Starting off investing

lost_in_the_woods

Hi guys and gals

I am looking to start off investing small amounts (about £70-100 a month) mostly buying indexes but also a small amount (<10%) in individual shares in companies.

A bit of background…
I am 23, graduated last summer, have no debt other than student loan, no dependents, earn just under £40k and save significant amounts each month in an ISA. Just got an 18% pay rise (to put me up to £40k) so could put more in each month but want to just dip my toe at the moment so keeping most of my money in cash.

I am looking for advice, are my plans idiotic? Would you recommend a different approach? Which websites would you recommend using? If I decide not to buy individual shares would the recommended website change? Any other recommendations?

Thanks for what I’m sure will be great advice!

droopsnoot

Personally I'd have a look at Motley Fool and Monevator web sites, I'm sure there are many others too. I find the MF forum a bit difficult to navigate, but there's a lot of informative articles as well as the forum.

gadgetmind

lost_in_the_woods wrote: »

save significant amounts each month in an ISA

Cash ISA or S&S?

I am looking for advice, are my plans idiotic? Would you recommend a different approach?

Not the trackers part, but the individual shares part is risky for two reasons. 1) Unless you're buying in chunks of >£1k and ideally >£2k, the trading fees start to bite. 2) You probably don't yet know enough about investing to be able to evaluate the current and future value of companies (does anyone, really?) and will therefore be prone to go for "shiny things" that others tip.

Which websites would you recommend using? If I decide not to buy individual shares would the recommended website change? Any other recommendations?

Yes, read some books first.

Try "Smarter Investing" by Tim Hale and "The Intelligent Asset Allocator" by William Bernstein. If you polish those off too quickly, try "The Intelligent Investor" by William Graham.

I have listed these books in age order and the latter one is *very* old. I got a lot from it for this very reason: it's good to see how every decade has faced different scenarios and has had to decide how to invest without being able to predict the future.

After that, I can recommend both the Monevator blog and the Motley Fool forums. Both have a very different feel.

You're in a splendid situation, and if you do your research before acting, stand to do very well.

BTW, does your employer offer a pension? You're not yet paying higher rate tax, but could be quite soon, and many employers offer good pensions into which they also contribute. This should always be top of your list of places to put money.

lost_in_the_woods

I have read numerous articles from both of the websites and more over the last few months but there seems to be very little of actually how to invest. And of cause as soon as an article is posted it is out of date.

xylophone

When you refer to your ISA, I am assuming that you mean a cash ISA.
With the £100 a month you might be better off investing monthly into a unit or investment trust within an S&S Isa.

Hargreaves Lansdown offer a wide choice of OEICS and a monthly investment scheme. http://www.hl.co.uk/investment-services/isa

Alliance might be better for Trusts.

http://www.thisismoney.co.uk/money/investing/article-1724731/The-best-ways-buy-hold-investment-trusts.html might be of interest.

gadgetmind

droopsnoot wrote: »

I find the MF forum a bit difficult to navigate

Understatement! It's really, really nasty, but I think this has been part of what's kept it as the preserve of serious private investors. There are also a few professional fund managers on there, and people who made their wodge in that industry.

I can't think of anywhere that I could have picked up so much about fixed interest, debt hierarchy, private equity, and much more, because most other investing web sites never get far beyond mainstream equities.

gadgetmind

lost_in_the_woods wrote: »

but there seems to be very little of actually how to invest.

What do you mean by "how to invest"? That part is easy!

The big choice: tax wrapper. You need to understand the different rules regarding pensions, ISAs and unwrapped investments.

The next level: Asset allocation, which means equities, bonds, cash, property, gold, etc.

Down one more: How to hold these assets, so trackers, Investment Trusts, OEICs/UTs. ETFs, or individual equities.

Phew, we're at the bottom: Where to hold them, which means choosing a platform. You can't do this without having done the bits up there ^^^.

lost_in_the_woods

gadgetmind wrote: »

Cash ISA or S&S?



Not the trackers part, but the individual shares part is risky for two reasons. 1) Unless you're buying in chunks of >£1k and ideally >£2k, the trading fees start to bite. 2) You probably don't yet know enough about investing to be able to evaluate the current and future value of companies (does anyone, really?) and will therefore be prone to go for "shiny things" that others tip.



Yes, read some books first.

Try "Smarter Investing" by Tim Hale and "The Intelligent Asset Allocator" by William Bernstein. If you polish those off too quickly, try "The Intelligent Investor" by William Graham.

I have listed these books in age order and the latter one is *very* old. I got a lot from it for this very reason: it's good to see how every decade has faced different scenarios and has had to decide how to invest without being able to predict the future.

After that, I can recommend both the Monevator blog and the Motley Fool forums. Both have a very different feel.

You're in a splendid situation, and if you do your research before acting, stand to do very well.

BTW, does your employer offer a pension? You're not yet paying higher rate tax, but could be quite soon, and many employers offer good pensions into which they also contribute. This should always be top of your list of places to put money.

Thanks

Sorry I was referring to cash ISA but when investing I want to use my S&S ISA (that is possible isnt it??).

When investing in individual shares I was going to stick with my industry (oil and gas) and maybe frolic with utilities (there is a water company I fancy) and consumables (e.g. Unilever), maybe not the most inspiring and exciting picks. But if the fees put a stop to this I will have no problem staying with trackers.

I realise I am in a fortunate financial situation (unless you believe “more money more problems”) but when doing my research the main thing I have taken is it takes time to grow so I would like to start soon.

Yes I am in my company’s pension plan, sorry I should have included this. I put in 5% and my employer puts in an extra 9.5% (which is the max they will put in).

Although I have read a lot online I haven’t read any books yet so I will look for them. Thanks.

So which website would you recommended to buy trackers in an ISA, I don’t intend to trade regularly (maybe 3 times a year?), which will be cheapest? HL? XO? Iii? An other?

Thanks again.

gadgetmind

lost_in_the_woods wrote: »

Sorry I was referring to cash ISA but when investing I want to use my S&S ISA (that is possible isnt it??).

Yes, but note that you can put max £5640 into a cash ISA this tax year and £11280 minus whatever you put into a cash ISA into a S&S ISA. You can transfer cash ISAs into S&S but not the other way around.

When investing in individual shares I was going to stick with my industry (oil and gas)

Knowing the industry can help. I invest in tech shares, and spend more time reading through the key patents of high growth tech companies than is healthy. As with everything, the more you put in, the more you get out, but it can still all go wrong ...

maybe frolic with utilities (there is a water company I fancy) and consumables (e.g. Unilever), maybe not the most inspiring and exciting picks. But if the fees put a stop to this I will have no problem staying with trackers.

I suspect the fees will be an issue, but note that I've done enough reading to be convinced that trackers are a great option. Others disagree.

I realise I am in a fortunate financial situation (unless you believe “more money more problems”)

Only if you spend it on stupid things and/or let it turn you into a complete tosspot. Both of these are serious risks, but ...

main thing I have taken is it takes time to grow so I would like to start soon.

This gives me a lot of confidence that you'll get it right.

Yes I am in my company’s pension plan, sorry I should have included this. I put in 5% and my employer puts in an extra 9.5% (which is the max they will put in).

That's very good.

So which website would you recommended to buy trackers in an ISA, I don’t intend to trade regularly (maybe 3 times a year?), which will be cheapest? HL? XO? Iii? An other?

Monevator is the best place to get this info. I currently use BestInvest to hold a range of Vanguard trackers, but this is because my holdings are such that their £60 annual fee is noise. My wife puts £300 pcm into a single Vanguard LifeStrategy tracker via HL as the £24 fee for this works better for her.

lost_in_the_woods

gadgetmind wrote: »

What do you mean by "how to invest"? That part is easy!

The big choice: tax wrapper. You need to understand the different rules regarding pensions, ISAs and unwrapped investments.

S&S Isa if possible

The next level: Asset allocation, which means equities, bonds, cash, property, gold, etc.

As I am young and only investing small amounts with most of my excess money going to my cash ISA I would be putting it all in equities.

Down one more: How to hold these assets, so trackers, Investment Trusts, OEICs/UTs. ETFs, or individual equities.

This is where I am not sure, but with the small amounts I am looking to invest individual shares seem not economically viable.
I want to be able to track various markets around the world and specific sectors.

Phew, we're at the bottom: Where to hold them, which means choosing a platform. You can't do this without having done the bits up there ^^^.

I also don’t know where to hold them.

lost_in_the_woods

gadgetmind wrote: »

Yes, but note that you can put max £5640 into a cash ISA this tax year and £11280 minus whatever you put into a cash ISA into a S&S ISA. You can transfer cash ISAs into S&S but not the other way around.


I will be maxing out my Cash ISA this year (and hopefully most years in future)

Monevator is the best place to get this info.

Ok I’ll check it out. Thanks.

I currently use BestInvest to hold a range of Vanguard trackers, but this is because my holdings are such that their £60 annual fee is noise. My wife puts £300 pcm into a single Vanguard LifeStrategy tracker via HL as the £24 fee for this works better for her.

These fees seem a lot if I am only investing about £1k a year.