Thought I was doing the right thing with my money

saver861

JohnRo wrote: »

The worst thing anyone could do is panic sell and that's exactly what some obviously do when things head south and red numbers light up their account screen, as they're bound to do from time to time, which is the time when they should be buying more.

Yes that is the truth. Been through the 2001 and 2008 crash but did not sell a bean. Have a few funds that I fed with monthly instalments over the years. It does take a little bit of grit to keep paying into something that keeps having a lesser value each time you check as around the 2001 era.

However, the sitting tight option is really only feasible with money that you don't need to get your hands on. You do need to have accessibility to other funds for the unforeseen otherwise the strategy is a bit perilous.

Equally, you need to think ahead. When I realised there was a slight possibility of getting early retirement, I whacked my AVC fund into a virtually 0% growth deposit fund. That was nearly two years before I actually took the retirement and, as it happens, there was no downward spiral in the market during those two years so I lost a little on the move. However, had there been a crash in that two years I might have lost 40% of my fund on retirement - a chance I was not prepared to take.

oldfella

whatever you decide, putting a lot of money into PBs is not a good idea. The chances of winning are extremely low, so put £100 in. If you put £30K in the chances may be 3000 times larger, but 3000 times extremely low is still extremely low !

atush

Originally Posted by misty6 View Post

I'm a little bit scared of investments. I don't think I could cope with the stress of potentially losing all my money with stocks and shares as I can't earn any more now to replace it!

Thanks

It is right to be cautious of things you dont understand, but coming here and reading up elsewhere is a good start.

As Jim J said above, there is a huge difference in investing in single shares (which is high risk and we dont suggest you do) where you could lose 100% of your money (although fairly rare) and well diversified portfolio of funds, which could drop 20-40% or more in a big market crash, but A- generally recover and B- carry on paying an income anyway so if you dont have to sell it doesn't really matter so much.

Funds are safer because they hold 20+ or even hundreds of companies shares, other assets like property and bonds, and in other countries not just the UK. Which means they are never going to go down to zero, as all the companies would not fail, and all the countries might not have a huge market drop.

In any case, only invest a fraction of your 39K that way. But I would invest some, because over periods of 10 years or more, with income reinvested, equities usually do better than all other assets. And they tend to grow in excess of inflation, which is what cash doens't.

I suggested 15K as that is your S&S isa allowance, and only half your PB money. So less than 40% of your overall savings, leaving you 24K in cash for emergencies and other spending meaning you would never have to sell your S&Sisa funds into a falling market. Of course, you could invest less, say 10K that way, but the lower you go- the more the rest of your cash is exposed to inflation/shortfall risk.

atush

PS, I have been very lucky withPBs but dont recommend them for large amts of savings for others.

I only hold 100 worth, when we bought the same for all 5 members of our family. I have been very lucky, int hat I won 100 back the first month I was eligible, and have since won 25 twice. Others in the fmaily have won 25 or so, and some haven't won anything- this was abt 10 years ago.

Basically, I think about them as a bit of fun/a flutter. And I dont play the lottery in general (did buy 5x1 quid sctrach cards to put in home made xmas crackers).

FLAPJACK

Eco_Miser wrote: »

From next April you will be able to have about £3000 savings interest tax free:
£10.6k personal allowance + £5k savings income zero-rated band - £12.6k pension, so putting your money into high-interest current accounts will be way better than cash ISAs. See Top Savings Accounts near the top of the page for details (BOS also have a 3% account 3 x £5k).

Keep a few PBs for the chance to win big, and put the rest where it will earn most.

Hi.

I'm in almost the exact situation as the OP, I have maxed out the high interest current accounts, and also this years cash isa (with plans to do the same with next years isa as the allowance is higher).

I am interested in the above figures and indeed have often wondered how about savings income tax as I am sure I read somewhere that there is a lower tax band for a certain sum of savings. If this is the case how do you ensure that the savings account is taxed at the lower rate.

I would also be interested to know that as I am also getting an enhanced DB pension (SP is 8 years away), is it being suggested here that the OP should pay into a private pension as a way of having a tax effective savings vehicle?...as I have thought in the past would this be may be viable thing to do if it's allowed.

Any thoughts??

Cheers and Happy New Year

Eco_Miser

Yes, there is currently a £2880 band at 10% tax for saving income. This is only available if your earned income is less than your personal allowance, or partially if your earned income is less than £2880 over your personal allowance. You have to reclaim the excess deducted tax on form R40.
In April the rate drops to zero, and the band widens to £5000, and in some circumstances you can register a form R85 with the bank to get tax-free interest.

Yes, a pension contribution is being suggested as a savings vehicle. There's a lot about this on the Pensions board.

FLAPJACK

Thanks Eco

Investigating the pension aspect will be my project. Seems it could a viable option together with the already running stocks and shares isa for the next 10+ years.