Really stupid person needs advice

rachel2008

Well the really stupid person would be me, i will explain my financial story.

Im 22, student, never had a savings account, or even really having surplus money to spare at the end of the month. Therefore there has been no real need for me to look at investing money, isa's, rates, variable, fixed term, bonds. (I have no idea what any of this is:o)

I have recently come into £3000. Not much but enough for me to know going on a major pub crawl proberly wont be the best idea! I want to use £1000 to clear all my debts, therefore improve my shockingly poor credit rating.

£2000 i want to save, i dont want to touch any of it for about 2-5 years. Basically my question is

What is the best way to save £2000 and make as much money from it as possible?

PS. Im sorry about my complete lack of knowledge!

fairtrade

It depends on your attitude to risk.

No risk - put the money in an ISA or a fixed rate bond.

Risk - buy shares, victorian silver cutlery, books, etc.

There is no - one size fits all approach.

At the moment, savings are paying a very poor rate, it may be worthwhile going down a different avenue, but unless you know what you are doing this can not be advised.

climberup

rachel2008 wrote: »

£2000 i want to save, i dont want to touch any of it for about 2-5 years. Basically my question is

What is the best way to save £2000 and make as much money from it as possible?

If you will need it in 2 years, invest the cash in a high interest savings account - look for a good 2 year fixed rate deal perhaps.

You could invest some or all of it in a unit trust (OEIC as they are sometimes called). Basically a unit trust is a fund that invests in many shares, so it's a stock market investment but your investment is spread across many shares. In the long run it should do a lot better than cash. BUT, if you suddenly need to cash in in, say, 3 years time and the stock market happens to be down at that time you could lose a chunk of your money. Or you could be lucky and make quite a bit. The "risk" works both ways. As a general rule, the longer the money is invested the better bet a stock market investment should be. But there's no guarantee!

No reason why you shouldn't put some into a cash ISA or cash savings bond and some into a unit trust: you could put say £500 into a unit trust and look upon it as a bit of a punt AND as education - you'll have some experience of investing which could pay dividends when you start to have more money to invest later in life. There are hundreds of unit trusts to choose from - something big and boring like the Fidelity Special Situations or the M&G Recovery Fund perhaps. So there's the first part of you education: research those two funds and have a look at some of the other unit trusts. Some invest just in UK shares, some in places like China, some invest worldwide. So if you put £500 into a unit trust that invests worldwide you may end up owning a tiny bit of Toyota, Microsoft, BP, HSBC and many many other companies. Every year the unit trust manager sends you a report showing the value of your investment and which shares the unit trust is invested in.

fairtrade

IMHO any shares based investment is not a short term option.
The poster is looking at 2 years for investment. IMHO any broad spectrum share based product would need to be held for at least 6 years to gain any monetary advantage. A single punt on an individual share could create an advantage - but this would be down to chance.