How to invest on a (weeny) budget

gadgetmind

As this comes up here fairly often, I thought this article might be of interest.

http://monevator.com/2012/01/17/how-to-invest-on-a-budget/

Lokolo

I think it would have been nice to have a section "But if you really insist on buying shares..." and had a paragraph on their regular investment account whereby it only costs £1.50 a trade. So on a £100 a month basis it is resonably affordable to buy shares.

A one off initial charge of 1.5% isn't that big of a deal imo, to get that feel of owning shares.

atush

I agree with yoru comment you left on the link that 100% of equity in the UK market is mad.

i would change the 30 to a global tracker or change it to 10 into guilts and 20 each into UK and global.

gadgetmind

I'm not sure that HSBC have a global tracker.

atush

Well they miust have something non uk- do they have emerging markets? Surely they have Asia pacific?

gadgetmind

atush wrote: »

Well they miust have something non uk- do they have emerging markets? Surely they have Asia pacific?

Yes, Pacific, US, Europe and Japan, and L&G have an EM tracker, but it all gets a bit messy.

atush

Well I would split the 30 into 10 each in US, UK and Asia maybe. Basically would not put all my equties into the UK and would not put 40% into gilts unless the person saving was older.

gadgetmind

atush wrote: »

Well I would split the 30 into 10 each in US, UK and Asia maybe.

We can debate the split endlessly, but I certainly wouldn't do just UK.

would not put 40% into gilts unless the person saving was older.

I'm avoiding gilts right now. Yes, I know they are great because they don't correlate with equities, but while equities could go down from here, I'm betting on them going up, and gilts really don't have any credible upside.

srcandas

gadgetmind wrote: »

I'm avoiding gilts right now. Yes, I know they are great because they don't correlate with equities, but while equities could go down from here, I'm betting on them going up, and gilts really don't have any credible upside.

Gadget when you say 'they don't correlate with equities' I'm a bit confused. My Fidelity Moneybuilder Income Fund seems to have done just that in the past. I thought the advantage was less volatility so limited downside - but I'm looking at about 6% return. Perhaps I didn't go far enough back in history

And when you say no up side is that because interest rates are so low and are likely to rise - well they could hardly go much lower in the UK ?

ps I know this is only chat and promise not to sue you but would appreciate your thoughts

atush

Gilts are priced high at the moment (as they are seen as 'safe') so yields are low (sometimes it is the opposite). so basically if and when the eurocrisis is over gadget (I think) and I see gilts falling so would not buy more from now- sort of a mini bubble. But DYOR.

gadgetmind

srcandas wrote: »

Gadget when you say 'they don't correlate with equities' I'm a bit confused. My Fidelity Moneybuilder Income Fund seems to have done just that in the past.

I don't know much about that fund, but gilts tend to be fairly uncorrelated with equities while corporate bonds tend to correlate a bit more. Both are less volatile than equities but both suffer if interest rates rise or if equities are suddenly seen as "the place to be" and everyone sells them.

And when you say no up side is that because interest rates are so low and are likely to rise - well they could hardly go much lower in the UK ?

Not just interest rates, but also risk. If everywhere else is a scary place to put your money, people put it into gilts even if the interest rates are low or even negative. Yes, negative yields, so you have to pay HMG to look after your money!

When this unwinds, yields will rise to more sensible levels, which means that prices will drop, and they could drop FAST!.

I'm using corporate bonds, property and infrastructure (bridges, airports, hospitals, etc.) to reduce volatility and am just going to have to accept a higher correlation with equities.