Options for a £20,000 investment beating inflation?

tomleafs

Hi all,

I've recently finished University whilst managing to save around £20,000 from taking a year out as well as working part-time while studying. Currently half of the money is invested in a cash ISA (3.1%) and the other half in Premium Bonds. These investments barely keep up with current inflation*. I have researched into investing in the stock market or saving for a deposit for a house but realise I don't know nearly enough about either yet to commit any money.

Any advice regarding the types of investments that are likely to keep up with / beat inflation would be appreciated.

*I took the CPI from the ons.gov website (UK).

xylophone

http://www.moneysavingexpert.com/savings/inflation-linked-savings
might be worth a read.

Reaper

tomleafs wrote: »

...the other half in Premium Bonds. These investments barely keep up with current inflation

The premium bonds won't keep up with inflation. The average payout is currently set at 1.5%. There is a calculator and more details here:
http://www.moneysavingexpert.com/savings/premium-bonds

kidmugsy

tomleafs wrote: »

Hi all,

I have researched into investing in the stock market or saving for a deposit for a house

Many people would view the two as mutually exclusive, unless you plan to buy the house far in the future. Shares go up and down but you probably would prefer that your deposit money only goes up.

If you think you might be buying a house in 5 years time, keep on the alert for the next provider to offer an index-linked Cash ISA: Birmingham Midshires offered a good one a couple of months ago.
Next year perhaps ns&i might issue their excellent Index Linked Savings Certificates again.

If you think you might be buying a house in 10 years time you could always consider a Stocks and Shares ISA invested in an index-linked bond from Severn Trent.

jgh

tomleafs wrote: »

I've recently finished University whilst managing to save around £20,000

Most people would that those two as mutually exclusive. I left university £4,500 in debt, and that was in 1990.

R_P_W

Take your money out of premium bonds and get them in an ISA or highest % savings account you can. Maybe put it away for a year or two if you won't be looking to buy a house in the immediate term

TDM850

tomleafs, RPW is right re his comments on an ISA. Another idea - you also have an annual stocks and shares ISA allowance of £11,280. You could put £11k into a Stocks and Shares ISA and buy blue chip stocks within the tax shelter that pay a hefty dividend yield, (e.g Tesco, Vodafone etc). You could buy £11k worth of FTSE100 stocks with an average dividend yield of 5% - that's a return of £550 pa, which you can either reinvest into stock or leave as cash. That return would probably outstrip the yield from investing the full £20k. FYI Traders Own offer a Stocks & Shares ISA, no fees, you simply pay £6 per trade for every stock you purchase in the ISA wrapper. Info here

bigadaj

TDM850 wrote: »

tomleafs, RPW is right re his comments on an ISA. Another idea - you also have an annual stocks and shares ISA allowance of £11,280. You could put £11k into a Stocks and Shares ISA and buy blue chip stocks within the tax shelter that pay a hefty dividend yield, (e.g Tesco, Vodafone etc). You could buy £11k worth of FTSE100 stocks with an average dividend yield of 5% - that's a return of £550 pa, which you can either reinvest into stock or leave as cash. That return would probably outstrip the yield from investing the full £20k. FYI Traders Own offer a Stocks & Shares ISA, no fees, you simply pay £6 per trade for every stock you purchase in the ISA wrapper. Info here

Reasonable in theory but surely with the sums involved you would end up with a lot of small holdings to achieve diversification and avoid a bp, and then the trading and handling costs become uneconomic, a fund would be better I would have thought.