Investing for beginners and should i seek an IFA

mattpearson182

I am interested to know what's the best way to make my money grow or 'work for me' as i keep reading in financial articles! It strikes me that unless you know the financial sector well then the only accessible option is a cash ISA which is fine but no one achieves financial independence from saving in ISA's i would have thought.

Therefore i'm wondering if i should use an independent financial advisor to discuss how to make my money grow and maybe how i can invest it? How do you know when you're in a situation that you should get an IFA? I know next to nothing about the finance sector so want someone I can trust who can advise me as to what to do with my money.

I only have savings of just over £10k so if i contact an IFA will they laugh in my face because this is a measly sum of money, i suppose what i'm asking is how much do i need to have before i consider investing and seeking alternatives to an ISA.

Thanks for your comments.
Matt.

Derivative

You don't need an IFA to invest - there are many online resources to learn about the different types of investments.

For example, stocks are fairly straightforward. You buy some shares, pay 0.5% stamp duty and £5-10 dealer commission. When you go to sell, £5-10 commission again. Any gains are yours.

An IFA will know more and be able to tailor an investment strategy for your risk profile but that will come at a cost.

Check sites like investopedia, wikipedia, and so on to get what's what. Financial education is something that I believe most people should work on, we all use money after all!

dunstonh

Your choice is to IFA or DIY. Avoid other options (like sales reps/tied agents/multi-tie).

If you know what you are doing and understand it then DIY is fine. If you dont then DIY, like any area you DIY in, can end up costing you more than paying someone to do it for you.

I only have savings of just over £10k so if i contact an IFA will they laugh in my face because this is a measly sum of money, i suppose what i'm asking is how much do i need to have before i consider investing and seeking alternatives to an ISA.

Many IFAs will not be interested or will price themselves high (pro rata to your investment) as you are at the low value end. However, a more rural IFA may consider it or one that is a quiet period. However, only you can decide if you can DIY and do it well or not.

Totton

We first used professional advice with a similar sum to which we added £50 a month into two investment trusts recommended by the advisor and which allowed regular savings at a cost of I think 50p per month. I would certainly recommend taking advice if you have doubts about how to invest relative to your risk level. An IFA will risk-assess your attitude and advise accordingly which will of course help steer you later should you decide to go alone.

If you take paid advice rather than commission based then personally I think you'll get a better deal which will serve you better for the long-term.

One thing worthy of mention is that you should continue to judge your IFA and if unhappy discuss the issues with them, be prepared to move IFA or go it alone if that fits better. We stuck with our advisor for too long when the company were taken over a couple of times, of course the advisor was the same but business approach had changed and we were right to move on.

Nowadays we do all our own investing via Investment trusts and funds but remain glad we took advice at the start. The Internet is full of advice about investing so you could easily go it alone without too much problem if you wish to, you may think that your starting amount is too small but remember that next year it could easily be half as much or double the amount, it all depends on your decisions and I would put understanding your attitude to risk at the top.

In your shoes I would be inclined to get some quotes for initial advice from IFA's, remember that if you go alone you will need to spend time and perhaps some money for books, magazines or subscriptions which will easily put you close in one year to the amount you are likely to pay an IFA. Having said that, going it alone is not difficult, perhaps test-run a fantasy portfolio for 6 months using one of the free portfolio services run by the likes of the LSE, FT, Trustnet or Morningstar.

Regards,
Mickey

Tycho_2

I think I will soon be divorcing the IFA (Torquil Clark) I have used for the last few years. Amongst other issues, they advised me sometime ago to put my investments on to the Fidelity platform, then more recently, to move them to the Standard Life platform, a move which has caused some problems. If you use an IFA, and they recommend using a platform, get a written statement on the who/what/why/how and when of the control of the funds.

dunstonh

Tycho wrote: »

I think I will soon be divorcing the IFA (Torquil Clark) I have used for the last few years. Amongst other issues, they advised me sometime ago to put my investments on to the Fidelity platform, then more recently, to move them to the Standard Life platform, a move which has caused some problems. If you use an IFA, and they recommend using a platform, get a written statement on the who/what/why/how and when of the control of the funds.

Using a platform is common sense and has been for a while. I can understand why they want off Fidelity. Fidelity have been going downhill for a while and lagged behind the others. They used to be heavily used by IFAs but they have largely stood still and better alternatives now exist.

That said, the choice of Standard Life wrap probably has more to do with their post RDR proposition rather than you. Larger firms are starting to position themselves with just one platform and you have to fit that platform. Not the other way around. This is where the small firms that intend to remain fully independent post RDR are going to benefit.

It is actually quite hard to justify using Standard Life wrap on advice basis. Its not the most expensive but its nowhere near the cheapest. It has brand strength and financial strength but it just doesn't excel in any area. It is your typical mid table provider. The firms that seem to be using this are the ones likely to drop independence (note that a wrap in itself can offer virtually whole of market access to investments - so some consider independence less important post RDR - however, if real independents are still using multiple platforms that you fit and not the other way around, then that has to be better).

That said, in the case of the OP with just £10k, a wrap platform would not be logical. A fund supermarket platform would be better.

kidmugsy

£10k. Is that in addition to your emergency fund containing, say, 6 months of outgoings? If it isn't, then I'd be tempted in your shoes to keep your savings in cash ISAs but then, as Totton hinted
above, consider opening a monthly saver with one of the big Investment Trusts. Alliance Trust would be one possibility: other people might like to name their favourites here. Of course, it might be sensible to wrap that investment in a Stocks and Shares ISA. Plus you could also have a look at the T&Cs of the new Index-Linked Savings Certificates when they appear. Past issues have had penalties for cashing-in early, but they've been pretty light once you've held the certificates for a full year.

blackrat779

Matt,
A couple of months ago I was in your position and as a comparison this is what I have done.
I like the Dummies books so I bought "Investing in Shares for Dummies"
I trawled the internet for recommended investing sites, I have Reuters Buisness news, Shareprice.co.uk, The Sharecentre.com (I also use them for buying and selling. This site and Fool.co.uk. I also read everything I could on the the sectors I wanted to be in.

I registered for the Yahoo Fantasy Trader and a practice account on the Sharecentre.com. I played on these sites to give me a better understanding of how things work with pretend money.

I created my own strategy for buying and selling ie minerals and resources at the moment (although this is transforming into other things soon) and invested my own money, but not all at once.

So far I have been successful (some may say lucky) and I have done well.

What have I learned....Do Your Own Research (DYOR) people say this a lot but then are swayed by what someone says on a bulletin board. People on BB have their own motives for saying stuff and it is very difficult to work out who is telling the truth, beware of them.

Try and stick to one or two sectors but also diversify. Well you cant at first sight. You need to diversify to spread your risk but also stick to one or two sectors so that you become more knowledgeable about them and make better decisions. Maybe oil say but in different regions (that's how I have done it)

Ignore the spread betters ect. Their strategy's are for very short term, sometimes only days. Try and take a much longer view.

If you don't like research and checking things out, put your money in a fund and let someone else do the work but of course they will take some of your profits in charges.

My biggest tip is read, read and then do some more reading, research will help you make good decisions. Read about your companies and also the wider global market to see how this will effect your companies.

I am not in any way an expert and fully expect to be shot down for what I have said here, but it has worked for me. If you can put the shares into an ISA then you must, its a no-brainer. Not all shares are allowed to be in an ISA.

What do I hold I hear you ask? Please bear in mind that this is a snapshot in time and I am constantly planning what to dump and and what to replace it with.

Rockhopper RKH
African Barrick Gold ABG
Xcite Energy XEL
Dominion Petrolium DPL
HSBC HSBA
Solomon Gold SOLG
Tesco TSCO

I do not recommend that you buy any of these or that you don't. Today at this moment, I am happy that I hold these.

Incomming, tin hat on.

Blackrat

oldtoolie

You don't really need an advisor with a relatively small stake and as you say, advisors aren't very interested in you.
You have essentially two directions to go in:
1. Play the market like blackrat779 at post #8 and good luck to him. He spends lots of time with it and enjoys matching wits with incredibly smart people who do this 24/7.
2. Adopt a passive investor strategy and pick a balanced selection of market index funds and drip feed these funds over the years. Check your investments once or twice a year. In 10 or 20 years time, you will probably be doing all right with a better return than simply putting it into a savings account.
So go to the library or a bookstore and read a book on investing (not one on how to get rich quick).