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Advice please on calculations and getting the best yield

patwa_2
Posts: 1,542 Forumite
Hello.
I'm looking to invest £5,617 for a 3 year period. The money will not need to be touched during this time.
I would be grateful if you could look over my findings and advise if there is anything better.
1. Regular Saver.
Both the HSBC Regular Saver and Lloyds Monthly Saver offer 8% interest rates, with the interest paid annually.
This being the case, I'd be investing £156.02 per month. However, my calculations are a bit off:
156.02 * (((1.08)^36)-1)/0.08) yields £29.191.68. The 'to the power 36' is trying to take into account the monthly interest.
2. Heritable bank have a 3 year fix rate bond that pays 5.41% interest annually. So according to my calculations this would give:
£5,617 * (1.0541^3) = £6,578.84.
My first calculation is wrong, so if someone could help with that it'd be appreciated. I'm thinking the regular saver would not offer a greater yield even at the increased rate, due to the fact that for nearly the entire term interest would not be being earned on the full amount of the investment.
If anyone can advise that'd be much appreciate. Thanks.
Cheers and take care.
Hussein.
P.S. An ISA has already been opened and that allowance has been used up. So it's a seperate solution we're looking at here.
I'm looking to invest £5,617 for a 3 year period. The money will not need to be touched during this time.
I would be grateful if you could look over my findings and advise if there is anything better.
1. Regular Saver.
Both the HSBC Regular Saver and Lloyds Monthly Saver offer 8% interest rates, with the interest paid annually.
This being the case, I'd be investing £156.02 per month. However, my calculations are a bit off:
156.02 * (((1.08)^36)-1)/0.08) yields £29.191.68. The 'to the power 36' is trying to take into account the monthly interest.
2. Heritable bank have a 3 year fix rate bond that pays 5.41% interest annually. So according to my calculations this would give:
£5,617 * (1.0541^3) = £6,578.84.
My first calculation is wrong, so if someone could help with that it'd be appreciated. I'm thinking the regular saver would not offer a greater yield even at the increased rate, due to the fact that for nearly the entire term interest would not be being earned on the full amount of the investment.
If anyone can advise that'd be much appreciate. Thanks.
Cheers and take care.
Hussein.
P.S. An ISA has already been opened and that allowance has been used up. So it's a seperate solution we're looking at here.
Know me for who I am, not for who I say I am.
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Comments
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patwa wrote:£156.02 per month. However, my calculations are a bit off:
156.02 * (((1.08)^36)-1)/0.08) yields £29.191.68.
This formula is so utterly wrong.
e.g.
1.08^36 would be for a 36 year investment in some circumstances.
I see no reason for dividing by 0.08
Only one lot of money is in for 36 months, one lot for 35 , etc 34 33 32 ....... 4 3 2 1
............................................................................................
You should be pleased to be getting 8% never mind about the mathematics...0 -
See the following thread for correct formula for regular investments: compound interest-how do I work it out?. In your case you should use monthly rate 1.08^(1/12)-1=0.006434=0.6434%. Your other mistake is in assuming that both HSBS and Lloyds accounts can last for 36 month. The HSBC one lasts 12 months. When it matures total balance and iterest are swept to some other account and the balance of the RS account starts growing from zero again. Lloyds account lasts 24 months and AFAIK you cannot start from zero again when it matures.0
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Robert_Sterling wrote:...1.08^36 would be for a 36 year investment in some circumstances.
I see no reason for dividing by 0.08
156.02 *1.08* ((1.08)^36)-1)/0.080 -
You should be pleased to be getting 8% never mind about the mathematics.
Mathematics is everything i.e. difrence between 7% and 8% is around 14% in acutal dosh
edit, forgot to add that the 14% only apply's to a noraml savings acount not a reg savings0 -
For your HSBC account you can only make 12 regular payments of £250:
250 * (0.08/12) * 12( 12+1 / 2 ) = £130 (Gross)
You'll need your current account with salary with HSBC, and can only open 1.
You could drip feed from another savings account, if you drip fed from an account paying 5%, I would calculate at the end of the first year, a total gross rate of 5.87%, i.e. £329.60 gross interest. If interest rates change, this will, your bond wont. They could go up (bad for bond, good for normal savings?) or down (good for bond, bad for normal savings).0 -
remember you loose money on clearing and on most acounts
1) the first day money is in an acount is not counted as a day you can earn interest
2) the day money is moved out of an acount is not counted as a day you can earn interest0 -
Apologies for the maths. Yes, I did think the 36 in my calculations was for 36 months.
So, based on what we've outlined here, what would you do?
Also, anyone know of any better investments I can make? I got the curent info from moneysupermarket.com.
Hussein.Know me for who I am, not for who I say I am.0 -
Also, anyone know of any better investments I can make?
You have mentioned investing a few times but you have only made reference to savings accounts. Do you want to save or invest?I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
My apologies, I am one of the people who make the mistakes of lumping savings and investments into the same category. Obviously to those in the know this means two very different things.
I was thinking of seting up a multi-regular-saver system, whereby money would be trickled into a Lloyds 8% AER reguar saver for two years, at the same time the unused funds would be trickled into the Bromwish 1 year 5.41% AER E-bond, and the remainder would go into a high interest savings account, such as that offered by ING Direct. But then i realised whereas this would maximize the interest being earned on all the money at any given time, it would make life complicated remembering which payment had to go where on what date, and with the different loading times between banks it could result in missed payments.
I think I'm looking into 'savings' as you put it, not investments like the stock market or trackers. The person whose money I'm dealing with does not want to risk the money, well risk as in the typical meaning understood by most normal people.
Cheers and take care.
Hussein.Know me for who I am, not for who I say I am.0 -
According to the LLoyds Tsb website calculator for the Monthly saver if you invest £156.02 over 24 months you would have a total of £4231.65 at the end, having paid in £3744.48. So you would have made £487.17 over the 2 years. I have looked at this myself today. You do need to have a current account with them though.Hope this helps.:DLove to save & love a bargain0
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