£800/month to invest - ideas? high & low risk

evilplan

One of my many questions is about the different types of investment I can put into my ISA.

I can see the simplest method seems to be to choose a unit trust or OEIC and tell H-L to pay into it from my direct debit each month. There seem to be no fees for buying, right? Just management fees. Simple - I choose a fund and "forget about it" if I want to.

But what if I want an "investment trust"? Can someone quickly explain if I've got this right: If I want to pay into an investment trust, that's just the same as buying shares, right? And that means there will be a fee for buying? Do people buy these shares each month, or do you just say "oh I've got £500 here, let's buy some shares in an IT"? I can't seem to find an answer here, but does H-L allow me to make regular purchases of such products, or is that just a no-no?

One of the things that confuses me is, why do, say, OEICs allow me to pay in £50 a month, but Investment Trusts, if I've got this right, require discrete purchases? Remember, I'm totally new, which means I might actually understand way more than I think, but get stuck on the simple questions.

As part of people helping by explaining what you invest in, could you give me an idea of what different products you buy? I guess "diverse" doesn't just mean "high/med/low risk unit trusts", but "some stable shares, some unit trusts, maybe some gilts and some cash"?

Thanks again...

chazzee

A unit trust or OEIC is open ended and you pay an initial charge upon purchase less any saving, so no broker fee, and sales are normally free of charge . An Investment Trust is closed ended and treated as a company (listed on an exchange etc.) so broker fees apply on purchases and sales within most investment wrappers.

However, the companies behind the investment trust eg. Aberdeen may allow you to purchase the investment trust directly through them on a regular basis with little or no broker fees.

Jegersmart

Hi

As long as I find a fund with the focus and risk profile I want then I do not mind which type it is. Thats a personal view and I am sure others have another view:)

With regards to switching monthly contributions, I would say that generally speaking - when investing you have some reasons to invest in a particular "asset" - and unless enough of those reasons change I would stick with it. Spreading yourself with £100 in 38 different funds would probably be hard to track and you have probably overdiversified. One of the hardest things about investing is taking a decision and sticking to it as long as the reasons for the investment remain - and not just in your head because you want to be right (:)) - or the market tells you otherwise. Of course, understanding the markets' language is not as easy as to say it...:D

If anyone wants to take this offline in terms of discussion, idea sharing and so on - you can reach me at demarini123 at hotmail dot com .

All the best

Ark_Welder

First and foremost, an emergency cash reserve. After that is sorted out, take your time and don't feel the need to rush into anything. Have a read of the financial press or weekend quality newspapers - not just the Money sections, but the Business sections. The latter because they will tell you far more about what is going on in the economy - both here and abroad - and this might influence your decisions (Money sections can have a tendency for discussing themes that are currently trendy). For instance, you may discover that inflation in China is on the increase, there are concerns about credit growth and debts of local authorities there, there may be a property bubble, and that the economy is slowing down. And, the effect that this could have on the prices of certain commodities. Not necessarily reasons for not investing in these areas because the economy is still growing, but something to be considered.

Whilst not a guide to the future (with the market opening up a lot more to outside investors), have a look at this chart of the Shanghai Stock Market Index, and play around with earliest date. This with Chinese GDP has been growing at a good rate for many years...

One of the problems with what *we* are investing in is that *we* all have different requirements, attitudes and time horizons. So my asset breakdown might be wholly innappropriate for someone else. On the other hand, if you know what everyone else is investing in, it could make excellent sense to do totally the opposite! But I would suggest avoiding individual shares for now until you have more experience. Even then, you might decide that a collective scheme is better for you. I do hold a few individual shares and bonds but the majority of my holdings are via collective schemes.

But, to reiterate, take your time: better to miss out on something that is rising rather than to jump into something that suddenly falls. I was lucky enough to have started investing about 18 months before the stock market crash of 19th October, 1987 - about 20% in a few hours. Why lucky? I didn't have very much invested in funds at the time, so my 'losses' were minimal compared to the cash that I had. This experience helped to to actually take an interest in what I was doing (rather than just being seduced by historical performance figures, which in those days did not carry a warning about them not being a guide to the future!), and it helped me to avoid the worst excesses of the DotCom bubble bursting (i.e. not believing in the marketing and 'share tips').

Spreading yourself with £100 in 38 different funds would probably be hard to track and you have probably overdiversified

And I would add to this by saying that if you do hold too many funds that are similar in nature, then you might just start to experience tracker-style performance, but at a higher cost.

atush

It is fine you are single and don't ever expect to have kids. I'd be richer if I had gone tht way lol.

But, what do you pay in rent each month? Do you want to save to buy a place to live in (and perhaps gain thru equity over time?) and save money on rent? Our advice if we knew you had some sort og goal ahead might help.

But, in your situation, I would have no problem with your proposed mix of cash, and equities in mid to higher risk areas. As long as your investments are the lowest cost you can find (be that HL or not)mand tax efficient.

I have been a fan of emerging markets, private equity and contrarian investments in the past and have profited. But most of my choices are Investment trusts (although some like Fidelity special situations have 'mirror' OEICs) so won't be likely to help you as HL charge quite a bit to have ITs in your ISA or so I hear.


I generally pick an area I want to invest in thru research/reading/general outlook (say emerging markets etc) then look at funds and ITs in that area. then I choose one.

Totton

atush wrote: »

as HL charge quite a bit to have ITs in your ISA or so I hear.

The annual fee reduces to a max of £45 per year from August 1st, currently £200 max based on 0.5% of ISA. I was considering switching out of HL as I hold IT's in my ISA but at £45 for the year I will stay with HL.

Mickey

Totton

Consider buying Tm Hales book 'Smarter Investing', it will save you a lot of money over time. I'm sure there are other good reads around but this is a good one imho.

Okay, £800 a month is a lot to invest but it is probably too little to purchase an Investment Trust holding each month, the only viable option is to use the IT managers savings scheme which is a low cost way of purchasing smaller amounts of IT's on a regular basis. Most of the IT houses offer schemes from around £25 to £50 per months so you go for quite a few if you wanted to.

For OECIS I would be considering going for something like a 70/30 split in favour of core funds over satellite holdings. It can be a boring way to invest I guess but works for me. The idea is to have 70% of your holdings in steady performers such as Troy Trojan, M&G Recovery, Newton Global Higher Income etc, then to have around 30% in spicier offerings such as JPM Natural Resources, M&G Global Basics, Neptune Russia, First State Asia Pacific and say Newton Asian Income.

Another method at the start when amounts are low, is to start off with a multi manager offering such as Jupiter Merlin Growth. Costs for these funds are high, often above 3% but as a start they can be useful. At the very least you could do worse than visit the websites of a few multi managers and take a look at their fund fact sheets to get an idea of fund portfolio construction.

My recent purchases have been Templeton Emerging Markets (TEM), Troy Income & Growth (TIGT), Temple Bar (TMPL), Personal Assets Trust (PNL) and Worldwide Healthcare Trust (WWH), whilst in another portfolio based on OEICS, I have recently chosen Newton Asian Income, Newton Global Higher Income, First State Global Emerging Mkts, M&G Global Basics and Troy Trojan.

Some of the above are top-ups, other such as WWH are new purchases. A bit of a mixed bag but hopefully gives some ideas.
Regards,
Mickey

oldtoolie

You like your job, make plenty of money, have no responsibilities and don't want to fritter away your money. Why not set up a SIPP -- self-invested personal pension. Big tax breaks, you can learn to play the market with it and if you are prudent, you won't have to wait til you're 65-66-68-70 to retire.

Nice thick value-for-money book is "The Financial Times Guide to Investing: The Definitive Companion to Investment and the Financial Markets"

Ark_Welder

Prefereably, learn to play the market with a fantasy portfolio rather than real wedge...

evilplan

OK, now I've come to a juddering halt, thanks to oldtoolie

I've got a good work pension, but I've only been in it for 10 years. I'll have 20-30 years in it all told if I retire at 50-60.

For that reason I'd not thought of a SIPP.

But, oldtoolie has made me look at it differently. I *could* retire in 14 years (I'm 41). That's "medium-long term", really - it's the sort of time that you'd want to leave investments anyway, right?

So, back to a basic question: Am I better off saying "I will DEFINITELY leave the money to grow", take the tax break (gives me 20% extra, right?), and put it in a SIPP with a view to retiring at 55?

I've always been a bit confused about pensions. If I reach 55 and see a nice pot of money, but not enough to make me able to retire, can I still "retire" as far as the SIPP is concerned, or is "retire" actually a legal term that would mean, for example, I must also take my work pension at the same time?

Or to put it in English: What if I reach 55 and don't want to retire, but look at my SIPP and say "yeah I want some of that money now" - can I do it, keep my work pension going and stay working? Sure, it's hard to see why, but it'd be good to know the parameters.

I'm not waiting for people to do my work for me - I'm busy reading. But I have always found it more helpful to ask "real" people to explain stuff. You guys have had to go through all of this, so you often explain it better, as you've proved again and again in this thread.