SIPP Opened - Investing for income?

gadgetmind

stringer_bell wrote: »

I thought about investing outside of pension/ISA, but it looks like a royal pain to keep track of in regards for tax

Yes, big time. If ISA allowance allows, always use an ISA(1), and I'd always go for maxing a pension in your situation, but some don't like the restrictions.

(1) - Just for completeness, for a basic rate tax payer, there are complex considerations regards taxation of income versus dividends, which means some assets are best in an ISA but others OK unwrapped, however these won't apply to you.

stringer_bell

gadgetmind wrote: »

Yes, big time. If ISA allowance allows, always use an ISA(1), and I'd always go for maxing a pension in your situation, but some don't like the restrictions.

(1) - Just for completeness, for a basic rate tax payer, there are complex considerations regards taxation of income versus dividends, which means some assets are best in an ISA but others OK unwrapped, however these won't apply to you.

I just wish I could put more in an ISA!

IronWolf

I think you should think carefully about risk too. Emerging markets doesn't necessarily mean high risk, and a FTSE 100 Blue chip doesn't mean low risk.

A lot of articles on the web assume that risk and return are correlated, but this is a fallacy. It is true that you can find high risk high return and low risk low return, but there are plenty of high risk low return shares about, and even some low risk high return shares.

The trick is to distinguish between them, or find a fund manager that can over long periods of time.

Another important thing to note is that risk and volatility are not the same thing, despite what the economics "experts" say about beta.

gadgetmind

stringer_bell wrote: »

I just wish I could put more in an ISA!

I'm lucky enough to have a wife who doesn't pay higher rate tax, so we can save unwrapped in her name. Unfortunately, she doesn't work at all (too busy, she says!) which kind of defeats the object.

gadgetmind

IronWolf wrote: »

Another important thing to note is that risk and volatility are not the same thing, despite what the economics "experts" say about beta.

Agreed. I much prefer using the word "volatility", or even "standard deviation", but many people can't relate to this. Where I do use "risk" is when looking at the probability of various assets (and asset combinations) failing to deliver real returns over a given time period.

(BTW, did you mean alpha?)

IronWolf

gadgetmind wrote: »

(BTW, did you mean alpha?)

well, depends if we're talking statistical testing or jsut general terminology. Beta to me is the measure of an individual stocks volatility although most of my reading has been around the US so beta could be the US version of alpha.

stringer_bell

I'm actually leaning towards using this years £50k allowance to buy shares in 20 companies at 2k per block. That's £40k, and I think IR tops that up by 20 percent to £48k if I'm not mistaken, then next year start with the funds

gadgetmind

IronWolf wrote: »

well, depends if we're talking statistical testing or jsut general terminology. Beta to me is the measure of an individual stocks volatility although most of my reading has been around the US so beta could be the US version of alpha.

Surely beta how much it tracks the rest of the market and alpha the risk adjusted performance?

People often use sigma for annualised volatility but normally just use σ rather than "sigma". Dunno why we do this and then use "alpha" and "beta".

gadgetmind

stringer_bell wrote: »

That's £40k, and I think IR tops that up by 20 percent to £48k if I'm not mistaken, then next year start with the funds

HMG puts in an extra 25%. You put in £40k, and extra £10k gets reclaims. This is because the tax at 20% on £50k is £10k.

A 40% tax payer than claims back an extra £10k via their tax return.

stringer_bell

gadgetmind wrote: »

HMG puts in an extra 25%. You put in £40k, and extra £10k gets reclaims. This is because the tax at 20% on £50k is £10k.

A 40% tax payer than claims back an extra £10k via their tax return.

that's perfect then, will round me up to £50k, that way I won't incur any charge