3-5 year investments

RichardJC

Hi everyone! I am looking for some advice on 3-5 year investments and would appreciate peoples input/experience.

I graduated from university last year and (luckily) found a job and have been plugging away at my £4300 of 0% debt I left uni with. Using the sites guides and tips I have just finished doing that (but still have a £1500 0% overdraft facility if required). At the same time I have had savings of about £6500 sitting in a Yorkshire BS ISA for the last year
paying 2.25%.

Now that I am debt free and stable in my job I no longer need instant access to my money and I am starting to look longer term for saving for a (15%) house deposit. I was hopeful that inflation would drop and interest rates rise this year but, given the current climate, that now looks unlikely for another 12 months.

So I would like to make some money on my savings aswell as start putting away about £350/month (the speed that I have been paying off my uni debt and would like some advice on what to do with my savings with the aim of saving enough money for a 15% deposit on a small house.

Intially I was looking to invest my savings along with a work bonus I recieve at the end of the month (a 1 off payment after 12 months
at the company) into the NS&I inflation linked bond. However with the recent market drop and the relatively long term investment scale I am looking for I was thinking of splitting the investment into £5000 into the bond and £3000 into a FTSE tracker (the Infidelity Moneybuilder due to low managment fee) to limit my exposure.

What do you think? Would this be a diverse enough investment?

I was also thinking of slitting the investment in 2 and investing half in a UK FTSE tracker and the other half in a Japan/China/India "surplus" econonmy due to the expectation that sterling will continue to lose value against these curriencies in the next few years.

Any advice would be greatly appreciated and sorry for the long post!

Lokolo

Hoping to get a return from Japan/China/Inida over a period of 3 years is risky at the very least.

UK FTSE tracker.... have you seen the FTSE lately? How would you feel if it goes down another 500 points over the next 3 years? You'd be losing money.

As a house deposit, stick with savings, or buy some NS&I index linked bonds.

opinions4u

Totally agree with Lokolo.

This is a savings portfolio that you need, not an investment strategy.

Maximise you tax free allowances, high rate monthly savers, fixed term accounts and easy access choices to your best advantage.

RichardJC

I was basing the plan on 2 views of future economic outlook

1. Economy tanks - High inflation and FTSE drops. House prices remain level or drop slightly. In this case the £5000 invested in the NS&I Bond and £350/month in regular savings allows me to purchase a small house in 4 years time with a 15% morgage. In this case the FTSE tracker remains invested as a longer term investment.

2. Economy Grows - 4ish% inflation and FTSE grows. House prices increase at about 3% above inflation (as Nationwide historical data indicates). In this situation the FTSE tracker provides the additional growth required to get onto the property ladder.

smartiedriver_2

Check out HSBC's SLSA. It's white -listed with IFAs at present so it really is best in class.

Put at least £3,000 into the SLSA for 3½ years - you earn a fixed rate of 16% gross interest (4.33% AER) at the end of the term if the FTSE 100 Index stays the same as at the start, or increases, or your money back plus 2% gross interest (0.57% AER) if the FTSE falls.

http://investments.hsbc.co.uk/product/4/stockmarket-linked-savings-account

westy22

Before you ask, yes, I work for a bank, but no, I didn't get a bonus!

After reading several of your posts around the forums today, you don't happen to work for HSBC do you! OP - other banks are available ;-)

Lokolo

RichardJC wrote: »

I was basing the plan on 2 views of future economic outlook

1. Economy tanks - High inflation and FTSE drops. House prices remain level or drop slightly. In this case the £5000 invested in the NS&I Bond and £350/month in regular savings allows me to purchase a small house in 4 years time with a 15% morgage. In this case the FTSE tracker remains invested as a longer term investment.

2. Economy Grows - 4ish% inflation and FTSE grows. House prices increase at about 3% above inflation (as Nationwide historical data indicates). In this situation the FTSE tracker provides the additional growth required to get onto the property ladder.

History doesn't mean it will happen again. High inflation could lead the rise in interest rates. With a weak economy and high interest rates I think you will find house prices will fall.

If you really are confident you will get out the best, then go ahead and do it, but I am recommending you just stick to savings.

Aegis

smartiedriver wrote: »

Check out HSBC's SLSA. It's white -listed with IFAs at present so it really is best in class.

Put at least £3,000 into the SLSA for 3½ years - you earn a fixed rate of 16% gross interest (4.33% AER) at the end of the term if the FTSE 100 Index stays the same as at the start, or increases, or your money back plus 2% gross interest (0.57% AER) if the FTSE falls.

http://investments.hsbc.co.uk/product/4/stockmarket-linked-savings-account

The SLSA is utter rubbish. Current best interest rate for 3 years is 4.26% (according to moneyfacts), which is already over 13% gross interest with no risk of losing any money to investment performance. Factor in another 6 months at, say, 2% and you're up to more or less 14% gross over the 3.5 year term. SLSA adds 2% interest with a chance of earning ONLY 2% interest.

It's a waste of money for pretty much anyone but HSBC.

ses6jwg

the HSBC retail savings and investment range is just dire

Aegis

ses6jwg wrote: »

the HSBC retail savings and investment range is just dire

Have to agree. There are a couple of nice funds in there, but their use seems very sporadic (Invesco Perpetual's Income fund is in there, for example). The good funds seem to be recommended a lot less than the World Selection funds, which HSBC has decided not to benchmark against anything, in theory because they are unconstrained and therefore can't be benchmarked, but in practice because they underperform against other funds with similar mandates and risk levels.

ses6jwg

it would possibly be forgivable if their retail savings range was at the least competitive.

apart from the 8% regular saver, I fail to see why anyone would save with HSBC