Your thoughts on my first steps?

competitionscafe

amosworks wrote:

I avoid council tax by not declaring where I live and I don't believe in TV licenses so don't have one (I think they are unlawful). As for VAT, it's in my interest to open a Ltd co and pass stuff through there, I'm investigating this at the moment :cool: I really dislike taxes lol

Nobody 'likes' taxes but that's not an excuse for breaking the law. NHS, council services, education...all has to be paid for - moneysaving and investing is one thing, fraud is quite another. You won't get much support or advice on here if you are advocating the latter.

amosworks

competitionscafe wrote:

Nobody 'likes' taxes but that's not an excuse for breaking the law. NHS, council services, education...all has to be paid for - moneysaving and investing is one thing, fraud is quite another. You won't get much support or advice on here if you are advocating the latter.

Oh gosh not at all, but I'm certainly not agin working the system to my advantage.

P.S., I don't actually watch TV anyway - awful thing :-O

competitionscafe

amosworks wrote:

Where do you go to find a list of trusts and the areas that they invest in? Sorry if that seems like a dumb question :rolleyes:

Try http://www.trustnet.com/ or http://www.morningstar.co.uk/

amosworks wrote:

P.S., I don't actually watch TV anyway - awful thing :-O

Fair enough - your'e not missing much.

amosworks

Sincerest thanks for everybodies thoughts, suggestions and help. I appreciate UT's a lot more now and I think this is something that I will be looking to get in to so I'm grateful for opening my eyes to the possibilities

Before I jump in to my plans I'd appreciate anybodies thoughts on whether what I want to do with my money is sensible or whether I've got anything a bit too wrong? Should I save/invest 50/50% or should I invest more than I save?

Kindest thanks folks

Chrismaths

It's not really a ratio - In my opinion you should have in cash or near-cash as an emergency fund around 6 months expenditure. IFAs are taught to say 3 months wages, but it's expenditure that matters IMO. Once you have this invest the remainder - so 100%! Best of luck.

MGW

Age 24! Start by promising yourself not to let anyone else take a regular percentage of your wealth! Do the sums: things like unit trusts can lose you in the region of 1.5% to 3% per annum in explicit and implicit costs.

As a general principle, anything which is heavily advertised will be too expensive.

Question 1 is to what extent you are prepared to take stock market risk, and do you have the right philosoply to cope with the inevitable booms and crashes of the future. Strongly suggest you buy "The intelligent investor" (usually in stock at the really big bookshop branches, but Amazon etc easy, author Ben Graham, very good recent addition with new chapters interspersed by (I think) Jason Zweig). The younger you are when you first read this the better. Not for nothing is this book regarded as the best book on investment ever written.

Assuming you are prepared for stock market risk, the next question is how much you want to diversify, and how much to take investment decisions yourself. Most people will want to feel they have a reasonably diversified portfolio. So some sort of pooled arrangement, perhaps?

Which gets us to things like unit trusts - big big NO, the costs make them totally uneconomic. Their cost structures often permit them to pay commission to salesmen ad infinitum, not just at outset. But there are other things.

The next choice is investment trusts. You'll have to read up what these are. The big old ones can be cheap. And cheapness is everything. The newer ones are generally not. Like most financial products of recent years they are designed to separate you from a material proportion of the wealth generated each year from your assets. You need to find out the TER (measure of espenses, excluding the costs incurred within the fund when trading the inderlying investments). AITC (assoc of investment trust cos) web site has links to good info.

And then we have the new phenomenon of exchange traded funds (ETFs). You can buy these like stock market investments. There is an underlying annual charge, relatively competitive, but do your research. "Index funds" is another term which encompasses ETFs.

Personally, I would go for a couple of investment trusts at first.

Always remember that when markets are high, as they are today, your expected return will be lower over the years than when you start when markets are low. And the lower markets are, the better off investors are in the long run because they get more underlying earnings with their money. But we may, sadly, be going into a long era of low real interest rates, low rates of return on capital, etc - in which case asset prices could stay high or go even higher. Past history tends to warn against the "this time is different" argument, and high prices have always ended in some tears - eventually. The academic consensus is that, whilst there is always a risk that stock market investing could show a loss over quite a period of years, on balance you are better off just investing and not worrying aout the price levels! This is only the case if you have a really long horizon, though. Age 25 again....


As to how to hold your stockmarket investments. For many people, using the ISA maximum, if you have that much to save (currently pds 7000 pa) does make sense. But it does not make sense to use an ISA to buy heavily marketed unit trusts or other managed funds - not in my opinion anyway - because of the cost. So the only ISA I would ever recommend is one which charges you a fixed fee, say pds 50 per annum, irrespective of the size of your fund. Within an ISA you don't pay GCT, you get gross interest on any fixed interest stocks held, and you don't suffer any additional taxes on company dividends over and above what the company has to pay (it's a bit like their dedicting basic rate at source). Tax rules can always change of course.

For more and more people, saving some money in their own pension pot, a SIPP, makes good sense. Again, the cardinal rule in my opinion would be never to let anyone take a percentage of your fund. There are SIPP arrangements which charge a fixed fee per annum. They all used to be horribly expensive, but these days you can get something very flexible for pds 200 per annum.

You'll have to do your own research to understand the rules around all these things. "Pension" means you can't get at it for very many years - apart from if you die the pot would usually become available in some way to your dependents - but there may be some contracts under which the pension provider takes the pot. Basically anything with an insurance company involved in the investment will have huge charges.


Hope all this is of some help.

I Would be interested to know what demand there is, if any, for more general info along these lines. I must declare in interest - I am thinking about how consumers might "fight back" in the financial services arena by setting up their own mutual (i.e. not for profit) mechanisms for providing ultra-cheap, non-commission paying index funds. And I want to discover other people who are also determined to make a difference in this way! The financial services industry argument that we all need to use financial advisers is seriously flawed. And the very best advisers will be prepared to charge fees.

dunstonh

Age 24! Start by promising yourself not to let anyone else take a regular percentage of your wealth! Do the sums: things like unit trusts can lose you in the region of 1.5% to 3% per annum in explicit and implicit costs.

Although also have the realism that you get nothing if you pay nothing. After charges, I tend to average in excess of 20% a year. There is no problem paying for something when you get value for money.

The financial services industry argument that we all need to use financial advisers is seriously flawed.

I'm not sure I have heard that argument. Although there are many people that do go it alone who make mistakes that would not have occured with a financial advisor. Relying on the media for your financial advice can cost you a lot of money. Remember the media used to recommended endowments and the media encouraged investment into tech stocks. If you invested the same day that the Daily Mail more or less told you to invest in tech stocks, you would now need 900% growth just to get your money back.

And the very best advisers will be prepared to charge fees.

All independents have to offer that option. Its not a choice at our level but a choice with the consumer.

Basically anything with an insurance company involved in the investment will have huge charges.

This is an incorrect misconception often promoted by those with an anti-financial services opinion. Whilst it is historically correct, it is no longer the case with a large number of contracts. It's a bit like saying trains damage the environment because of the smoke the steam train generates. Yes, correct but you dont see as many steam trains today.

For more and more people, saving some money in their own pension pot, a SIPP, makes good sense. Again, the cardinal rule in my opinion would be never to let anyone take a percentage of your fund. There are SIPP arrangements which charge a fixed fee per annum. They all used to be horribly expensive, but these days you can get something very flexible for pds 200 per annum.

There are also a large number of personal pensions that offer all the major funds and can do it cheaper than a SIPP. The FSA recently issued warnings telling us not to get carried away with the media hype on SIPPs and that SIPPs should not be used when the same funds or required features can be obtained in cheaper stakeholder/personal pensions. If you are going to do your own research, it is useful to take note of what the FSA is telling advisors to do as, in effect, you will be your own advisor.

MGW

Thanks Dunstonh


I'm interested in the 20% per annum. Over what period? Is this because the general market level had been rising, or have you found a fund manager whose performance you are confident is skill rather than luck? It's added value against a reference index which counts - you can't blame a fund manager much if the overall market falls.

On SIPPS and funds, I think the trick may be to avoid the major funds, if they pay commission, whether initial or remewal. I try to limit my universe to some old-fashioned investment trusts, or direct holdings, but may start using ETFs. I'm not happy to go though an intermediary to get commission rebated - I don't want the deduction in the first place. Scope here perhaps for consumers to work together to develop alternatives. There was something in the FT FM section last Monday about consumer-favouring trends. Thoughts?