I need some good, regular, honest advice

andylarkin

Hello all

I have gone from being a big debtor to quite a saver in the last ten years - and now I need some advice.

I inheritted £55k when my gran sadly passed away (I became joint mortgagee with her when she bought her council house and paid the mortgage each month in full). After all the death duties have been paid off and capital gains paid off etc etc - £55k is what I am left with.

As I said, I was a big debtor for a number of years but changed my attitude to money around and became shrewder. I have worked for myself for the last four years and have worked very hard and have been very fortunate. I have been able to save some money after I have paid off all of my taxes and have now been able to save approximately £40k giving me £95k in total.

All well and good I hear you say - so hear is my dilemna.

Having just passed 40 I am looking to the future and my retirement and it doesn't look that far away. I am trying to work out what is the best way to use this money for my retirement years!

I have a pension but it not a huge amount (worth about £36K in transfers) and only pay about £40 per month - simply forgot about it as I took it out years ago when retiring seemed so far off that it wasn't worth worrying about. My Pensions advisor has suggested to look at the Property Market as he doesn't think pensions are the best route for me. I have an aversion to my money being locked away for all that time - a hangover from never having any I guess!

I have a mortgage of £56K on a house worth £150k and have 12 months left before repayment penalties are exempt (£1800 for early repayment). I have no ISA's and have my savings with HSBC at the moment at their bet interest rates.

So what I am asking is what is the best form of investment for my future. Is it Buy To Let? Is it Stocks and Shares? Should I pay off my mortgage?

I can honestly say that I am having more sleepless nights worrying what to do with the money than when I owed loads - that was simple - I just had to find the necessary each month to pay it back!

My big hang up with what or where to invest is because it is my legacy from a Gran that I loved very much and I don't want to waste this money or expose it to un-necessary risk. We have never been a wealthy family and therefore investments are always treated with some form of incomprehension and bafflement.

I have looked into the Buy To Let market and will be able to afford the deposits on a couple of flats in this city - but is this best way to go?

Can anyone advise on what they think is the best route to go down?

For your info - I live on my own, I have a girlfriend but no children and am a top rate tax payer. Thats not meant to be a show off statement, purely to help you advisors out there.

tomstickland

Personally I'd steer clear of property investment and put the money into a mixture of safe savings accounts and a range of stocks and shares investments. Paying off the mortgage is also an attractive idea; however, if you believe that you can make more than the mortgage interest rate from your savings and investments then it might be better to keep the mortgage since the £56K is then gaining you ground.

benood

I'll second Tom's advice - put your stocks and shares into ISAs this gives you some tax advantages mostly CGT shelter if you are a basic rate payer, if you become a top rate tax payer then the advantages are better still.

brasso

Again, I would avoid property. Too risky at the moment. The housing bubble must be nearing its top.

Thinking about retirement is very wise. At 40, you still have 20-25 years for your money to grow -- a very good period.

Personally I'd put £7K in a maxi-ISA (i.e. equities or funds) NOW i.e. before April, then another £7K in another maxi-ISA in April, as it's the next tax year.

I'd open a SIPP, transfer my existing pensions into it and perhaps top it up with another £10K or so (which would be increased by up to 40% by the Inland Revenue). The rest I would invest in a range of funds and equities covering as many different asset classes I could. You're in it for the long term, so try not to be too impatient if their value dips from time to time. Over 20/25 years you are very likely to make large gains unless there's some cataclysm that we can't predict.

Normally, people gradually move their gains from riskier (and usually more profitable) investments into safer ones e.g. bonds, as they get closer to retirement.

Nothing can be guaranteed but unless you do something silly, like put the lot into one single investment or asset class, you should be nicely set up. Don't have sleepless nights!

Mortgage_&_debt_free

brasso wrote:

Again, I would avoid property. Too risky at the moment. The housing bubble must be nearing its top.

Thinking about retirement is very wise. At 40, you still have 20-25 years for your money to grow -- a very good period.

Personally I'd put £7K in a maxi-ISA (i.e. equities or funds) NOW i.e. before April, then another £7K in another maxi-ISA in April, as it's the next tax year.

I'd open a SIPP, transfer my existing pensions into it and perhaps top it up with another £10K or so (which would be increased by up to 40% by the Inland Revenue). The rest I would invest in a range of funds and equities covering as many different asset classes I could. You're in it for the long term, so try not to be too impatient if their value dips from time to time. Over 20/25 years you are very likely to make large gains unless there's some cataclysm that we can't predict.

Normally, people gradually move their gains from riskier (and usually more profitable) investments into safer ones e.g. bonds, as they get closer to retirement.

Nothing can be guaranteed but unless you do something silly, like put the lot into one single investment or asset class, you should be nicely set up. Don't have sleepless nights!

I would urge great caution about the OP investing in a SIPP as he is clearly a novice/virgin investor. SIPPs are really for those who are going to use all the functionality of them, which is really the only way you are going to justify the high charges. As it is clear the OP has little/no idea of investment strategies/asset allocation/SIPPs so I think it is unwise to think of SIPPs now as he will be paying high charges to do basic investing which can be done far cheaper outside of a SIPP>

cheerfulcat

Mortgage_&_debt_free wrote:

SIPPs are really for those who are going to use all the functionality of them, which is really the only way you are going to justify the high charges. As it is clear the OP has little/no idea of investment strategies/asset allocation/SIPPs so I think it is unwise to think of SIPPs now as he will be paying high charges to do basic investing which can be done far cheaper outside of a SIPP>

While I'm inclined to agree that a novice investor needs to learn more before investing directly in shares, it is incorrect to say that [all] SIPPs have high charges. And they are perfectly suitable for just buying shares and funds.

brasso

I've had a Hargreaves Lansdown SIPP for about 18 months now. I knew nothing at all about investing when I opened it. Yes, I've made mistakes and will no doubt continue to do so, but I've also learnt a lot, and hope to learn a lot more.

Unless you do something mad, like pile all your money into one AIM stock, I don't see that you can do much damage over the long term. As long as you have a few years until retirement, anyone with a bit of sense and who takes the time to read and learn is likely to do no worse than the average tipster or fund manager or IFA. Indeed, because it's my own money, I suspect I'm a bit more careful with what I do with it than the average third-party manager.

EdInvestor

Try working out your attitude to risk first.Then you'll be able to think about how to allocate the money - which proportion into which type of asset.

This calculator plus explanations may help.

There's one difference with the US, in that in the UK rather have have all the low-medium risk chunk in bonds, we tend to put some in property funds, which have a similar level of risk.

But otherwise the calculator works quite well.At the higher risk end, you can also consider commodities funds for a small sliver. Note that you should include other assets (eg cash savings) in the total as it gives an overall picture, not just focussed on the bit you want to invest now.

Cannon_Fodder

As the OP seems shy of risk and time is on his side...

I would say don't forget to have a Cash ISA - 8% at Alliance and Leicester, £3000 now and again in April would be £6000 "emergency" money set aside.

Can still do £4000 now and again April into Share ISA for first fund choices.

6% on the balance in a savings account for a year while getting his head round the options, rather then throw it all into funds in one hit (when this month could still be a wobbler) might be considered.