What should I do with my £4000?

ljhhuk

I have just put £4000 into Fidelity's cash park so that it will qualify for my 11/12 ISA allowance. I am a pensioner and still working but hope to reitire in 2015. Initially I thought I would invest this money in a couple of tracker funds as the charges are low. However, I am a bit worried about the FTSE going down in the next 6 months and making a loss. I have also considered Investment Trusts as they also have low charges. Problem is, I don't know enough about either investment and wonder if any of you have some advice as to what you would do with this money if you wanted it to keep up with inflation or make a reasonable profit by 2015. I am not adverse to a little risk but don't want to throw my money away. It is not possible to live on the state pension.:(

ljhhuk

I am not very savvy when it comes to forums so can someone tell me why I have got no replies? Have I broken an unspoken rule?

ermine

Have I broken an unspoken rule?

No. It's just hard to know what to say, as you don't seem to have a clear strategy

Share investments suffer from a high volatility. One of the greatest favours you can do yourself is to accept that you know that you don't know what share prices will do over the next 6 months. You can look at long term total returns (ie including dividends) and see if you like what you find. As a rule of thumb never put money into the stock market that you know you will need to use in the next five years. The value of your shares is like a very gradual updrift with a lot of noise, although quietly and invisibly in the background there is also the addition of dividends, about 3% for the FTSE allshare ISTR.

You can target the income from stock market investments, which is a lot less volatile that the capital value. If you want a higher income you could target funds such as Invesco Perp High Income. High income usually comes at the expense of capital appreciation.

But there's no getting away from the fact that you probably need to do some study into what stocks can and cannot do for you to get peace of mind for stocks and shares investments.

For a start if you are worried about the FTSE going down then drip your 4k into the market - buy £800 of the unitrs each month, Then at least if there is a drop you get to buy more shares in the cheaper later months, and if it rises, well, you got some in at the lower price at the start

psychic_teabag

Everyone's requirements from investments are different. The amateurs on here are not really in a position to give specific advice for which funds you should invest in. The professional IFA's on here are probably not allowed to.

2015 is three years away : that's very short term for investments. An index tracker might halve or double - should really be looking at 10+ years for investments, since on that sort of timescale, equities usually win rather than lose.

You really need something low risk. A balanced portfolio mixing equities and fixed-interest, or something.

Most of the web sites offer suggested portfolios for low, medium or high risk. eg
http://www.hl.co.uk/funds/master-portfolios
https://select.bestinvest.co.uk/products-services/isa/readymade-isa-portfolios

I'm not saying any of these are good. But they know more about it than me.

Are you actually interested in the process of investing, or are you looking for someone to tell you what to do ? You could try hitting the personal finance section of your local library for some background reading. One often-recommended book is "Smarter Investing" by Tim Hale. One web site that does more investment than money-saving is http://www.candidmoney.com/investment/default.aspx (run by an ex-IFA).

You'd probably have to give a lot more information about yourself to get some specific advice. People often get a response if they come up with a specific plan and ask for criticism rather than just asking what to do.

ljhhuk

Ermine & Psychic teabag,

Many thanks for your replies.

You are right, I don't have a strategy, I have done some research but am very aware that many of the websites that give advice are trying to sell their own products and are unlikely to recommend their low charging funds. The amount of funds available is mind boggling and I have yet to sort out the meaning of all the jargon.
You have, however given me some starting points and the drip feed idea will also be considered.
Will think about coming back on here with my plan, when I have one, to see what people think.

ermine

Monevator's passive investing isn't a bad place to start and gives you a general rationale. You can probably find most of the funds on Fidelity. Monevator, and his sidekick/alter ego TA are rabid about keeping total costs low, and they're not trying to sell you anything.

But first of all you must ask yourself how you feel about risk. One possible risk is that there may be a hellacious crash associated with the Eurozone at some point. You can tell whether you are suited for the stock market if you view that as a threat, or as an opportunity It's both - it is a threat to any money you already have exposed to the market, but it is an opportunity to buy low.

psychic_teabag

ermine wrote: »

It's both - it is a threat to any money you already have exposed to the market, but it is an opportunity to buy low.

May be more of a threat for the OP, who has a lump sum to invest now, but may not have further funds to take advantage of the subsequent buying opportunity.

Ranger8

ljhhuk wrote: »

I am not very savvy when it comes to forums so can someone tell me why I have got no replies? Have I broken an unspoken rule?

Sorry but I think its because theres not a lot you can do to get much return on £4k