I want to start saving/ investing £50 per month.....

poolielad

I would like to do it for about 5 years!!!! Any tips where to put it and what return I would be looking at???? I have never done anything like this before, I am just going o invest my payrise..... So any help would be appreciated....

droopsnoot

Well, the thing with investing is that no-one can predict what return you're going to get. Five years is a minimum really for investment, as for where is best to put it I am sure others will be along with some suggestions. There are various sites you can read up on different investment options, Monevator being a popular one.

AlanP_2

Do you want to SAVE (keep as cash in an account somewhere, earn interest) or INVEST (buy assets of some kind that you hope will go up in value e.g. Shares or Funds)?

Big difference between the two and what you want to do will help us to provide better suggestions and ideas.

lalman

AlanP you have hit the nail firmly on the head.


I think there is a misconception and the word saving and investing can be interchanged... by society... but not by people on this forum lol

poolielad

Obviously saving is the safest, but I would not mind taking a risk and investing it.....I know the risk is all mine, but would be grateful for some advice/ tips where to invest it....

AlanP_2

If you invested £50 pm in Stocks & shares, say through a mixed fund, over your 5 year time horizon you would have an average of £1500 in the market.

Given that historical returns are ~5% pa above inflation you could expect to make ~ £603 assuming that inflation is ~2% pa.

So at the end of your 5 years you COULD have a pot valued at £3,603 but you would have paid some kine of fees for the investment (say 0.5% pa) which brings it down to £3555.

Depending on market performance going forward the point at which you wish to sell (5 years from today) could be a good time or a bad time.

At a GOOD time you could get the £3555 mentioned above at a BAD time you could get £2133 or worse (if you sold just after a 40% drop).

I'm not trying to put you off, just encouraging you to think about what you want your hard earned money to do for you and when you REALLY need it back in cash i.e. can't leave it invested anymore and MUST SELL.

For example if it was savings for a planned event (wedding, house purchase, offsprings 21st or something) then the fact that there is a hard date means you are taking a higher risk

If, after 5 years, you can just say "Oh well, I'll leave it invested until the price goes up again (and in the meantime invest more as it is cheap at the moment)" and can then afford to wait another 2-5 years maybe for it to recover then that's better.

Normal advice is to make sure you have what you can reasonably foreseeable needs to be in cash in cash plus a bit over for unforeseen incidents and emergencies.

If you go the cash route there are various threads on the forum covering Regular Saver and Interest Paying Current Accounts.

If you want to invest in Stocks & Shares / Funds I would play safe and go for a Tracker fund or funds that invest across the globe thus hedging your bets a bit.

monevator.com and the articles under Investing there on Passive Investing and their "pretend" passive portfolio will give you a starting point to start your thinking.

atush

If you want to save in cash, look at regular savers. if you wan to invest, look at s&sISAS. These will give you the best bang for your buck re charges/interest to do what you want with 50 a month.

I also like investment trust savings plans but these can be S&S isas.

brasso

£50 a month isn't enough for investment, IMO. With charges you would lose money. Best bet may be to save it into an interest-paying savings account, then every 6 months or so, pay the £300 into a S & A ISA and buy a different tracker fund each time -- or something like Vanguard LifeStrategy 100%.

If you're working, don't assume you'll have to stick with 50 a month. If you're developing a career, you should be able to increase save/invest more year on year. Perhaps 70 a month next year, then 100 a month etc. You'll be amazed at how this can build up. Knock up a spreadsheet to give yourself some motivation!

Good luck.

bowlhead99

brasso wrote: »

£50 a month isn't enough for investment, IMO. With charges you would lose money. Best bet may be to save it into an interest-paying savings account, then every 6 months or so, pay the £300 into a S & A ISA and buy a different tracker fund each time -- or something like Vanguard LifeStrategy 100%.

£50 a month is OK. There are a variety of brokers / fund supermarket platforms (or funds or investment trusts that can be bought directly from the manager) that allow you to invest monthly via direct debit without charging fees for every individual transaction, so there may be no fees advantage in investing £300 half-yearly instead of £50 a month; £50 would usually be the lowest they allow though. There may be an annual fee for the product but not so much that it exceeds your expected annual return. The type of price structure to avoid is one that has fees which are fixed regardless of the value, because at £600 a year of contributions you don't have much to play with.

However if you are investing monthly for 5 years, some of your £50s will have been invested for almost the 5 years but the vast majority will not and some will have only been invested a month or two. That timescale isn't really suitable for 'investing'. In a period of 0 to 5 years, pretty much anything could happen to your money. When your money has all been invested 5, 10 , 15 years on average rather than just the first pound being invested the full five years, THEN you will start to benefit from the long term effects of markets generally rising over time. In the short term they bobble around all over the place and you could easily end up well out of pocket.

So, it's not the low amount per month that's the problem, just that the timescale is too short.

AlanP wrote: »

If you want to invest in Stocks & Shares / Funds I would play safe and go for a Tracker fund or funds that invest across the globe thus hedging your bets a bit.

I agree with using fund/funds that invest across the globe rather than just in one country. Nobody knows what country will do 'best' but individual countries are much more likely to have their markets plummet in value than a broad spread.

Using a Tracker fund rather than a fund with any other type of strategy does not hedge your bets - typically it concentrates your bets into being a bet on the biggest companies in the index. Which is not necessarily any better than an actively managed fund, and especially if it is only tracking one market, it is not what you want.

Using a tracker fund or any other type of fund is certainly less risky and much more sensible and affordable for a new investor than buying stocks or shares of individual companies, can't argue with that.

If you're working, don't assume you'll have to stick with 50 a month. If you're developing a career, you should be able to increase save/invest more year on year. Perhaps 70 a month next year, then 100 a month etc. You'll be amazed at how this can build up. Knock up a spreadsheet to give yourself some motivation!

Good luck.

Agreed with that! Aim to invest more and for longer, you may be surprised what you can achieve. But importantly, the longer you can leave it, the more likely you are to be able to achieve what you actually plan on your spreadsheet...

lawriejones1

All good advice here. Tax free allowance increases this month, it's not much but you're likelu to see something around £10 extra a month, so that's £60 a month from now on.

Thinking like this has seen me up my contributions from £25 to a couple of hundred with no lifestyle implications. I just don't notice it.

Sadly, I did just spend £350 on Eurovision tickets, which is hardly money saving!

themanfromamarillo

The big question is, do you have an emergency fund? As others have mentoned that means is if you lost your job or got ill or something would you have enough cash to be able to live for 3-6 months. If not it might be a good idea to build that up in an account that pays a nice bit of interest first. Then once you've got that maybe start investing a bit in some low cost share funds.