What are the best forms of investment?

Phoenixica

Hey everyone,

I'm new to this forum and I am looking for some guidance in identifying the best place(s) to invest my savings as a 24 year old with no kids. I'm not trying to be lazy in asking this. Since I left home 3 weeks ago I've obsessed over what to do with my savings and have been reading so much about how to make the most of money, but the problem with having so much choice is the indecision it creates.

I have £2,800 in total. The investment opportunities I've identified are:

- Switch Current Account: According to MSE, First Direct offers the best acc as you get £100 as a new customer and 6% in-credit interest if you pay in £1,000 per month (from memory). The issue is the £1,000 per month... can someone deposit £1,200 the first month, take £1,000 out, and use it as next month's "wages"? And can they close their account straight after getting the £100 with no penalty?

- Get a credit card: I've got a free credit check from noddle.co.uk (3/5 no CIFAS) and am contemplating getting a Tesco Clubcard Credit Card in order to build a credit history, get the extra clubcard points and free finance. Is this worthwhile if I know I'll always make the repayments on time? And how do they cross-reference your income?

- Bonds: Are HM Treasury backed bonds a much better option than a current account? I plan on not touching the bottom £1,000 of my total savings so was thinking the NS&I post office bond for this?

- Peer to Peer Lending: I've recently discovered funding circle, Zopa and Ratesetter. FC looks the best but can you only secure the best loan parts through offering a large investment? And do you lose everything you invest in a single company if it fails?

- Cryptocurrency: Online currencies such as bitcoins have generated massive interest and their value has skyrocketed in the past. Are these markets too volatile for any proper investment? And does it look like their value is only going to plummet from this point?

- Precious Metals: Where do you actually buy them from and at a good price? Is it too late to invest in gold and is silver a good option?

- Buy Low, Sell High: In a recession more items are sold under market value so I consider whether I could make a profit by finding these items and selling them on at their market values or does this never work?

- Buy to lease: I figure I could make money in investing in an expensive machine and get insurance then lease it to those who only want it for a single use.

- Invest in skills: I already want to learn many things like computer repair, so if I buy faulty computers at a low price and fix them up then sell them on for market price I'd gain the maximum benefit.

From what you have learned over time in MSE and experience, which forms of investment mentioned above are best?

Thank you x

Totton

Hi,
Well done on getting started early with savings and thoughts for the future. For me, £2,800 suggests that you should start with the basics and opt for a savings pot of six months earnings and only then begin to do something else. The next step for me would be to start a cash ISA or a Stocks & Shares ISA depending on your risk tolerance. At your age I would go for the Stocks ISA and begin investing in a Global fund or similar.

Peer to peer lending I'd steer clear of as there is risk albeit not high, you can always go into p2p at a later date. Crypto currency I'd also steer clear off, just stick to the basics until your safety nets are in place imho.

Above all else, keep things simple and remember the power of compounding to grow your pot of wealth.

HTH,
Mickey

bigadaj

My heart sank a bit when you mentioned being lazy, but to be fair you've put quite a bit of thought into it.

Your post flags the question about personal investment advice, and whilst people will vary in terms of age, income, knowledge, background and attitude to risk then the process is similar for many people.

Initially cash is king so keep saving. In the bizarre economc world we currently occupy then savings accounts are frequently not the best place for savings! Regular savings are good, and you can have more than one so long as they are with different banks, which is a way of cycling money to get a higher rate. Current accounts pay better than savings so get accounts with nationwide and or Santander, hbos, lloyds etc depending on the restrictions and your requirements.

Once you have more than say 5 or 10k then you have an emergency fund to cover illness, redundancy, emergencies etc.

Investment then comes as an option, study required but following a life stratgey type investment could be good initially. This also depends on whether you are looking for a house, as if so then most would advise saving this separately as you want to access this in a couple of years.

Do you have access to a pension though work, if so its normally worhwhile investing teh maximum, though there are exceptions and post on here for opinions on your specific scheme with details.

Credit card paying off monthly is very useful, don't carry a balance as the interest is high but this helps your credit profile and means you have access to better mortgage rates, loans etc.

If you have specilist skills or interest then this can be a lucrative sideline, but again do research and there may be some risk if things don't sell or work out.

atush

Thinking about money and your future is a great start.

Most of your ideas are too advanced for now, and you haven't mentioned goals.

Getting a CC is a great idea if you pay it off every month. ones that give you freebies like clucard points are good, as are cashback ones.

Save 3-6 months spending in Cash. This can be in an ISA or not, as long as it is easy access. do this now.

then you can look to other savings and investments. but generally investments are for longer term savings of over 5 years. If you are saving for a house deposit and expect to buy before 5 years, I'd stick to cash. Or if you aren't sure in a mix of Cash ISAs and S&S isas.

For now, until you are more experienced i'd give short shrift to crypto currency, peer to peer and PMs.

dunstonh

You have just £2800. As mentioned above, a number of the things you list are too advanced or required too much input on an ongoing basis or have too much risk for the amount of money you have.

There is no reason to ignore conventional and look at the unusual. The simple investment options may be boring to some but they do their job and will still be there in years to come. The weird, unusual and unconventional tends to be where all the problems come.

grizzly1911

Ones that make a profit.

AlwaysLearnin

I'll echo points above.

Build up a decent cash buffer, and in the mean time whilst that builds to a good level, read up on things like investments, S&S ISA's etc - loads of tips in these forums. Also look in to any pension that your employer may provide so you're making the most out of any contribution they may offer

As previous poster has said, without wishing to dismiss the cash ISA option, we're in the unusual situation at the moment where some current accounts can provide better rates, even after tax, albeit they can require certain funding and/or direct debit conditions to be met, and the higher rates are sometimes only be for an offer period. Unfortunately it's not a great environment for savers at the moment, so we're having to work a bit harder for our money!

Just to point out re your point on the First Direct acct, the current acct doesn't give any credit interest. The 6% you refer to is their regular saver account that having the current account gives you access to, but you need to commit to regular amounts each month for a year for that.

Well done on the first step of getting in the savings mindset. Good luck for the future

AndyPK

With that amount a Lloyds vantage or Santander 123 would be the best rate.

Santander want £500 in a month but will give cash back on gas elec comms bills.

bigfreddiel

1 start a pension

2 isa lifestrategy 60% acc fund

and thats it boring, simple and just right for lazy people - i'm the definition of lazy and wish someone had told me this when I was 24

ignore all other advice that you can't understand or goeson beyond 140 chacaters

cheers

fj

100saving

don't start a pension it will never pay what you need.

just put it all in this year isa and keep building that up and use other saving accounts when this years isa is full. then you can just fill it up every year on the first day of the tax year from the other saving accounts. do this for 5 years and you could earn a nice sum just from the interest

bowlhead99

100saving wrote: »

don't start a pension it will never pay what you need.

There is probably no need to set up a private personal pension of your own, given the money will be locked away for 30 years and you are likely not a high rate taxpayer as yet (and even if you are, you probably have other life goals in the next 10-20 years such as buying a house or supporting future family etc.).

The exception is as bigadaj mentioned, if you can join a pension scheme through work - these are often no-brainers to join, because the company are willing to put free money into the pot on top of your normal salary, and if you don't sign up and put a bit of your own money into the pot, you lose the free stuff. In that case it's worth having it instead of not having it, even if you can't touch it for a few decades - your future self will thank you for it.

I would ignore peer-to-peer lending, bitcoins and shiny metals etc etc. As Dunstonh says, you have (only) £2800. When that's your monthly or weekly net salary and you have a large emergency fund and some traditional investments and want for nothing in your own life this year or next, you can start thinking about i) making unsecured loans to people you dont know; ii) speculative investments in virtual currency which can halve or worse overnight; iii) shiny metal which produces no income and can easily fall in value and only has any real use as a 'safe haven' in turbulent financial markets (for the moment you don't even have any other assets like shares or bonds in the markets anyway).

Similarly, buying an asset to lease out: For that money you could be thinking a photocopier, a quad bike, a bouncy castle, one very dilapidated fishing boat or van, or a bungee jump kit. Though any of them might generate slightly more income than they cost to run in terms of maintenance cost, they all require supervision i.e. you manning them or running customer service, which is time you could spend instead getting a proper career which gets you towards the long term 2800 a week goal.

Invest in skills is good. Ideally invest cash on books or equipment or time off to study something with a meaningful qualification or future-proof skill. I wouldn't bother trying to take up computer repair as anything other than a personal hobby in your own time for your own fun and satisfaction. It is not a business model. The fact I could install a new motherboard and graphics card 20 years ago before enerything was plug-and-play, is increasingly value-less now that everything is plug-and-play, cheap to replace or disposable, and my two-year-old Galaxy S2 phone has more computing power than a room full of 15-20-year-old computers, while having zero user-serviceable parts. On an iphone, you can't even replace the battery or add memory, and consumers flock to them in droves.

National Savings bonds? They are OK if you find one paying a decent interest rate (i.e. better than high street) but for that sort of money (i.e. under £85,000) they are not any safer, practically speaking, than any mainstream bank account. And just because you hope not to need the last 35% of your savings, don't lock it away such that you lose instant access to it and might have to borrow and pay interest on a credit card or overdraft to handle some unforseen circumstance. On a thousand pounds, a percent of interest is a tenner. Having instant access to a thousand pounds, as and when needed, as someone who's just left home and has yet to experience much of life in the big wide world, is much more valuable than a tenner in one year's time.

What does that leave? You and a few month's rent in your pocket or the running costs of a car for a couple of years while you commute to work and go up the career ladder knowing you have something away for a rainy day. Put the money in an instant-access ISA or a high interest current account. Once you have a couple of years' worth of ISA allowances maxed out, maybe come back here and lets talk.