How to fall in love with saving money

atush

Only use a Sipp if you will be using all the bells and whistles they provide (such as say single shares, and commercial property) as some personal pensions can have cheaper charges (if you intend to hold mainly funds and bonds etc).

cathybird

atush wrote: »

Only use a Sipp if you will be using all the bells and whistles they provide (such as say single shares, and commercial property) as some personal pensions can have cheaper charges (if you intend to hold mainly funds and bonds etc).

Thanks atush. I should also see if there's the option of putting more money into the workplace pension - I thought I'd maxed out the amount I can stash away each month but they wrote recently to say I could save more in it, so I could check that out. It offers a limited selection of funds but does include a global index tracker.

cathybird

YoungBusinessman wrote: »

:jPayday today means one thing....more money to the savings

YoungBusinessman, have you reached your £15,000 goal yet, btw? .... Hope so

cathybird

I have been trying to work out which S&S Isa would be the cheapest, but remain confused. I may have to start asking some stupid questions on this forum sometime soon.

atush

I'd go to the ISA subforum and read around/do a search. Isas are more flexible than pensions (but this can be bad if you want to spend it- are you over that feeling now lol?)

But your work pension could work out cheaper than a Sipp (lower charges sometimes for economies of scale). I am assuming you already put in enough to get max employers contribs?

cathybird

atush wrote: »

I'd go to the ISA subforum and read around/do a search. Isas are more flexible than pensions (but this can be bad if you want to spend it- are you over that feeling now lol?)

But your work pension could work out cheaper than a Sipp (lower charges sometimes for economies of scale). I am assuming you already put in enough to get max employers contribs?

Thanks, atush. I have done a search, read through the "cheapest S&S Isa" thread on MSE, printed it out and did some sums, and also ferreted around on Monevator to look at their recommendations, but am still struggling to work out which platform would be the cheapest for me.

I do get the maximum employer contribution on my work pension. I'm in the higher tax bracket and a wondering if I could get a cheap SIPP whether I could, if I saved enough into it, engineer myself down to the lower one. I need to find out.

I saw you recommended a global index tracker on another thread. Having read up on it I can really see the point of the passive indexing argument now, and also by pound-cost averaging, but am not clear on how you combine the two, unless you only invest into a small number of ETFs or trackers. Let's say I've got £500 to sock away each month and I've got (say) four ETFs to be diversified. Do invest £125 each month into each ETF/tracker? ... Or would it work out cheaper to lob the whole £500 at one of them, then £500 at another of the ETFs the next month, and so on, thus covering all four each four months? ... Apologies if this is a stupid query but I'm trying to work out the mechanics of it. I like the idea of between six to eight funds (eg: global, FTSE all-share, emerging markets, US, Europe ex UK, perhaps two bond funds, potentially global property or UK small caps? still thinking), so am not sure how pound-cost averaging would work with that.

I am thinking aloud rather than writing this down in a coherent order, as you can possibly tell

atush

I do get the maximum employer contribution on my work pension. I'm in the higher tax bracket and a wondering if I could get a cheap SIPP whether I could, if I saved enough into it, engineer myself down to the lower one. I need to find out.

If you can afford it, it is always best to put enough into pensions to take you out of HRtax.

saw you recommended a global index tracker on another thread. Having read up on it I can really see the point of the passive indexing argument now, and also by pound-cost averaging, but am not clear on how you combine the two, unless you only invest into a small number of ETFs or trackers. Let's say I've got £500 to sock away each month and I've got (say) four ETFs to be diversified. Do invest £125 each month into each ETF/tracker? ... Or would it work out cheaper to lob the whole £500 at one of them, then

Def 125 into 4 or 100 into 5 etc. you take out the pound cost averaging effect if you aren't putting in every single month.

And you keep saying SIPP, but are only talking funds and trackers. So make sure you aren't overlooking a lower cost PP that can hold the same funds you choose.

So maybe choose your funds first then find out how much it would cost on several different platforms?

Eco_Miser

atush wrote: »

Def 125 into 4 or 100 into 5 etc. you take out the pound cost averaging effect if you aren't putting in every single month.

No it doesn't! You still get pound cost averaging if you only invest every four months.

If buying monthly is better than buying four-monthly, then it stands to reason that buying weekly will be even better, and buying daily better still.

In reality, the more often you buy, the more you pay in fees, so buying a single fund each month is considerably cheaper than buying four funds each month for a quarter of the money each, assuming the fees you are paying are not a pure percentage.

In any case pound cost averaging is more of a psychological trick than a sensible basis for investing. Half the time you will be worse off than if you invested a lump sum.

Bowlhead99 explains this better than I can.

cathybird

Eco_Miser wrote: »

No it doesn't! You still get pound cost averaging if you only invest every four months.

If buying monthly is better than buying four-monthly, then it stands to reason that buying weekly will be even better, and buying daily better still.

In reality, the more often you buy, the more you pay in fees, so buying a single fund each month is considerably cheaper than buying four funds each month for a quarter of the money each, assuming the fees you are paying are not a pure percentage.

In any case pound cost averaging is more of a psychological trick than a sensible basis for investing. Half the time you will be worse off than if you invested a lump sum.

Bowlhead99 explains this better than I can.

The fees were exactly the bit I was trying to get my head around, Eco Miser - I thought there was a strong possibility that splitting the sum invested across several funds each month would be costlier.

What buying "one fund" per month would mean is that the portfolio would only be balanced one every four or six months - the rest of time it would be out of whack with the intended allocations. But over time as the sums got bigger that effect would shrink.

cathybird

Thanks also, Eco Miser, for the post from bowlhead, which answers the other question I was puzzling over - everyone says buy bonds, but is there a reason to when yields are so low, in many cases lower than you could get for longer-term deposits in cash? ... I know you don't keep fixed income for the return but cash is safer (at least in the lowish amounts I'm currently looking to invest) and the rate in many cases rather higher.

If I look to save £1,000 a month (still ambitious but I'm trying to think of ways I could make it possible) I would (I think) want to split it 30/70 fixed income/equities (I am looking at roughly a 15-year timeline). So I could save 30 per cent into savings accounts, moving lump sums every now and then into fixed-term deposits (if I can get a reasonable rate on those) and put the other £700 into funds. I suppose for the sake of keeping it a bit more rebalanced I could split the £700 into two. But I am still not sure, not having done the sums properly re fees etc, that it would be worthwhile. Regular investing ISAs tend to offer a rate of about £1.50 on transactions, where if you just put in a lump sum the going rate for a transaction tends to be around £5 at the cheapest, so if I'm going to use a portion of monthly income it might be worthwhile to go the regular investing route. If I have accurately understood what is meant by "regular investing".