Investment Trust ISA?

fish10

I recently inherited quite a large sum of money and have followed much of the 'safe' savings advice on this site (ie regular savings a/c's and cash ISA ). I'm now wondering whether or not to invest £4K with a multi-management fund ISA as my next step.
I'm a complete novice, as all hard earned income up to now has been spent on my family! Any advice appreciated.

Thanks
Fish10

dunstonh

Is it specifically investment trusts you want to deal with or unit trusts & OEICS?

You should note that whilst we can talk in general about portfolio building and various concepts we cannot give specific investment advice. If you want that you will need to see an IFA.

Assuming you mean unit trust/oeics, on 4k, a Fund of Funds could be good sense. Manager of Manager funds can be less diversified and have higher charges than a decent fund of funds. If you want to target a specifc investment area you also have a number of blend funds now which can giver a decent spread of funds in a particular area.

fish10

Thanks for the reply dunstonh,

I was thinking about unit trusts.
I have no idea of the differences between manager of manager funds and fund of funds. I'm on something of a steep learning curve here and am beginning to think that reading is not enough and I'd be better off going to see an IFA.

Thanks anyway
fish10

dunstonh

Dont go off and see one quite yet. CC, Ed, RI and others will post a bit more over the coming days and, if after all that, you are still lost, then you can go to an IFA.

It is also possible with £4000 to have 8 individual funds and you could build your sector allocated portfolio. Whilst it wouldnt be perfect as 12.5% per fund doesnt allow an ideal spread, it could still be good enough to allow a decent range and individual funds should work out a bit cheaper.

fish10

I do have considerably more than £4K to invest overall, if I'm understanding you correctly.
I only gave that figure as I believed that, with already having £3K in a cash ISA, an addtional £4K would use up my ISA 'allowance' for this tax year, which would be a good thing to do.
Thanks again
fish10

cheerfulcat

Hello, fish10,

I'm on something of a steep learning curve here and am beginning to think that reading is not enough and I'd be better off going to see an IFA.

Reading can be enough; there is no rush to invest, so why not have a browse round the available information first? There was a brief discussion recently of books (and websites ) that might be useful to a novice investor, here. There are a few threads on the TMF Investment Strategies board concerning larger amounts which are worth reading; do a search for " investing lump sum " and similar. The Retirement Investing board has some interesting discussions as well ( don't mind the name of the board, there's some good stuff there on general investing ).

It is certainly a good idea to use up your entire ISA allowance, and that of any spouse, but beware of " letting the tax tail wag the investment dog ". Make sure that you are comfortable investing in equities. Any debt should normally be paid off first, as well.

Then you might like to think about what you want this money to do for you. Do you want income from it? Are you likely to have any big expenses coming up, like weddings or university? Fancy holidays? Do you have money saved for retirement?

Finally, you say

I was thinking about unit trusts.
I have no idea of the differences between manager of manager funds and fund of funds.

Please, please don't invest in anything until you understand how it works; even if you end up going to an IFA, make sure that you know what you are buying, and be aware that you are buying a financial product from ( forgive me, dh, wf et al ) a salesman and that they are not all as helpful and well meaning as our friends here.

HTH and welcome to MSE

Cheerfulcat

fish10

Thanks for the good advice and very useful links cheerfulcat.
I should have said 'I have considerably more than £4000 to save and invest.'
I am actually quite nervous about equities and thought that the investment ISA was a good way of dipping my toe in to test those particular waters!
Our debts are cleared, we have a relatively small mortgage on which we're paying 4.09% (fixed until Sept. '08) and we have no major expenditure coming up; our eldest son won't be going to Uni. for another 6 years and both the children have £10,000 to save/invest to cover some of the costs, (that'll be another thread!)
Thanks again
fish10

cheerfulcat

I am actually quite nervous about equities and thought that the investment ISA was a good way of dipping my toe in to test those particular waters!

Yes, it's not a bad idea to start small and work your way up. If you look at the iii funds page, there is a section which shows you funds by risk level ( near the bottom of the page ). You might find that helpful.

EdInvestor

You might like to have a look at this asset allocation calculator, to see if you can get a better idea of how you should divide up your total assets according to your attitude to risk.It's American but should give an idea how much should be in each category as between

-no risk (cash)
-low risk (bonds and commercial property funds),
-medium risk(mainstream big cap shares) and
-higher risk (small cap shares,foreign shares, commodities etc)


http://www.schaeffersresearch.com/personalfinance/calculators/AssetAllocator.aspx

Let us know the result and if you feel comfortable with it, and we can take it from there.

dunstonh

I am not a fan of the sector tool Ed posts as it targets the US market and US consumers are very inward looking. You cannot really match up UK investors to that asset spread.

However, asset allocation is by far the best way to go.

With more than the ISA allowance available to invest, make sure you have as one of your requirements that any investment outside of the ISA can be moved into the ISA each tax year at no cost and without you being taken out of the market. Not all providers do that.

fish10

Thanks to all for the continued advice. This site is excellent! Despite agreeing with dunstonh's comments on American consumers being inward looking, I checked out the asset calculator and was surprised by the results.

I was classed as a moderately conservative investor (3 on the scale) yet it suggested 17%cash, 26% low risk bonds, 21% medium risk big cap shares and a whopping 36% higher risk mid to small cap shares and foreign shares. Not so sure about the latter- told you I was nervous.
I just don't know enough about this, nor do I understand much of the terminology and need to do the suggested reading before I can attempt even a halfway intelligent conversation with you guys!
Thanks again
fish10