Getting started in Investing

Lieutenant_Thrift

I've got £3700 to spare from my 2009/10 cash ISA which is lingering in an account paying 0.25%. Recently a friend showed me his account with Fidelity where by he was able to continually move his money around from fund to fund. When he showed me, his total stock had gone up by £500 over night. He uses Morning Star for his information about fund performance and ratings.

It looked amazing and much more fun than shoving it into a 3% cash isa and letting it sit there to get £100 at the end of the year. I'd love to be seeing my money grow (or shrink) on a daily basis.

I'm thinking of putting this £3700 into a similar account but I feel clueless. Where do you think I should start? I could just do what my friend does but I'm not sure it's the cheapest way of doing things.

Any advice much appreciated.

LT

Rollinghome

For unit trust funds you'll find most people here use https://www.h-l.co.uk . They discount the initial charge to zero on most funds and rebate a smidgeon of the annual charge.

As you realise, your friend's gain of £500 could turn into a loss of £500 or a lot more than that just as easily. It won't cost any more to hold your units in an ISA but you might not gain by it either. Tax paid on dividends can't be reclaimed but you won't be liable to further tax if you're a higher rate payer and interest on bond funds is reclaimed for you. There's no liabilty for capital gains tax but then that's not likely to be an issue unless you have very large sums invested.

Loughton_Monkey

On Thursday 21st October, my equity investments made £1,148 29.

On Tuesday 26th October, the same equity investments lost £1,902.75.

There is nothing wrong with 'dipping your toes in' into a Stocks & Shares ISA. But make sure it is cash that you want to invest for the longer term. And do it under the umbrella of someone like Hargreaves Lansdown where there is no "up front" charge - meaning you can buy/sell almost at will.

But please don't think of it as "Easy Money". September, and October (well most of it!) showed exceptional growth. My budget is very cautious and assumes only 5% annual growth in equities. During these two months, I have made 7.5 times this. But you must remember that there are months where I lost about 5 or 6 times what I had planned to gain.

As your portfolio grows, you must expect overall growth in any one year to lie somewhere between -50% and +50%. Around 7% on average is often quoted, but it is only an average. If you lose 20% in a year, don't forget that it must grow 25% the following year, merely to get back to where it was.

Not trying to be funny, but if you have failed to 'manage' your Cash ISA so that it is only earning 0.25% when you should be getting more than 10 times more than that, then you should ask yourself if you have 'converted' and have the time/knowledge/energy to manage a more volatile equity portfolio.

musehead

Just remember that from day to day it is essentially gambling.

Even over the course of several years you could end up losing money.

cashbackproblems

Investing in emerging markets funds are good as the risk is spread over many companies and you dont know enough about how the market works or individual companies and can see past performance.

However if you not willing too take too many risks i much prefer investing in individual shares and have build up a portfolio of UK listed firms, some in AIM mining/oil stock, and the other half in vodaphone, rsa, aviva, rbs and barclays.

Overall im up but made some losses on the smaller companies which then means it bcomes a"long term" hold!

xrjtg

cashbackproblems wrote: »

Investing in emerging markets funds are good as the risk is spread over many companies and you dont know enough about how the market works or individual companies and can see past performance.

However if you not willing too take too many risks i much prefer investing in individual shares and have build up a portfolio of UK listed firms, some in AIM mining/oil stock, and the other half in vodaphone, rsa, aviva, rbs and barclays.

Overall im up but made some losses on the smaller companies which then means it bcomes a"long term" hold!

A few things worth picking up on here. Funds are a way to spread risk, but emerging markets themselves probably aren't viewed that way by most.

The other side of this is that investing in individual shares is one of the highest risk approaches, especially if, as you've found, you invest in small companies.

Finally, you may have been joking, but it doesn't follow that stock you're currently facing a loss on should be held for the long time. The market doesn't remember what you bought at, and doesn't feel any obligation to return your purchase price if you're sufficiently patient.

jimjames

Your friend showed you that he had made £500 on his ISA, was that on a single years investment ie £10200 or on the collection of many years investment?

At least £500 movement on a £100,000 portfolio is very likely on a day to day basis both up & down.

I'd also echo the HL recommendation. They are more flexible than any of the other ISAs I've used.

I would say if you are not looking to take many risks then individual shares are definitely not the way to go. Imagine 2 massive companies, BP & RBS. 4 years ago most people would imagine that big blue chip companies like that are pretty secure ways to invest their money and get a decent dividend. Losing 90%+ of their investment was not something that was even remotely considered as possible. The reality is that it happens even to big companies.

At least with a fund you are spreading the risk, for a beginner ISA I think FTSE trackers in the HL wrapper are a pretty good starting point.

Andy

blinko

im about the same i went up abotu 6% in the first weeks of October and then i Slid down to around 1 - 2% with india and asia ending up negative,

i woudl start with unit trusts these are alot less voltaile than shares and will get you used to losing and making money within a month also give you exposure to the markets

yes most people are with HL inc me . they are the chepaest and biggest probably

and use up your ISA allowance first, good luck

cashbackproblems

blinko wrote: »

im about the same i went up abotu 6% in the first weeks of October and then i Slid down to around 1 - 2% with india and asia ending up negative,

i woudl start with unit trusts these are alot less voltaile than shares and will get you used to losing and making money within a month also give you exposure to the markets

yes most people are with HL inc me . they are the chepaest and biggest probably

and use up your ISA allowance first, good luck

What are the tax benefits of using you S+S ISA allowance for funds?

Lokolo

cashbackproblems wrote: »

What are the tax benefits of using you S+S ISA allowance for funds?

No Capital Gains should you go over your allowance.

Some funds also pay income, so higher rate tax payers wouldn't need to pay a higher rate (I believe, wait for Dunston).

jimjames

Lokolo wrote: »

Some funds also pay income, so higher rate tax payers wouldn't need to pay a higher rate (I believe, wait for Dunston).

Absolutely true, most funds pay at least some income. If you are a basic rate taxpayer only investing a few thousand then the benefits of an ISA are less clear cut but it is always worth considering the long term and the assets being out of the taxmans reach - at least for now!

Also simplifies your tax return as they don't need to be declared.

Andy