looking at best ways to invest

crystal_pixie_2

Just looking at options for saving/investing.

I am a 40% tax payer and have opened a Lloyds club account with a view to putting £5k into the account with 4% interest - realise this is safe and with a guaranteed return.

However, I wonder as I will be taxed at 40% on any interest would I be better off starting up a stocks and shares ISA instead?

I suppose it is difficult to assess returns with a SS ISA but if anyone could give me some guidelines for return then I would appreciate it.

jimjames

With a S&S ISA your capital isn't guaranteed so it is not like a bank account.

With investments there are 2 parts to the return - the income (from dividends) and capital growth (or loss)

Currently you can get 4% from income funds and the capital will vary day by day. Really depends what your priority is and when you will need the money. If it's within 5 years then investment isn't really a viable option as the capital may have dropped when you need to access it.

Kendall80

jimjames wrote: »

With a S&S ISA your capital isn't guaranteed so it is not like a bank account.

With investments there are 2 parts to the return - the income (from dividends) and capital growth (or loss)

Currently you can get 4% from income funds and the capital will vary day by day. Really depends what your priority is and when you will need the money. If it's within 5 years then investment isn't really a viable option as the capital may have dropped when you need to access it.

However dividend income is also taxed. 25% for a 40% income tax bracket if I remember correctly.


Depending on your circumstances increased pension contributions may be a good option for you.

enjoyyourshoes

At some stage you will be faced with seriously considering' investing in stocks and shares.

You have to have a long term perspective.
You can buy shares in individual companies or a mix of companies within Investment Trusts.
You have to spread any risk across different asset classes (equities, bonds, property, commodities etc)
Then consider spreading risk against different markets in Global economy (FTSE, S&P 500 (USA), Emerging markets, etc)

If you want advice it will cost you, if you want to do it alone you can learn as you go

You can mitigate risk going alone by starting small, investing in Investment trusts or similar.

Use a website (I am with Fidelity) to learn about your options, have a separate page open to google all the abbreviations and financial term they use. part of the learning process, bit painful but necessary evil.

By the time you have read, inwardly digested and have come to some conclusion, the markets may have sorted themselves out and a more realistic perspective (they call it sentiment) may be in residence.

jimjames

Kendall80 wrote: »

However dividend income is also taxed. 25% for a 40% income tax bracket if I remember correctly.


Depending on your circumstances increased pension contributions may be a good option for you.

But no additional tax to pay inside an ISA. Or indeed any additional tax outside an ISA if you are a basic rate taxpayer.

crystal_pixie_2

Thanks for the replies.

To answer some questions yes I am looking for long term savings - potential of 15 years. The 4% interest offer (I think) from Lloyds is only for one year and I would have to move it elsewhere anyway.

I have just set up a SIPP with HL and have a good DB scheme with my company. I feel I am saving enough for the time being for retirement.

However, I was looking at some long term contingency savings (I have an emergency savings account that I can dip into - took note of that one!). So I would rather not pay tax on these savings if I can help it - but some of the ISAs are paying really poor rates at the moment.

I have a reasonable understanding of investments and I wondered if it would be better to try and invest this money rather than saving.

crystal_pixie_2

enjoyyourshoes wrote: »

At some stage you will be faced with seriously considering' investing in stocks and shares.

You have to have a long term perspective.
You can buy shares in individual companies or a mix of companies within Investment Trusts.
You have to spread any risk across different asset classes (equities, bonds, property, commodities etc)
Then consider spreading risk against different markets in Global economy (FTSE, S&P 500 (USA), Emerging markets, etc)

If you want advice it will cost you, if you want to do it alone you can learn as you go

You can mitigate risk going alone by starting small, investing in Investment trusts or similar.

Use a website (I am with Fidelity) to learn about your options, have a separate page open to google all the abbreviations and financial term they use. part of the learning process, bit painful but necessary evil.

By the time you have read, inwardly digested and have come to some conclusion, the markets may have sorted themselves out and a more realistic perspective (they call it sentiment) may be in residence.

Enjoyyourshoes - I believe I am at this point. I was lucky that HL offered me some free financial advice when I transferred my old pension pot to them. Sounds like the time is right to look at "Investing" rather than "saving". My end goal is to have enough to buy a house in 15 years time and I dont feel with the rates of return at the moment that I can achieve this goal.