£550pm to invest or save ??

liverpoolcarl

Hi,

I currently own a property which I rent out. It generates £550 per month.

I have maxed my Cash Isa for this tax year.

I have seen a Halifax Financial Adviser and he has told me to take a Stock and Shares Maxi Isa out and put £333 per month into that so the tax man cannot get my money.

I was going to pay overpayments of my mortgage but the advise said but it into gilts and bonds and some stocks and shares for the next five year and beat my mortagage interest rate (4.45%) and then pay a lump some of my mortgage.

If I need access to quick cash I can fall back on my Cash Isa. The only worry is in two years I would have enough money to fund a deposit for a new property.

Does any body have any better ideas ?

Should I use the Halifax for a Maxi Isa ? He says they won't be beaten because they don't charge to but and sell shares ?

Any help will be greatly appreciated and I am open to all suggestions ??

Decadent_Fool

I think it depends upon what degree of security vs risk you're after.

For me, I would (and am!) put all my money into paying off my mortgage. I can therefore easily have a not-so-long plan to be mortgage free, know where I stand, and have taken no risks that would be associated with speculating on the market.

My money may not be making 8 - 9 - 10+%, but I'm happy with the 4.75 equivalent I get from my overpayments and zero risk.

Hope this helps, and look forward to hearing some alternative options in this thread (hopefully)

dunstonh

I have seen a Halifax Financial Adviser and he has told me to take a Stock and Shares Maxi Isa out and put £333 per month into that so the tax man cannot get my money.

Concept of using a stocks and shares ISA is good but using a Halifax salesman is not.

I was going to pay overpayments of my mortgage but the advise said but it into gilts and bonds and some stocks and shares for the next five year and beat my mortagage interest rate (4.45%) and then pay a lump some of my mortgage.

gilts and bonds over the next 5 years are not expected to perform too well and quite probably will be no higher than the mortgage rate. There are no guarnantees with these things and what you are buying with a stocks and shares ISA is potential. Had the salesman been a real advisor, they would have looked at REIT funds, commercial property and diversified equity funds and presented the potential of these against your risk profile and the potential that they could return 20% a year but could also return a loss. Of course, the Halifax salesman cannot make portfolio recommendations as he/she is a tied agent.

Should I use the Halifax for a Maxi Isa ? He says they won't be beaten because they don't charge to but and sell shares ?

No you shouldnt and the comment on them not being beaten is disgraceful.

If you take the two most commonly sold Halifax funds from the UKs biggest sector; UK All Companies and look at them over 1, 3 and 5 years, you will find them ranked 299 & 433 out of 491.

Any help will be greatly appreciated and I am open to all suggestions ??

The idea is right but the provider and the funds recommended are not. As a tied adviser, the Halifax salesman will not have the licence or the experience to recommend suitable funds. You can test it by asking their opinion on commercial property funds and REIT funds within an ISA. That usually results in a tied agent trying to change the subject.

My money may not be making 8 - 9 - 10+%, but I'm happy with the 4.75 equivalent I get from my overpayments and zero risk.

This is the key point. What you are happy with. Although 8-10% p.a. returns are lower than what you would expect on medium/long term average from a medium risk porfolio. 15% p.a. being closer to the mark (if you invested a lump sum just before the last stockmarket crash, you would have got 15% p.a. or higher with a half decent portfolio).

Paying the money off the mortgage is nil risk and you save a small percentage. The other option involves taken some risk with the aim of beating the 4.75% but with the knowledge that some years it may not and you could get back less than you paid in if timing doesnt work in your favour.

One last thing is that the ISA allowance is a use it or lose it allowance. ISAs can be useful for retirment planning as well as medium to long term investments. Pay the money off the mortgage and its gone. Pay the money into an ISA and you put it in a tax free environment which you can use for a multitude of things later on. Including taking an income in retirement tax free.