Where to invest?

astudentmidwife

Hi all,

I am a student with savings as follows (I am not in any debt):

£7400 in Premium Bonds
£5240 in an easy access ISA
£650 in an instant savings account

I am not going to need to access most of this for the next 3 years and feel like I could be getting a better return if I did some investing outside of standard savings accounts - does anyone have any ideas?

Thanks!

psychic_teabag

3 years is a bit too short for investing in the stock market.

Are you covered for emergencies ? If you were to lock the money away, could that cause problems if you can't get to it at all. Or maybe you have family you can turn to in a crisis. Some fixed-term accounts do allow early access, with penalties. Martin's email mentioned a 3-year ISA with early transfer/closure with 99 days notice.

Premium bonds aren't really much good - you might get lucky, but the average return is poor.

You could consider p2p lending (zopa, etc), I suppose. Though a zopa loan is for 3 years, so if you made a loan now, you couldn't reinvest the repayments so you wouldn't really get all that much back. Ratesetter have a rolling monthly thing, and have just introduced 1-year loans. But it is all riskier that savings accounts.

astudentmidwife

Ah really? I know nothing about the stock market, how long would you need to invest to see any return?

Maybe I am better off with the savings accounts in that case.

Thanks for your advice!

psychic_teabag

astudentmidwife wrote: »

Ah really? I know nothing about the stock market, how long would you need to invest to see any return?

It's not so much that you have to be invested for a time to see any return. The stock market is very volatile : it tends to make large moves up and down, with a general trend upwards. (Akin to a game of snakes and ladders - you generally make forwards progress, but sometimes suffer big setbacks.) So you're playing for averages : there's about as much chance it will be down after 3 years than up. But if you leave it in for longer (10, 20 years) the probability of success is much more in your favour.

For a bit more background, see http://www.candidmoney.com/investment/default.aspx

bobthedambuilder

You don't say what interest you're getting in the ISA and instant access savings account. You might want to check that you're getting the best available in both, and transfer them to a better provider if you're not. And come April you'll be able to put a further £5640 into a new cash ISA - with a much better return statistically than leaving it in Premium Bonds.

Perceived wisdom is to have about 6 months salary in reasonably accessible funds as a fallback in case of unforeseen changes in your circumstances. Anything beyond that can go into a fixed term account (with a better interest rate) if you're happy that you're not going to need it.

Also perceived wisdom is that the stock market is really for the longer term investor - 5-10 years being the often quoted figure.