as I had more cash to spare so I believe you can put more in if you want.

ReportInvestor

This "friend" should be giving advice - not receiving it, IMHO.

I'm impressed by him so far.

It sounds like he's ready for regular saving into the stock market.

I would go for a low charge investment trust.

A few would go for trackers.

Some would advise ways to pick the best performing future fund.

Others would say that IFAs can do that best for a small fee.

homersimpson_3

I would go for a low charge investment trust. A few would go for trackers.
Some would advise ways to pick the best performing future fund. Others would say that IFAs can do that best for a small fee.

my friend like so many others suffered because of endownment crisis and is scared about investing in stock market. he wants security and stability. these days he's really interested in finances- prior to this just believed financial adviser who told him don't worry endownment would pay mortgage and provide him with lump sum (the usual story). he made complaint and won. which investment trusts are better than others? if you put money into the safe ones (cash or sterling ones) you seem to get less interest than you would get if you put money into bank or building society. how do you know when a financial advisor is any good? even if they are ifa regulated you sometimes get different ones saying different things. how do you know which advise if any to follow? is there a criteria for judging one against the other? is there a list of fees/charges they should be charging- how do you know whether fees are reasonable or you're being ripped off? how often should you change investment trusts- can you log on each day and see how much money funds has made. say if it made loss on monday can you move it on tuesday to another and then move it again later on in the week? or is it long-term thing and it should be reviewed annually? sorry so many questions but i an lots of other people unfortuantely don't have a clue!

ReportInvestor

homersimpson wrote:

my friend like so many others suffered because of endownment crisis and is scared about investing in stock market. he wants security and stability.

I'm happy to provide some pointers, but if your friend is scared of losing any money and just wants "security and stability" then perhaps the stock market is not for him.

But it sounds - reading between the lines - that he is also vaguely aware of the risks (in today's low interest rate environment) of not investing in the stock market. The key is to get the right balance of investments for his risk profile. I continually ask myself, "If the stock market fell 50% in the next three months, could I still live with my current investment choices?"

My suggestion would be regular saving into the stock market via a unit trust or an investment trust as this helps reduce the risk of a market crash in the early years - and your friend could learn more as he watched his investment perform.

Investment Trusts do have additional risk factors. They can borrow money and the discount of assets to share value can fluctuate - both of which mean that if shares fall out of favour you could lose even more. But they are cheap in terms of charges, and fairly easy to trade - but check the nuts and bolts of same day dealing if you are buying into a regular saving scheme.

Plenty of ITs do regular savings schemes and you can check out their daily performance, compare past performance over 5 years, check Net Asset Value, check their main investments and check the countries they are invested in on

https://www.trustnet.co.uk

And you can compare unit trusts and oeics there, too.

mbamick

I'm in a very similar position to your friend; and its a nice position to be in.

Once i've got my ISA(s) topped up for the year, I tend to slip some money into Premium Bonds. you can invest up to £30k now; there are 2 x £1Million prizes each month; and a raft of smaller prizes. There's no guaranteed interest payments as such - the notional interest is used to form the prize fund. But, that said, I've been averaging over 4% per annum in prizes.

It also has the benefit that your money is safe, and you can get it back within about 4-5 working days.

It might not be for everyone - but the beginning of each month does bring a little sense of anticipation, as you await the list of prize winners.

Stock_Market_Guru

ReportInvestor wrote:

This "friend" should be giving advice - not receiving it, IMHO.

I'm impressed by him so far.

It sounds like he's ready for regular saving into the stock market.

I would go for a low charge investment trust.

A few would go for trackers.

Some would advise ways to pick the best performing future fund.

Others would say that IFAs can do that best for a small fee.

Actually, that will be a common mistake to pick the best performing fund. You see, the best performing fund today, has been the fund which has been doing well in the past.. but there no indication that it will do well in the future.

Its like buying a hot stock today because it went up last week, but then drops next week.

Its better to spot trends in get into the funds that have potential for gain in the coming months and years. For example, buying a fund heavily invested in commodities and gold has probably yeilded some nice gains over the past 5yrs. But will that fund perform well heading into the next 5yrs? Chances are it will not.

Just off the top of my head, fiber optics are back in vogue, companies like JDSU are doing well... how about a fund that is focused on telecom that could profit from the increasing momentum in this sector?