My investment strategy - what do you think?

chequeout

Hi all,

I was just wondering what, if any, feedback or tips anyone has with my savings strategy?

I'm 36 years old, single with no children, renting a flat in London on my own. After rent and all bills and outgoings are paid I am left with around £900 spare each month.

Out of this £900, £150 per month goes into a pension, £50 into a stocks and shares ISA and the rest goes towards maxing out my cash ISA allowance each year (I currently have three "full" cash ISAs and have almost saved enough for next year's). Any money left over from all that goes to myself to enjoy

I used to have severe debt problems - bailiffs, CCJs, the works. I have since repaid all my creditors (to the tune of around £30,000.... gulp) and I think I have now gone "the other way" and I am obsessed by saving. I think that's why I am so heavy on cash ISAs - I like the thought of having all this money close at hand rather than being locked away in a pension or riding the current stock exchange and poorly performing funds. I am intending to max my cash ISA every year forever basically - I am very good about not touching them and I am not likely to dip into them unless an absolute life or death emergency.

I'm also happy to rent - living in London I would have to get a mammoth deposit together and I just don't want to see all my cash etc disappear into property. The idea of owning my own place simply isn't for me.

So - £150 a month to a pension, £50 per month into a stocks and share ISA (I don't want to do more as I don't know enough about funds and stocks etc to feel confident, but recognise the gamble that you could win...) and around £5k each year in cash ISAs (not likely to be touched).

What do you think? I know I should perhaps be more "daring" but after being in such dire straits in the past I just can't risk my capital.

Thanks in advance :beer:

Lokolo

I think you should be putting less in cash and more in Pension and S&S ISA readying for your retirement. Even though you say you don't want any risk I'm not sure whether filling up your Cash ISA every year will help supply you with enough.

Do you actually have any goals or are you just saving for the sake of saving?

calypso_rhapsody

Over 75% in one asset class (cash) is not really the best strategy if you are saving for the long term. I do understand your nervousness about investing in stocks and shares but at the moment all the cash you have saved is losing value as you are getting less than inflation return and has no prospect of growing to provide for your future.

I'd suggest that you try to learn more about equity investing - lots of books recommended on threads on here - and maybe do a bit of shadow portfolio building .... to gain some confidence.

If you really really do want to stay in cash type products keep an eye out for the next issue of NSandI index linked savings certs ...

dunstonh

I like the thought of having all this money close at hand rather than being locked away in a pension or riding the current stock exchange and poorly performing funds.

Or to put it another way, you prefer to see your cash savings go down in real terms as the interest rate you get is lower than inflation rather than invest it tax free getting better returns over the long term than cash (even the bog standard funds have been getting better than cash savings rates)

What are your objectives with the money?

We can assume retirement planning is one. However, given your past debt situation (and well done for getting that sorted) does this mean you have little or no previous retirement provision? If so, £150pm at age 36 is rather on the poor side.

Totton

Get yourself a cash reserve that makes you feel comfortable, at least 6 months salary worth I would suggest. I'm no pension expert but your £150 seems very low if you are able to save £900 monthly Perhaps you have a job pension and this is a top-up, if not then if practicable I would consider putting more into the pension, perhaps through a SIPP. All in all I would put more into investments, cash is not king whilst interest rates are so low.

HTH,
Mickey

chequeout

Thanks all for your advice. The concensus seems to be to invest more in non-cash assets - which I kind of knew would be the concensus. But, I just daren't take the jump! I know I need to find out more about funds and stocks (and certainly would do before putting any money into them) but even then I will be soooo worried.

I am pretty sure it stems from being in so much debt previously - now I have the money I am absolutely petrified of losing it!!! I am an ISA "tart" and will happily move it all to get the best cash ISA rates (which I realise is still poor) but I feel safest doing that.

Aaaaargh!

dunstonh

but even then I will be soooo worried.

Aren't you worried that you are losing money currently by having it in cash?

Risk is not on/off. It is a sliding scale. You dont have to jump right up the scale to the top end. Also, equities are not the only type of investment. A mixture of assets is best. Especially for the long term. The longer the term, the more cash increases in risk and equities reduce in risk.

Annisele

Unfortunately you don't have a risk free option.

Over the longer term it's extremely likely that you will lose money in real terms if you keep it in cash. If your concern is preserving the real value of your investments between now and your retirement, I think you're probably better off sticking it all in equities than all in cash (though I don't think either would be a good idea).

I'm only slightly younger than you, and I also get nervous when I see my pension investments fall in value (which they've been doing a lot of lately; they're bouncing around all over the place). However, I comfort myself with the thought that the value now is pretty much irrelevant - I only really care how much it's worth in 30 or so years when I come to retire. If my investments fall in value now, that makes them cheaper - so it costs less to buy more of them. Since I'm adding to my investments every month, then I think that overall the volatility doesn't really hurt me all that much.

webnibbler

Annisele wrote: »

However, I comfort myself with the thought that the value now is pretty much irrelevant - I only really care how much it's worth in 30 or so years when I come to retire.

This is my approach too. I'm trying not to look at my investments more than a couple of times a year to rebalance - although this is not easy.

I think I'm saving all my nerves for 28 years time !

chequeout

Thanks all. Returning to one of the posts above, unfortunately my work doesn't have a pension scheme set up.... a great company with fab benefits apart from that So, the 150 a month I pay in is the total amount that the pension is funded with.

A combination of your advice plus my own common sense has made me decide to double the pension payments as of January - so £300 a month will now go into it. That will still leave me with enough cash to put away whilst doubling my pension contribution. Also, within a year or so I will have an extra £400 per month to play with (a large finance agreement coming to an end) and have already decided that out of this, an extra £200 per month will go into my pension and £100 into stocks and shares ISA.

Therefore within a year or so I will be putting £500 per month into a pension, £150 per month into stocks and shares ISA and the rest into my cash ISAs (I just can't let them go....)

What do you think?

Totton

Sounds good, hopefully a pension expert will come along with some advice but if I were you then I would be looking to put aside 15% a month into the pension or SIPP.