What is the best way to invest my money?

Skag

Hi all,

I have a good sum of money, 50k, and I am interested in getting the most out of it. I had a word with an HSBC advisor and told me that first of all, they investment interest rate should be greater than the inflation rate, and hence yearly bonds are not a very good option.
He directed me to go for financial investement banking. (shares, stock market etc), provided that I will not need my money for 4-5 years at least. Also told me that HSBC has a 24hr monitoring system worldwide, and had the min loss during the credit crunch in comparisson to other banks/institutes (which I am aware if that's any true or not anyway).

I've also read a thread in the website (which I am not allowed to post from the system) that mentions Independent Financial Advisors (IFA) are the best option, in contrast to banks, which are an expensive way to go for investment.

Lastly, the bank advisor told me that they don't invest the whole money package anyway, they only invest a 15-20%.

What are your thoughts?

Regards

lisyloo

Banks are generally a poor choice for investment.

Do you have enough liquid cash available for emergencies before you tie this up?

Is your pension fund adequately funded? Are you a higher rate taxpayer? Could you get any tax advanatges from pensions? (which will also be invested).

If you want to invest then there are several route to go down

1) Become a sophiticated investor and buy shares yourself
2) Use funds but pick them yourself. There are sites like Hargreaves and Lansdown that might suit for this.

3) Hand it all off to an advisor. This works well if you aren't that interested a have a GOOD advisor. You really need a personal recommendation for this. My advisor take care of my portfolio and recommends switches if necessary on a monthly basis. They send me their report and I agree/decline to their recommendations. But they DO manage it and not jsut leave it there like some advisors. I think this is key. Some advisors set it up and take commission and then do nothing. If you want to be a passive unsophisticated investor then you need a service that reviews it regularly for you.

You first need to decide what sort of investor you are going to be then we can point you to the correct people to talk to.

A pension is just a wrapper (but does tie up your money). You can have exactly the same investment both insde or outside a pension.
There may be tax advanatages (depending on your status) but on the downside money is tied up until you retire (or die).

The bank is probably a poor option.

Note also you don't have to do just ONE thing with your money. You can split it between various choices.

dunstonh

Also told me that HSBC has a 24hr monitoring system worldwide, and had the min loss during the credit crunch in comparisson to other banks/institutes (which I am aware if that's any true or not anyway).

Complete bull and nothing to do with investing.

I've also read a thread in the website (which I am not allowed to post from the system) that mentions Independent Financial Advisors (IFA) are the best option, in contrast to banks, which are an expensive way to go for investment.

Correct. Banks are not just the most expensive distribution channel, as they have been lowering their costs recently. They are also tied to limited providers and operate as a salesforce. So, you get told all sorts of rubbish. HSBC would probably try and flog their low quality world selection investments. However, you can buy those via an IFA if you really wanted them (which you wouldnt) and the IFA can retail them cheaper than a tied HSBC rep.

Lastly, the bank advisor told me that they don't invest the whole money package anyway, they only invest a 15-20%.

Its up to you what you invest. Obviously you need cash and the amount of cash will depend on your circumstances and objectives.

What is the best way to invest my money?

There is no best way. There are some poor quality ways but there are many different ways which are valid. Investing is about opinion. Some may do high yield strategies, sector allocation, asset allocation or a combination or something different. As long as you avoid banks and insurance companies and dont fashion invest then you eliminate the three poorer options.

Skag

Thanks a lot for your replies. I'm already forming some opinion. Of course the website is not the only source one should consult but I think it's a good start.

To start with, I have also been told that I should have a plan for short - mid - and long term, i.e. what am I going to do if I need liquid in a short term, and what I am planning to do with my long-term investment. That is not an issue, let's suppose that short and mid plans are covered, and for argument's sake let's say that this money have come from an inheritage or parents. It doesn't really matter. What matters is (as everyone else) that I don't want to make any rushed decisions, and I want the best out of it.

I am very new to the whole investing idea, though I keep a close eye to economies and financial affairs the last year. I got a sudden interest on the area.

I would like to be the player of my own investments, i.e. buy and sell and manage my own portfolio, however I would go with option No 3 as mentioned "Hand it all off to an advisor", as I don't have much time myself at the moment, and I am newly introduced to investing. I am aware of bad investors as well, as my family had a bad incident from poor portfolio management. Pension however is not an option for me. Also I am not a higher rate taxpayer, I'm on 22%.

Lastly, concerning the amount of the money package for investing, I wouldn't want to put all my eggs in one basket, i.e. investing the whole amount. However consider the following example:

Scenario a)
Invest the whole amount of money in a 5-year bond. End up with initial amount + 3% (hypothetical) annual interest. At the end I get my money, plus 7,5k roughly. I might have lost the inflation difference, but I'm on my money in general terms.

Scenario b)
Invest a portion of the money in investment instruments(shares), say 20k of it.
What are the odds that in 5 years, 20k/50k will generate 7.5k or more in comparisson to the 5 year bond?

Does that make sense?

lisyloo

Also I am not a higher rate taxpayer, I'm on 22%.

Basic rate tax has been 20% for serveral years, so I think you'll find you are on 20%

Scenario b)

On £50K I'd be expecting a return of greater than 3% possibly a lot greater, but there is no way anyone can tell. You could even lose money.
But on balance you'd expect than 3%, that would be a very conservative projection.

However it does depend on what you invest in.
If you invest if high risk investments you might get 50%, but there is a higher risk you would lose your money.
The risk tends to go along with the return, so it does depend on what level of risk you are going to take.
In general it's a good idea to diversify e.g. not put all your money in one share and also not put all your money in one type of investment, so you can spread between cash, property, gilts, bonds, shares, gold etc.

Long term the general advice would be to go with scenario B.
With Scenario A your main risk is a low return. Possibly even below inflation meaning your capital is devaluing.

Youd be better off talking to an independent advisor than one that only offers the investments of one company e.g. HSBC.