Long term savings? Gold?

plarka

We want to beat inflation.

What would you do for long term savings, like 10 years as the minimum and pension being the other. We have one lump sum of about £3000 and we can save about £80 a month as well. We have a mortgage and some ISAs.

We just read about buying gold online. We calculated that if we had bought gold with this £3000 10 years ago (when we got it and put it in an ISA) it would be worth £14,000 now.

So.......gold? Or mutual funds, or something else?

Masomnia

NS & I inflation linked certificates are probably worth a look.

If you'd bought gold 30 years ago you'd still be down in real terms, it depends which dates you look at; and that's why it's probably not suitable for the novice investor, which given that you don't mention any other investments I guess you are.

alanq

Masomnia wrote: »

NS & I inflation linked certificates are probably worth a look.

Not at present as they are only currently available to reinvest existing NSC funds.

plarka

Yeah, we looked at the inflation linked things and there are none available. Do they become available after a time?

We're total novices. We want to stop letting our money sit in low interest accounts (even the 'highest' ones right now are low) and start investing and being smart with it. We never have done really smart things with our money like invest. ISAs are as far as we've got.

Glen_Clark

The most successful investors find assest that are selling below their true value - i.e something that will generate a lot of income has as high value. When it comes to gold they are stumped because it doesn't generate any income. Warren Buffet said gold was overvalued at $1,000, and who am I to argue. But that didn't stop gold climbing to about $1,900, because its value is based on sentiment. People buy it on the 'bigger fool' theory - i.e a bigger fool than you will pay even more for it than you did. This happens, and its impossible to know if/when the bubble will burst, there will be a stampede to sell, and the price will hit the floor.
The point is that you are paying a lot of money for something that in real terms is almost worthless. So if the price does fall it could fall to almost nothing. Unlike other assets like land, property, even shares, which have a UNDERLYING value that will stop the price falling very far.

gadgetmind

plarka wrote: »

We never have done really smart things with our money like invest. ISAs are as far as we've got.

Read Smarter Investing by Tim Hale but bear in mind that with greater returns comes greater volatility, which means that the value of your investment changes, often drastically. Over the long-term, you can expect to gain, but you do need this long-term perspective.

Even very experienced investors find gold scary as the value can drop and then stay low for decades, and unlike savings, bonds and equities, it doesn't earn you an ongoing income. I'm currently positioned in global equities, with a Pacific/EM bias, and with my fixed interest skewed towards corporate bonds and infrastructure.

The preceding paragraph was deliberately written to be somewhat opaque, which could be seen as being cruel, but was intended to be kindness. The world of investment is full of unfamiliar terms, and opinions from people who may, or (more likely) may not, know what they'd on about. I include myself in the latter category.

If you stray away from cash investments, which is well worth doing if you're young and/or don't need the money for a while, but you need to do some up-front research.

C_Mababejive

Buy shares in essentials such as utilities/supermarkets etc..

Glen_Clark

C_Mababejive wrote: »

Buy shares in essentials such as utilities/supermarkets etc..

Both have been giving an income well above cash. But there are a lot of clouds on the horizon. How much longer will consumers put up with being ripped off by the utility companies before they force the politicians to act?
Although the politicians are restricted by being dependant on the utility companies to invest in new infrastructure like power stations. Britain is the only country in the world whose power and water supplies are owned by foreign corporations, so they have a big hold over us and will use it to maintain prices, currently 20% higher than they charge for the same electricity in France.

Sainsburys are on a Price Earnings multiple of 9.6. So your money could be earning 10.6% in Sainsbury's shares, instead of 3.2% in cash. But thats based on last years profits and there are a lot of clouds on the horizon.
Their net profit margin is only 2.7% of turnover, and they make more profit on the premium range. If their cash strapped customers changed to the value range it could wipe the profits out.
They have debt equity ratio of 0.45 - below average for the sector and less than Tesco, but enough to wipe out profits if interest rates rise.

Supermarkets also have a lot of new floorspace in the pipeline, at a time when their market is contracting as money becomes tighter...

Company profits in general are high at the moment because the Tory Government has been very generous to them in tax relief. The Lib Dems might force them to change that....

A lot of it depends on what the politicians do. So its no coincidence that so many companies hire politicians, and ex politicians. To find out what policy will be, if not to influence it.

If you can make an accurate judgement about all that, and anything else which I haven't thought of, you will know whether the shares are worth buying or not.

alexanderalexander

plarka wrote: »

We want to beat inflation.

What would you do for long term savings, like 10 years as the minimum and pension being the other. We have one lump sum of about £3000 and we can save about £80 a month as well. We have a mortgage and some ISAs.

We just read about buying gold online. We calculated that if we had bought gold with this £3000 10 years ago (when we got it and put it in an ISA) it would be worth £14,000 now.

So.......gold? Or mutual funds, or something else?

You are way too late to jump on to the gold bubble, it'll burst at some point in the not too distant. With a 10 year timespan put your money into a share fund, as shares are (probably) undervalued at the moment to it's not a bad time to jump in. Regarding which fund to choose it's up to you – I'd probably go for emerging markets for greatest growth potential.

Glen_Clark

I'd be even more wary of buying gold unless I had got the gold in my hand. The Crown Currency section of this website (which has got so interminably long I am not suggesting you attempt to read it) shows one bunch of crooks who have been taking money online for gold that does not exist. I suspect a lot more will be flushed out when fear overpowers greed, the gold price crashes, and more people are trying to get their money out than put money in.

saveonarola

plarka wrote: »

What would you do for long term savings, like 10 years as the minimum and pension being the other.

If you don't have a pension, that's probably the thing to sort out first. Do you have a company scheme with employers' contributions? That's usually the way to go, because you get the tax relief on your own contributions plus the extra contributions from the employer. If not, then a SIPP might be the answer. Some people argue that an ISA is more suitable than a SIPP in some cases (both are 'wrappers' for the same kinds of investments, but they have different rules about tax and when you can access the money). There's a sticky about this at the top of the pensions forum.