Advice for 26 year old investing in shares - circa £500 per month

spreadsheet_monkey

Hi all

I’m looking to get in to investing in shares. I’ve been doing a lot of background reading in terms of share selection, including the basics of due diligence in the financial assessment of potential companies and so forth. That aspect I am relatively comfortable with. I am however a bit more overwhelmed with the choice of stockbrokers/platforms to select that is best option for me. I read plenty of warnings regarding avoiding high transaction costs and hidden costs, but nothing much further detailing the intricacies of what to look out for. I would be interested on the views of others here as to what may be the best options for me. I would also be very open to any pearls of wisdom or alternative investment strategies that you think would be better suited for me. I should mention at this point that I am intending on getting a financial advisor as well, but hey, I figure getting the views of more people on this can only be a positive thing, and hopefully make for an interesting thread.

Overview of my situation:

• Aged 26, recently purchased a house, there for all of my life savings has been pumped in to that. Before venturing fully in to shares, I intend on building up a cash reserve equivalent of 3 months wages, which I am not far from. Otherwise I have very little else to my name (but happy for what I have got I must say!).

• Given that I have no dependents (other than a missus with penchant for endless shoe purchases), or very little financial commitments further to the above, I reckon I can put circa £500 a month to one side to play with at least for the next two years or so.

• I’m mostly interested in holding for the long term, compounding through dividend re-investment, however I am also curious regarding some of the higher risk/reward possibilities presented by short term trades, which I will likely experiment with at some point.


A few questions/consideration

• Is making a £500 trade once a month going to be wastefully expensive, or is there a well-priced way of drip feeding in this way? I have considered holding back and saving, but at the same time I would like to diversify and maybe save £500 each in several holdings.

• ISA & Capital gains – I’m currently well below the capital gains allowance at present (however with a bit of luck the situation will be different in a good few years’ time). Should I look at starting my investments off now in an ISA wrapper for future protection, and is this cost effective, or should I worry about it later if/when I hopefully reach that point?

• As stated I need to find an appropriately priced stockbroker/platform to undertake the transactions. Ability to set specific buy/sell prices is a must, as apposed to best price available. Athough not essential at all, in would be preferable to go with a provider that has a good iPhone iOS interface. What else should I look out for, or any suggestions has anyone got suggestions for me?

SomeUser

Some platforms (did?) give you free trades and I'm not sure that any will let you set buy/sell prices on funds (OEICs). You're further restricted by platform if you want to hold ITs.

I use III although they've got some bad press on here and not the most cost effective unless you have a significant amount of assets under holding. I pay £1.50 per trade using their regular investments and use free trading credit for my very limited short term trading using set buy/sell prices (I hold a maximum of 3 short term volatile investments, usually bought for £1.50 and sold using £10 trading credit once I hit 10% return).

To limit charges, I tend to rotate the funds I invest in, i.e. one per month.

There's no reason not to use an ISA wrapper.

I'm sure there's probably better ways but it works for me.

Their app is not bad

Archi_Bald

I wouldn't invest in individual shares unless I can put some £10K into each of 10 shares at least. Until then, I would invest in funds. £500 a month is a perfectly reasonable sum of money to put into a fund, or may be even a couple of funds.

Holding your investment in an ISA makes perfect sense as you don't need to worry about CGT, and you don't need to worry about keeping records for tax purposes.

You haven't mentioned pension, however. Presumably you are employed, and your employer contributes to your pension? It might make financial sense to put additional money into your pension. I.e. split your £500 into medium and long term investment.

There is a huge long thread, with lots of links to other places, about platforms: https://forums.moneysavingexpert.com/discussion/3153942

badger09

Archi

did you mean £1000 or £10000 in each of 10 shares?

spreadsheet_monkey

Archi_Bald wrote: »

You haven't mentioned pension, however. Presumably you are employed, and your employer contributes to your pension? It might make financial sense to put additional money into your pension. I.e. split your £500 into medium and long term investment.
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Yeah forgot to mention that one. I currently match my employers contribution to my pension plan, which stands at roughly about £165 each side per month. Would it make sense to invest the additional £500 elsewhere rather than putting all the eggs in one basket? Or could pumping up the pension by such an amount over the next 12-24 months make for a very healthy boost in the long term?

Thanks

Archi_Bald

badger09 wrote: »

Archi

did you mean £1000 or £10000 in each of 10 shares?

£10K....thanks for spotting my mistake, have updated my post

Archi_Bald

spreadsheet_monkey wrote: »

Yeah forgot to mention that one. I currently match my employers contribution to my pension plan, which stands at roughly about £165 each side per month. Would it make sense to invest the additional £500 elsewhere rather than putting all the eggs in one basket? Or could pumping up the pension by such an amount over the next 12-24 months make for a very healthy boost in the long term?

It really depends....if you can put the money away until you are at least 55, putting more into the pension might make sense. It would be particularly attractive if your employer would match any additional payments you make.

If you need your money earlier, putting it into an ISA is the better option.

But may be there is a case for splitting your investment - say, another £200 into the pension, and £300 into an ISA.

atush

Have you thought of investing in those shares in a pension? Would mean you'd have an extra 25% each month to put in those shares.

In any case, if you have used all your savings, you need to build these up for emergencies first. at least 3 months outgoings overall, but a min of a few K for now, then split your extra money half into cash, the other half into shares until you have the 3 months worth.

Those who have a house and kids have to have a safety cushion.

masonic

Archi_Bald wrote: »

...if you can put the money away until you are at least 55, putting more into the pension might make sense.

It's a minor detail, but I think the likelihood of a 26 year old having access to their pension pot at 55 is slim.

Archi_Bald

Yes, you are right, that's why I said at least 55. It's the best I know today.

Cyberman60

I have lost a fortune in shares over the years for various reasons, so my advice would be to invest in property. Your property will never be stolen in the UK, but :

My bank shares were stolen by Gordon Brown, with no recompense even though the bank was still valued at billions by an independent valuer at the time he stole it.

A company I had a large share of was foreclosed on by a bank soon after a 6m pounds rights issue, which was supposed to finance it for another 18 months or so, but of course was used to clear the bank's debt !!!!.

Be very careful with shares at the moment especially as the market is over-priced, so there is only one way they will go IMO.

Houses always appreciate in the long run, but companies can and do go bust, and corruption is rife.