2 savings questions - long term safety & medium term risk for VERY small amounts.....

want-it-all

Firstly, I’ll apologise in advance for the fact that this post contains some really silly questions and statements, but having conducted quite a bit of research, I’m back to square one and still stumped.

Also, apologies for the length of the post.

Additionally, I do realise that any replies to this post don’t constitute formal financial advice, so feel free to shoot away with personal opinion, rather than what may be considered to be ‘sensible’ in your professional opinion, should the matters differ.

I have two main questions:

ONE:

I want to take out some form of very long-term (25+ years) regular savings account/plan, but I expressly don’t want to be able to touch it until a specified date, come hell or high water. The purpose of these savings would be to provide a small extra nest egg for retirement (I’m also in an occupational pension, and I’m currently aged 27).

Try as I might, I just don’t seem to be able to save in easy-access or short-notice accounts, since knowing that the money is there for the taking tempts me to no end. Therefore, despite the attractiveness of cash ISAs in terms of interest rates and tax treatment, I clean out any and all of my savings on a regular basis, just because I can. I’ve also used a lot of promotional monthly savings accounts that haven’t ‘worked’ for me, for similar reasons – the notice periods are too short for me, by over 20 years. I know that sounds awfully immature, but I suppose it’s just a quirk of my personality.

HOWEVER, I would like something that I could clean out in an absolute emergency (even if penalties apply), hence why I’ve avoided making additional pension contributions as a means of keeping the money out of sight and out of mind. Ideally, I would like an account/plan that penalises withdrawals heavily, so that only the most dire situations would force me to gain access.

For this portion of my savings, I’d like to take no risks with the capital (though I do understand that inflation can effectively diminish my capital). I’m looking to save…wait for it…a whopping £30 per month.

What options do I have?

TWO:

I’d like to start dabbling in S&S’s, but I’m a bit confused as to whether or not its feasible, considering the amounts of money I have at my disposal (that I’m willing to actively risk), versus the inherent costs of trading.

I know very little about stocks and shares, I’m a complete dummy, so please approach me as such if you have any answers/advice.

What I’m looking to do is invest around £10-15 per month in buying shares in a variety of companies right across the board. I don’t actively follow the stock market and its trends (but am willing to do my homework prior to any regular investment plan). Given my age, plus the paltry sums involved, I’m looking more for a bit of fun/experience, to prepare me for the possibility of hedging a teensy bit more of my money in the distant future as part of a more considered, larger and balanced overall investment strategy.

I intend (if it’s possible/feasible) to invest in this manner for around the next 5-10 years, before sitting back and leaving these initial investments to grow (I do understand from the very small sums involved that I’m about as likely to become rich as I am to visit planet Mars. I also understand the risks involved).

I do hold tens of thousands of very low-value shares across a dozen or so companies I basically picked at random on the AIM a year or two ago, just for pure sharedealing practice. Their collective worth is teensy, I won’t embarrass myself by stating the figure, but suffice to say it’s reflective of the very small sums I originally invested. I rarely bother to even keep an eye on how my splendid wealth is growing.

The problem is, I hold a HSBC InvestDirect account, which charges something like £11.95 per trade. I like the platform and its ease of use, but £11.95 when you’re only dealing in the kind of sums I have to invest is a bit of a killer. I’ve researched alternative platforms, but find that even the lower-priced providers would prove to be uneconomical.

What can/should I do? Should I even bother? Are there any alternatives for investing in S&S for someone in my position, i.e. options without killer charges?

Any input much appreciated, and feel free to pose any questions you like.

Like I said, I don’t know much, so do feel free to straighten me out on any matters of concern.

Thanks.

jimjames

The minimum sums for share based ISAs are normally £50 per month.

There are other share based savings accounts that go as low as £30 per month but that is still above your budget.

If you are saving for 25 years then is there a reason to use cash? Whatever you do avoid tax free savings bond type products as they are generally very expensive, inflexible and give poor returns.

want-it-all

jimjames wrote: »

If you are saving for 25 years then is there a reason to use cash?

Stuuupid question, but what is the alternative? Can you kindly elaborate?

ViolaLass

I can't advise you on the specifics but it strikes me that you're over diversifying - £15 here, £30 there means that each pot ends up with not very much in it. Why not throw more money at fewer things? e.g. is there any need to have separate 'pension' and 'playing with shares' pots?

qpop

I'm afraid you've got it the wrong way round.

Horses for courses here.
Cash is absolutely unequivocally (nearly) the worst asset class for an investment horizon of 25 years. This is compounded by the fact that you are forgoing FREE MONEY by not paying extra into your pension. Depending on your tax situation, you will receive 20%, 40%, or 50% of your contributions FOR FREE from the government.

You would be far far better off to pay into a pension pot invested in real assets (a combination of equities, fixed-interest and property), get the free extra from the govt. and save a seperate emergency fund in cash ISAs and savings accounts.

As for sharedealing, if you want to dabble get a SVS Securities or X-O account, it's ~£6 per trade.

want-it-all

ViolaLass wrote: »

I can't advise you on the specifics but it strikes me that you're over diversifying - £15 here, £30 there means that each pot ends up with not very much in it. Why not throw more money at fewer things? e.g. is there any need to have separate 'pension' and 'playing with shares' pots?

'Playing with shares' = having some control over my own investments, for better or worse (the possibility of 'worse' explaining the small initial sums). Plus the fun element of it, though at some point in the future, 'fun' will have to be replaced with seriousness.

I never considered the possibility of over-diversifying, though. Probably just confusion and inexperience playing their part.

I should note that these sums are so small because of my currently low income/disposable. I work part-time in what would be a relatively well-paid job for a full-timer. However, I enjoy the lifestyle and am still financially comfortable. At some point, though, I'll get my backside in gear and start earning a FT salary, which would bring with it a dramatic increase in disposable income.

want-it-all

qpop wrote: »

I'm afraid you've got it the wrong way round.

Horses for courses here.
Cash is absolutely unequivocally (nearly) the worst asset class for an investment horizon of 25 years. This is compounded by the fact that you are forgoing FREE MONEY by not paying extra into your pension. Depending on your tax situation, you will receive 20%, 40%, or 50% of your contributions FOR FREE from the government.

You would be far far better off to pay into a pension pot invested in real assets (a combination of equities, fixed-interest and property), get the free extra from the govt. and save a seperate emergency fund in cash ISAs and savings accounts.

As for sharedealing, if you want to dabble get a SVS Securities or X-O account, it's ~£6 per trade.

The situation with my works' pension is that it was very much a 'sign here' situation. The pack provided to employees is woefully inadequate. Our company is small in size, and the pension is arranged via an IFA based about 100 miles from where I work (near our head office). Beyond that, I know very little about the product at all (though I suppose I could find out more with more effort). So, I signed up for my 3% & employer 3% and put it to bed for now...it's only relatively recently I've begun to think about these things, and evidently in the wrong terms :rotfl:

I saw an HSBC (tied) FA, but even in my crude and uniformed opinion, his advice re: retirement planning was woeful. He established my attitude to risk, as one might expect, but the net result of our initial meeting was him recommending that I contribute £200pcm to some HSBC pension or another. He also, naturally, 'recommended' a great deal of expensive income and life protection, despite me having relatively little to protect right now. His overall assessment would've took £250pcm away from me, which is just about the current level of my entire disposable income, before any short-term savings for trivialities and day-to-day emergencies were considered. I didn't turn up for our second meeting!

psychic_teabag

My first reaction was just to kill two birds with one stone by putting your very-long-term savings into a managed fund in a S&S ISA somewhere, and just leave it to grow. It should beat cash, and maybe you'll be able to manage to treat investments differently from savings and resist the temptation to withdraw. You can withdraw in an emergency, and the penalty might be that the market is at a low. "Unfortunately", the market might also be at a high and you'll get out more than you expected.

Maybe there are some insurance sorts of savings products which build up gradually and don't mature until fixed time and give access with big penalties ? (with-profits things used to have early redemption penalties ? I don't really know what I'm talking about but maybe someone else will be inspired.)

I suppose there's things like zopa or ratesetter where you could just set the money to auto relend. zopa does have rapid-return but that doesn't really have that big a penalty. I don't think ratesetter has anything similar, so that would be a sort of up-to-3-years notice to withdraw. But who knows if they'll still be around in 25 years time !

atush

I can't think of anything but a pension to keep money out of your hands for option one. as well as a pension for this, I suggest you invest in impulse control- as that is your issue here. Via a therapist, a 12 step program, drug therapy or even a hypnotherapist.

for option 2, I think if you can raise your stakes to 20-25 per month you can invest in an investment trust savings plan.

inflationiscoming

what about a savings account you can only operate by post, sounds quite difficult to spend money on a whim
http://www.bmsavings.co.uk/existing-savers/managing-your-account/managing-your-postal-account/

still doesn't deal with the fact that your cash will be worth very little in 25 years time