Just starting, completely overwhelmed by options...

cybercook

Hi,

I'm just starting to learn how to invest money and after a couple of days of study I'm completely overwhelmed by the number of options available.

I read people recommending to start with a cash ISA, however giving today's interest rates it doesn't seem to me I'll be able to "grow" my initial investment (I've 3-4K GBP) but rather only limiting the "erosion" caused by the inflation. I don't want an explosive grow, I'll be happy to increase it about 4-5% per year.

I've been studying on bonds and I quite like the idea as they're not as risky as shares but they may pay better interests than a ISA or a saving account. In particular I'd like to invest in fixed corporate bonds with a close maturity date. Unfortunately I still haven't figured out exactly how to buy them and at the same time deposit the interests gained into a Stock & Shares ISA. Not even sure this is the most sensible approach, I'm a bit confused.
I first looked at HSBC since that's where I have my money but I find ridiculously expensive to invest with them (investments.hsbc.co.uk/pdf/41947-invest-direct-kfd.pdf, sorry I can't post a link as a new user). Why do I have to give them £39.95 just to place a deal ? is that normal ?
I've seen other stock brokers but they're either too expensive or have abysmal reviews (selftrade.co.uk...). It seems all the money I could make with my small initial investment will be eaten away by charges...

Looking for cheaper options I discovered websites like markets.com which has raving reviews but apparently uses a system called CFD (Contract for difference) and although they have a page saying you can trade bonds, I registered with a demo account and you actually can't (or I haven't figured out how to do it...). It seems they mostly deal with shares, which I'd like to avoid for the moment as I consider them too risky giving my current level of financial knowledge.

So now I'm no longer sure whether bonds are a good option for me and I'm lost in the other myriads of possibilities.

Can you recommend a strategy to grow a small capital (3-4K) by 4-5% per year without wasting all the earnings in charges ? Does such strategy even exist ?

Thanks in advance.

P.S.of course everything I said above may be completely wrong, please correct me if that's the case.

fiesta04

My advice is DO NOT INVEST YET!!

Use Savings Accounts, or even better the new 5% Nationwide Account for £2500 of your money. Plenty of threads on it.

Read a lot more about investing, do not rush into it and if you don't fully understand it don't do it. Money can be lost very easily.

Please think carefully.

F4

takesyourchances

Take your time and look at your options, the passive approach may suit you if you are prepared to give it a long term view, it does not have to be complicated and you can mix between bonds and equities.

The Vanguard Life Strategy topic on here maybe of good interest to you to read through.

https://forums.moneysavingexpert.com/discussion/4392271

At present I have the Vanguard Life Strategy and a couple of extra funds having started investing this year in a S&S ISA, I also recommend this book and I am 3 quarters of the way through it and it is an excellent read on the "passive" approach. Smarter Investing by Tim Hale.

http://www.amazon.co.uk/Smarter-Investing-Simpler-Decisions-Results/dp/0273722077

Also Monevator is a great web site.

http://monevator.com/

Review your options and the rest of your financial circumstances and form a decision. At the start there is a lot of "noise" to filter out and I am comfortable with the passive approach over time.

This forum is a great place to add to your learning and hope this bit of information helps having recently started myself with an S&S ISA for passive long term investing.

I will leave you to more advice from the more knowledgeable posters than me

Good Luck!

merlingrey

fiesta04 wrote: »

My advice is DO NOT INVEST YET!!

Use Savings Accounts, or even better the new 5% Nationwide Account for £2500 of your money. Plenty of threads on it.

Read a lot more about investing, do not rush into it and if you don't fully understand it don't do it. Money can be lost very easily.

Please think carefully.

F4

Losing money is part of investing you have to lose money and be able to handle it and learn from mistakes, if you cannot handle it then you don't do it.

The younger you get involved the better, it's a good way of finding out if you have thick enough skin and a stomach for it.
If you cannot handle a £500 loss today how will you handle a £50k loss in 20-30 years when you got more to lose?

By all means read some books first and don't invest in individual shares yet, but getting money in trackers and managed funds to start.

anotheruser

I'm like you and just starting out.

As I don't immediately know what will be the best for the future, I will be changing my savings account (HSBC flex saver at 0.75% - WOW!) to a 2% - 3% ISA account with someone.

I can then use the 2013 year to look at what is best. Because I'll open the account in a couple days then I'll be able to take advantage of the change in allowance years, plus I won't rush into doing anything else with it that might loose me money.

I was looking at Santander's 2 year fixed at 2.5% as I don't think I will need my investment for two years.

I don't really want to use any sort of current account scheme like Santander's 123 account because that means I have to mess about with direct debits going in and out and moving money all around for very little gain. I already do this with Halifax's Reward current account because I can move my £1000 out the next day but retain the £5.

Saying that though, the Nationwide 5% did interest me, but then I will have yet another account and I'd be splitting up my savings. From what I understand, if I put £2500 in a Nationwide account and left it, at the end of the 12 months I would be £125 better off, providing I pay in £1000 a month.
This is do-able as I can use the £1000 I pay into my Halifax account so it would go something like HSBC > Halifax > Nationwide > HSBC all within 5 days. A lot of work but for £125 and a few minutes setting up the DD then it might be worth it.

cybercook

Thanks a lot for all suggestions.

I'm not afraid of losing money, but I won't be able to handle it well if I lose them because I made silly decisions driven by a lack of knowledge rather than losing them because of unfavourable market conditions.

I guess starting with an ISA just now (before April) and then figuring out what to do in the next few months does actually makes sense.

BTW I'm reading the FT "Investing For Income" book, but I'll look into that "Smarter Investing" suggested too, from the table of contents it looks pretty useful.

This forum is great, thanks again.

psychic_teabag

anotheruser wrote: »

I don't really want to use any sort of current account scheme like Santander's 123 account because that means I have to mess about with direct debits going in and out and moving money all around for very little gain. I already do this with Halifax's Reward current account because I can move my £1000 out the next day but retain the £5.

Are you aware that Halifax are changing soon - they will require 2 monthly D/D to qualify for the £5 reward too. (But they are reducing the funding requirement to £750 per month.)

Strictly, there's no requirement for the money to be in the account overnight - many here do in and immediately out again, though I do tend to leave it in overnight.

Santander 123 gives an added benefit of cashback for specific categories of D/D so (assuming you have to pay them anyway) it's easy enough.

Lloyds and BOS vantage current accounts give good interest without the requirement of active direct debits. (But still the monthly money shuffling - just include them in the chain you already have, or use a parallel concurrent chain.)

JohnRo

You haven't lost anything unless you sell your investment for a loss, the words eggs and basket come to mind.

Collective investment vehicles such as, funds, investment trusts and the like, reduce the risk of picking a company that fails and a globally diversified portfolio of such vehicles across different asset classes reduces the risk further, while giving you exposure to the fluctuating fortunes of those various markets around the world.

atush

The reason people say to start with Cahs ISAs (despite the rates) is you need an emergency cash fund. For purchases, emergencies. So you aren't forced to sell investments that may currently be showing a loss.

So do open the cash isa first. Then look at investing in funds. Later, look at shares.

IronWolf

Read the Intelligent Investor too by Ben Graham, very good book which goes into investor psychology.

Just one thing to note, you cant buy corporate bonds close to maturity in an ISA.

EKEA

psychic_teabag wrote: »

Are you aware that Halifax are changing soon - they will require 2 monthly D/D to qualify for the £5 reward too. (But they are reducing the funding requirement to £750 per month.)

Thanks for the reminder!