Help me improve my saving/investment strategy

Rob_192

I’m after some advice about our long term saving/investment strategy. I have a feeling we could improve on how we do things.
My wife and I are both 48 and paid off our mortgage 7 years ago. Since when we have been saving hard and find ourselves in the following position:-

My pension pot - £170k (£67k in Pru - formerly Scot Am with-profits, £74k in PP’s and £29k in Sipp)
S&S Isas (self select with HL) - £35k
Cash Isas (various – always chase the best rates) - £53k
Cash savings (Mostly Lloyds Vantage) - £19k
Cash Savings/Isa in kids names for uni fees/deposits - £45k (3 kids)
House value £260k mortgage free

My wife will have a modest pension from various employers – current total forecast £6k/annum at 60. Mine will be entirely money purchase.

Our long term goal is a comfortable retirement, hopefully (preferably!) with early retirement.
Our medium term problem is paying for University accommodation for our eldest (2 years into a 5 year course) and youngest (3 years starting in 2014). Currently the eldest costs us about £3.5k/annum, but we know that’s cheap. Middle one not going to Uni (phew!)

We currently manage to set aside £400/month net (£500 gross) into my Sipp, £550/month into S&S isas, £300/month into FD regular saver (this then get put into cash Isa every year) + we do another £300/month into another FD reg saver, but this goes straight out to pay for the University costs. I can pay no more into pensions, since I’m the director of a small company and take most of my wages in the form of dividends, with only £6k as actual salary.

I know in my heart we have too much in cash savings, but struggle to bring myself to put more into S&Ss – I always seem to time things wrong and haven’t sufficient knowledge to choose investments – I don’t like FAs – I don’t know why, I just have a feeling many know little more than me and it’s easy to make suggestions with someone else’s money!

Any advice on where we could improve matters would be gratefully received.

R

atush

I think you need to get over your fear of IFAs if you are not confident in your investment choices. They are, after all, professionals. But if you are still bent on that course perhaps you need to do more reading and research.

And drip feeding into investments will aid you in not having the confidence to time the markets.

You do seem overwieght in cash (esp with the kids money added in as my savings for my kids is mainly in equities. And yes, that 3.5 K is looking very low indeed. My eldest is at Uni, and we spent 9K the first year, 7.5K the next. Right now, he has taken over the food part as he got a summer job, and I am spending 350/month on rent/utilities for him. Add in book costs, transport etc and we are talking 5.5K approx for this his last year.

I am budgeting 8K per annum for the next three years x2(twins) from next september for Uni living costs.

Rob_192

thanks Atush

Well, I drip feed £400/month into my Sipp and £550/month into S&S isas, but the last time I put across a lump sum it was about £12k and I held back investing whilst I did some reasearch, in the time it took me, the market went up sharply, I then bought into various funds and the market then dropped. Hey Ho.

With regard the University costs, we only pay for the accomodation and fortunately this is very reasonable. My son finances the tuition fees and living costs from his student loan. We also help out with other things which probably add another thousand or so. Don't envey you those twins!

R

dunstonh

I don’t like FAs – I don’t know why, I just have a feeling many know little more than me

With FAs its more likely their constraints give that impression (if you only have say 10-15 products you are going to appear limited). It should not be the case with an IFA that is going to be here after the end of the year. It would be fair to say they will know more than you.

Any advice on where we could improve matters would be gratefully received.

You said in your previous paragraph you didnt like FAs as its easy to make suggestions with other peoples money. Yet that is now what you are asking for.

Pensions need looking at as it looks like you have a selection and one you mention is probably looking long in tooth. Obviously, pension contriubtions from the company are a good option to getting money out without paying NI and personal tax whilst reducing your Corporation tax.

S&S ISA value seems low in relation to cash.

BLB53

Rob,
You are in a very good situation financially. You need to find a solid strategy that you feel comfortable with. I share your mistrust of IFAs (I used to be one!).

If it was me, I would be looking to drip feed the £950 pm into higher yielding blue chip equities eg. Vodafone, Glaxo, Tesco etc. If you don't like the idea of individual equities, Look at investment trusts like City of London, Edinburgh and for overseas exposure, Murray International.

The secret to stockmarket succes, imo, is to focus on dividends rather than share prices. Over the longer term, 10 yrs+, 90% of profits come from dividends and the growth in dividends. If you reinvest these dividends, this will turbocharge your portfolio.

For more ideas, have a look at some of the discussion boards on www.fool.co.uk eg Investment Strategies, HYP Practical, Investment Trust etc. Another good source of articles is www.monevator.com




Good luck

Rob_192

BLB53

Great advice, but now I'm really going to show my ignorance - how do I drip feed into the sort of equities you're suggesting? I use HL for both my Sipp and S&S Isa and I always thought buying shares monthly in relatively small amounts relulted in a very high level of fees.

Incidentally I do own some blue chip equities, but have bought these with lump sums, rather than drip feeding.

Regards

R

atush

If you buy in lots of 500-1000 min you shouldn't have too big a % fee. so you could buy one per month, or one every other month?

Some platforms (iii I think?) have quite low charges.

BLB53

Rob,

HL are OK for funds, but for direct shares/inv. trusts, you may want to consider other options.

I have my S&S isa with Interactive Investor and my sipp with sippdeal. Both offer the option to purchase shares on a regular monthly basis for only £1.50 per trade. So if you do your £400pm with one and £550pm with the other, buying one share per month with each will only cost £3 pm.

Also to bear in mind, only £50K of investments are covered with any one broker for the FSCS compensation, so it may be worth spreading your investments between several brokers just to be covered. (the £85K limit only applies to cash savings)

Rob_192

Well the charges at HL appear to have changed since I last bought, but from what I can see it would cost me £11.95/deal - I much prefer the sound of £1.50.

Seems to me I should be looking at a new provider - I will look into this before the financial year ends, so that I can start with a new S&S Isa provider for 2013/2013.

R