Suggestions for investing a lump sum?

timothee

Hi all,

I'm looking to invest about £30-40k. I have no debts (except student debt). I have used my full ISA entitlements etc. As we all are, I'm underwhelmed by the savings rates available. I joined Zopa but didn't like it enough to want to use it for a substantial sum.

I would like to invest for a period that will exceed 4 years. I do not want to tie up my income in fixed rate bonds offered by the banks: the rates don't look especially attractive. I am reluctant to contact IFAs or other professionals because the cost cuts into whatever return one might make. I am also averse to substantial upfront fees that appear to be charged by most fund managers. Annual fees - I can probably live with.

Any friendly tips on what kind of investments I might have a look at? I understand the FSA guidelines etc - I'm not looking for expert financial advice, I just wondered if anyone had any general ideas as to the kind of investments that I might consider.

Though I'm open-minded as to how I might make a decent return, I would expect to have some sort of exposure to the stock market (with the pound still weakish, I would have thought investing in the UK would be my preference). I read something brief in the newspaper about Exchange Traded Funds, I'm not sure if this would fit with what I wrote above?!

Many thanks in advance!

Danamic

4 years or under is a fairly short term view and usually stock market exposure would be minimal or none.

You seem fairly clued up though, talking about ETFs and the strength of the pound, and so as long as you realise the volatility-time risk of exposing any funds to the stockmarket for the short term.

There are ways to get around the upfront fees that investment managers charge, if you know how to.

If you want to see an IFA and don't want to see them take a %, then just ask them what their hourly fees are (2h-3h for an investment/paperwork should be sufficient).

opinions4u

timothee wrote: »

I'm looking to invest about £30-40k. I have no debts (except student debt). I have used my full ISA entitlements etc.

Does that include stocks and shares ISAs?

As we all are, I'm underwhelmed by the savings rates available.

Although the best buys currently have the biggest differential over and above BofE base rate in history. Positive savings rates when the RPI is 0% or less is also a sign that your money is growing in real terms - for now.

I would like to invest for a period that will exceed 4 years.

You would genuinely struggle to find any adviser who would recommend anything beyond savings accounts where period of time for investing is so short term.

I am reluctant to contact IFAs or other professionals because the cost cuts into whatever return one might make.

Although the right advice and right tax wrappers for an individual's circumstances can, over the long term, make several £thousand more than a botched DIY investment plan.

I am also averse to substantial upfront fees that appear to be charged by most fund managers. Annual fees - I can probably live with.

Look at it over the long term. A 10 year plan with 5% up front and 0.5% a year is better value than a 10 year plan with no up front fee and a 1.5% annual charge.

Any friendly tips on what kind of investments I might have a look at?

I don't know your full circumstances, and wouldn't for a second claim to know the best shares, the best funds, the best territory etc. Diversity may well be the key - don't put all your eggs in one basket!

BUT:

Consider

- pension provision and the tax relief / wrappers attached
- stocks and shares ISA wrapper
- a safe fund (e.g. fixed rate savings account / easy access savings account) to put a sum equal to the amount of your student loan. This would allow you to repay the loan if the RPI moved above the interest earned on your savings
- use of a partner's ISA allowances

Personally I would see a reputable IFA and talk about paying fees with rebates of any commission.

sabretoothtigger

Good advice is worth its weight in gold so long as it really is that good and its hard to know beforehand

(with the pound still weakish, I would have thought investing in the UK would be my preference)

Long term weak pound is a reason to invest abroad imo

G_M

4 years or under is a fairly short term view and usually stock market exposure would be minimal or none.

Normally I'd agree but times are strange. Personally I think markets will carry on going up and down unpredictably over the next 12 + months, but overall will rise. 18-24 months from now they'll be up.
Just my opinion of course!!!

If you do go into the markets, spread your investment ie using several unit trust funds for example.

Keep costs down - decide what you want to buy, then use a discount broker.

Danamic

G_M: Of course, it all depends on whether you understand the risks involved.

If you are prepared to take short term stockmarket risks, you should be prepared to stomach not getting what you put in back out.

A saying I regular use: It's not timing the market but time in the market that counts.

---

Since November of last year I have been a short term gambler. I invested heavily into individual AIM stocks and was prepared to lose it. In March, I was -30% down, but am now happily 60% up.

Paul_Herring

! would like to invest for a period that will exceed 4 years. [..] I am reluctant to contact IFAs or other professionals because the cost cuts into whatever return one might make.

How much would it cost, and how long would it take, to train to actually become an IFA?

G_M

A saying I regular use: It's not timing the market but time in the market that counts.

Hmm. Or maybe the opposite is true?

Sabretoothtigger recently wrote on another thread:

"In many ways its (footse) rising exactly how it should be. Eight years ago I bought the ftse, I had missed out on the nineties rise and I thought long term at least I would do better then savings.
Flash forward to the value it holds today and its weaker then eight years ago, that is incredibley poor performance. "

Timing!

timothee

Thanks for the tips guys: much appreciated and very generous of you to take the time to read my post.

Maybe four years was a little conservative: the £30-40k is an open-ended investment, but I cannot see any way that I'd need to use it within the next 4 years. I am not a homeowner and have little prospect of earning enough to become one in the next 5 years. I've always saved as a hobby, but the reality is that I'm probably saving for a deposit on a property. I guess if you look at inflation as something relative only to what you wish to eventually spend that sum of money on, I've been doing very well over the past year simply due to property price falls!

I'm currently a (mature) student and won't be earning much when I finish my studies, so I guess my priority is to gain as much value/lose as little value as possible relative to property prices in the next 5-10 years so that when I do take the plunge and buy a property, I'll be able to lay down a substantial deposit.

For the moment though, I have used up all my ISA allowance for 2009-10 (rather fortuitously, in the stock market in April). I've already ring-fenced £14,400 in term deposits for investment in ISA plans in 2010-11 and 2011-12.

Danamic

G_M wrote: »

Hmm. Or maybe the opposite is true?

Sabretoothtigger recently wrote on another thread:

"In many ways its (footse) rising exactly how it should be. Eight years ago I bought the ftse, I had missed out on the nineties rise and I thought long term at least I would do better then savings.
Flash forward to the value it holds today and its weaker then eight years ago, that is incredibley poor performance. "

Timing!

Lump sum investor: FTSE 100 has had a total return of 29.6% (not taking into account charges) over the last 8 years.

Regular monthly investor: FTSE 100 has had a total return of 17.9% (not taking into account charges) over the last 8 years.

sabretoothtigger

That'll be down to dividends I think, with reinvestment it would have helped alot at the bottom?

I did have an accumulation fund luckily because investing eight years ago was crap timing

When I summed up performance for my fund to summer 08, it came out slightly better then compound interest in a savings account .
Could be worse but obviously I should have closed it 07

29.6% sounds pretty high especially now but that equates to compound interest of 3.3% so I guess that is not far off my own conclusion. The ftse has really come back quite strongly now


Here is a really good link for people to calculate returns over time but it wont include divs for an index fund and I dont think it includes that kind of compound effect from reinvesting divs for normal shares, not sure

http://markets.ft.com/tearsheets/performance.asp?s=572009&ftauth=1252442844667



I think India in comparison returned over 100% over the last ten years not including any dividends (regular investment)
http://spreadsheets.google.com/ccc?key=0AocUWLQf7t7dcmo2MjY5VHIxaXpRbE4xMmxJUTVXNVE&hl=en