Advice on how to invest £2000

WhiteWolf87

Dear forum users,

I've been given £2000 as a one off gift for Christmas, I'm thinking of investing it in the Cazenove UK Smaller Companies Fund through the Fidelity fund supermarket in an ISA, as I predict the UK economy to continue to improve over the next year or at least stay about the same.

As a investment newbie I have two questions;

Is this the best method of getting the fund ?

And secondly should I be diversifying more, even with £2000?


The only other investment I have is £750 RM shares. My only obligation is rent of £720 a month and I usually come out with £1700 after tax. I would be looking to put a £100 into funds each month - my goal is to save 5000-6000 over a two year period.

I already have £3000 savings in a savings account but I haven't decided what to do with this yet. I am currently trying to get the ACA qualification, I can understand accounts pretty well but I still don't want to risk investing in standalone shares until I have carried out a lot more study in this area.

Thank you for any advice you can offer

mark55man

you've got to start somewhere


I don't disagree that small companies are a good place to be in a growing economy - although some would argue that too many other people have come to the same conclusion


usually smaller amounts of money would be even more diversified - see https://forums.moneysavingexpert.com/discussion/4392271 for quite a long discussion.


before you read that - just be sure you don't need the money any time soon, or you have sufficient appetite for risk - ie how will you feel if it loses 20% in 12 months

apple_mac_user

My advice is that you won't learn anything very useful from the courses you mentioned.

The best way to learn is to do it yourself.

Take the course fees and, worst case scenario, treat them as a loss in your investing. You will learn a lot more this way.

Unless you want to complete this course for other reasons, such as a CV, or job requirement, then disregard everything I said!

averageish

That fund has been hard closed now, IIRC, which means it is not open to new money. Also, it's the top performing fund and has become perhaps a little too large. Paul Marriage has done well, but usually it's best not to jump in with everyone else and go for the fund at the top of the list...

Either way, £2k in a single fund is quite a risk, it's your entire portfolio.

You dont really have enough to split your risk correctly and secure a good position. Personally, I would continue to save and invest a much larger chunk in time.

In my opinion, individual stocks should not be considered unless you have at least £150k to invest, probably more. Your portfolio needs strength and depth and a mixture of asset types, cash, property, gold, stocks, etc.

I've learned the hard way, I'm just trying to sort out my savings myself and in January I'll be seeking as much professional advice as I can get to secure my future.

The only thing that keeps popping up, is dont put all your eggs in one basket. Something I constantly remind myself!

mark55man

completely agree don't put all your eggs in one basket - but don't diversify (diworsify) just for the sake of it - its ok to have only a few baskets if you don't have many eggs - but choose those baskets well


remember you also have cash savings which could get you through 3-6 months in emergency and this is recommended


you also may have other assets - RM (which although single share you now have considerable margin of safety on)


so sometimes I have to try hard not to diversify too much separately within each my portfolios (savings, DC pension) and look at it in the whole


if its broad enough a single fund isn't too risky, but there isn't much extra cost in holding a couple or even 4 with £2k


(ps watch out for costs of the funds including transactions)

jimjames

I personally wouldn't put my entire portfolio in a single, fairly high risk fund. But if that is what you have decided to do then I would go via Cavendish Online - they still use the Fidelity fund supermarket but you get part of the fees rebated so will add 0.5% to your portfolio every year for free. Might not be much difference now but if you are adding to it every year then it could be significant.

You may also want to read the book called Smarter investing by Tim Hale. I got a copy for Christmas and it does open your eyes a bit so you may want to check that before you jump.

mark88man wrote: »

before you read that - just be sure you don't need the money any time soon, or you have sufficient appetite for risk - ie how will you feel if it loses 20% in 12 months

I'd be a bit more pessimistic in worst case scenarios. How would you feel with a 40-50% drop in 12 months? The FTSE100 fell nearly 50% and I think smaller companies could drop as much should an unexpected event happen based on the excellent run they have had recently.

Totton

With £2k it would be fine to use just one fund provided you opt for something generalist such as Marlborough Multi Cap Income, Unicorn UK Income or perhaps Odey Opus if looking outside the UK. There are lots of choices to be made but I wouldn't think 2k was worth more than choosing two funds, I would even consider using a single multi-manager fund such as Jupiter Merlin Growth until I had enough saved to make it worthwhile opting to diversify into your own portfolio choices.

Of course the multi-manager fund works out expensive and are generally disliked fir that reason, however if you are in the market for a global spread with limited funds then MM is still a reasonable choice in the short term imho.

Another choice may be one of the Fidelity portfolios (target funds) or a Vanguard LifeStrategy 80 fund to which you could just keep adding to until you have enough to warrant adding a few satellite holdings of spicier focus.

HTH,
Mickey

Totton

jimjames wrote: »

You may also want to read the book called Smarter investing by Tim Hale. I got a copy for Christmas and it does open your eyes a bit so you may want to check that before you jump.

Although a very good book parts of it made my eyes hurt so bad that I had to shut them :rotfl:

WhiteWolf87

Hi all, thank you for your advice! My appetite for risk is fairly high as I've got savings kn the bank , but I reckon i will try and place 2k in two funds. I'll order Smarter Investing too tomorrow it sounds quite useful. I have to study the aca as part of my job, luckily I don't have to pay for it, i agree the best way to learn about investing is by having a minor dabble. Again thanks all for your contributions .

digannio

As a starting point you could do a lot worse than look at the Fidelity MoneyBuilder UK Index Fund. You'll get a fair bit of diversification on these shores and with a TER of 0.3% you won't find a great deal of your money disappearing into someone else's pocket. It's up nearly 19% on the year.