What are the best forms of investment?

AndyPK

2500 is not a lot. So you want something guaranteed and good.

ISA RAtes are very poor at the moment. Yes put some in before April.

Do you have a Job?

dunstonh

100saving wrote: »

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

When you post on the internet, you run the risk of getting wrong responses. If you base your decisions on such posts, you end up risking a heck of a lot. The above post is a good example of someone that doesn't know what they are doing trying to give advice to someone else that doesn't really know what they are doing. A recipe for disaster.

It says don't sart a pension. It will never pay what you need. That is wrong. A pension does not make or lose money. It is a container for your money where you decide what it invests in. It is the investments that make or lose the money. Not the pension. Hold the same investments outside of a pension, say in an ISA or directly, then you get the same rate of return. So, you could even use the savings account option inside of a pension. In that respect, the poster contradicts themselves by saying you should use savings but not pensions.

However, lets look at the savings option and assume its not in a pension. Savings accounts tend to pay interest that will have periods over time that will exceed inflation and be less than inflation. Historically, you would expect to lose money in real terms over the long term by using savings. So, this poster is telling you to use an option that is guaranteeing that you will have less money in the future. So, it is placing the money in an area that gives you inflation risk and shortfall risk

By using investments, you do not know what returns you will get. There will be good and bad periods but as it is long term, you can look to average those out. The last decade has been one of the worst in investment history. Yet, even the bog standard investments that are typical on old fashioned or basic investments have still exceeded cash savings accounts. If you look at discrete periods within that 10 years there were some really bad periods when it wouldnt have done. However, cumulatively they would still have made more. Plus, if you were paying monthly, you would have benefitted from those low periods where you ended up buying more investments for your money as their price was lower. Investments give you investment risk, shortfall risk and inflation risk. However, whereas cash guarantees you inflation risk and shortfall risk, investments only may be subject to those.

One of the most common reasons that people have the opinion that pensions dont pay out what you need is that the person only every paid peanuts into them. It is a common opinion held by many. However, when you actually look at their pension planning, it becomes obvious why. You get scenarios like starting £30pm in 1988. That actually wasnt bad for 1988. However, in 2012 they are still paying £30. They failed to ever increase it to keep up with inflation. So, over 25 years they only paid in £9000. Yet they have this perception that the £9000 they paid would have paid them something like £5000 a year every year for life. They are getting peanuts because they paid in peanuts.

Things you can learn about investing and asking others is to judge their responses. If someone mixes up tax wrappers and investment assets then you know they do not know enough to give you advice. Someone that tells you to never invest on the stockmarket as they lost money is another thing to look out for. It is actually difficult to have lost money on the stockmarket unless you went into high risk investments, badly invested (e.g. no diversification and picking non-conventional investments) or pulled out at the wrong time not understanding that investing is long term. Typically, the people that tell you not to invest have a history which may include investing above their risk profile and not understanding that there will be periods of loss and that you need to average out (so they pull out and create a loss).

Everybody needs cash savings. You need to cover those short term periods (upto say 5 years). You need to cover unexpected emergency spending. Long term planning though using cash is actually higher risk than using a mixed asset spread.

jimjames

100saving wrote: »

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

Quite misleading advice when you know nothing about the OP and their situation. Out of interest how do you expect to be able to live when you retire with no pension income? The government may give a minimum but I'd rather be in the position to choose what I want to do not have to survive on £50 per week.

If they have a company pension available it is worth joining and very soon everyone will have to do so with auto enrolment.

Based on the fact they are 24 they have a long time until retirement. The earlier you start a pension the less you should need to contribute as the power of compounded returns takes effect.

Suggesting all money should be in a cash ISA earning paltry rates of interest - not a nice sum based on the the current low interest environment. Age 24 once you have your 3-6 months cash buffer in place it is certainly worth looking at long term savings which could include S&S ISAs not just cash.

jabba42

The best investments for me have been starting my own businesses. Not for everyone but if you get it right it gives you something to get up for each day.

innovate

100saving is a keen 22 year old who would like to make a million (probably in today's money) in 28 years by saving £950 a month. Hopefully they figure out before long where they are going wrong.

https://forums.moneysavingexpert.com/discussion/4642017

srcandas

jabba42 wrote: »

The best investments for me have been starting my own businesses. Not for everyone but if you get it right it gives you something to get up for each day.

Well it doesn't need to be a business but investing in your ability to earn while enjoying it has to be a top priority for most

For sure all the good stuff above about pensions is true (apart from "don't start a pension it will never pay what you need") but unless you have access to free money for your pension (employer's contribution, but even then possibly ) your priority should be self development. Anything that makes you more employable or increases your income.

Money you have tied up in a pension product is not accessible until late in life. However if you lost your job but could pay to be retrained or maybe move to a better job location - an accessible amount of dosh would good

I guess I'm saying it is about life planning and investments are just one part at your age. But that said you are obviously a sensible guy who is willing to ask so good luck to you :beer:

YoungBusinessman

innovate wrote: »

100saving is a keen 22 year old who would like to make a million (probably in today's money) in 28 years by saving £950 a month. Hopefully they figure out before long where they are going wrong.

https://forums.moneysavingexpert.com/discussion/4642017

Noticed the OP from this other thread. Still forms a varied discussion with a thread like this. Apart from Lokolo (sp?) it seems noone on this forum under 25 knows anything about saving

dunstonh

innovate wrote: »

100saving is a keen 22 year old who would like to make a million (probably in today's money) in 28 years by saving £950 a month. Hopefully they figure out before long where they are going wrong.

https://forums.moneysavingexpert.com/discussion/4642017

Being keen is good. We should encourage all 22 year olds to be keen. What appears to be lacking is common sense, research and flawed opinions that are not based on facts.

I think I just described the average Daily Mail reader! (or writer)

atush

100saving wrote: »

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

rubbish, pensions get tax relief and ISas don't. Pensions use your personal allowance, ISAs don't.

Pensions do pay what you 'need' if you put enough into them and if you put in enough to use your personal allowance, they will be on the same tax basis as ISA income. They only fail, when you fail to put enough in.

you should have both a pension (workplace is Always best as you get free money) and an ISA. there is NO free money with an ISA.

srcandas

I think most people see the attractions of pensions but we also understand why someone below the age of 25 might have trouble with the concept of being 60 or so (as no doubt 55 will not be he limit in their life time).

Many younger ones realise they will need a deposit for a house, possibly money to start a business or buy a franchise, or to take three years out at the age of 28 when they realise a university course would give them a new and better start.

Imagine the frustration of having that money tied up in a pension?

Of course it is not black and white. No one is suggesting that they put all their money in a pension. But nonetheless when I bought my first property it took every penny I had and more. But breaking the bank not only put me on the housing ladder but totally changed my atitude to life. Had I had money in a pension that stopped me I would have been very pi55ed off:(

But equally it is not only about accumulating money but about getting into the saving/investing habit.

So suggestion to HMGov. Why not have some sort of combined ISA/pension product for those up to say 25. They get tax relief and employers can contribute. But they also get an escape route, perhaps with some penalty on the tax relief.

Haven't thought out the details but there are under the right (but not foreseeable) circumstances situations when a pension before 25 makes no sense at all.

If a 25 year old has ISAs accumulated they can invariably dump them into a pension so the loss of tax relief doesn't stand up. It is only employer contributions where they exist that is the problem.

Just a sunday morning thought :beer: