New investor advice needed

Muhren

Hi, I am looking for some advice regarding investing in shares/funds over the coming year.

A little bit of background first, as you can see from my sig I got myself into into a right financial mess through gambling. I have now been off three years and will have cleared my debt by around September time this year.

I'll be 33 in a couple of months and also start a new role in Feb with the same company where my pension contributions are 6% with my employer paying in 9%. I own a property that I am renting out as I pay back my debt whilst living back at home with my parents.

I am involved in two different share purchasing schemes at work, the first where I buy shares at the market rate, they then get matched by the company up to three shares. The second is a share save which I am paying 2 x £250 a month over three years with one amount of £250 maturing in October. I want to diversify my share holdings from just having them in the company that I work for so I'm thinking of moving these into a multi asset fund as soon as I purchase them in October and will do the same the following October. I obviously need to do a fair bit of reading up on this before then but wanted to find out if this is a good approach? My plan is to keep these for a long time, possibly until retirement and have the dividends reinvested to compound growth.

On top of thinking of releasing some equity from my house to either buy another property for me to live in or move back into the current one and get a BTL. Again I would like some advice on this, especially seeing as I have read that the tax and stamp duty will be changing for people purchasing second properties in April.

Any advice would be grateful on my plans for this year.

Muhren

Anyone care to offer some advice?

Linton

I strongly agree with you diversifying into a multi-asset fund. The problem with investing a significant amount with your employer is that if the employer goes bust you lose both your job and your savings. However the 3 for 1 deal on your company shares looks good. What benefit do you get from your share save scheme?

Your plan to take on more debt to get a BTL seems highly risky to me especially considering the governments clear aim to reduce the profitability of BTL. The recent changes may well not be the end of the story. Better to focus on getting your multi-asset investment to a reasonable size.

Do you have sufficient money saved as cash to cover emergencies? A suggested amount is 6 months living expenses. If you havent got such a fund focus on that before investing as you dont want to be a forced seller of investments should you lose your job or whatever.

Muhren

Thanks for your reply.

The two share saves that I am currently paying into both have an option price that were discounted 20%, as it stands the option price is still around 20% lower than the current share price.

That is my concern regarding BTL but my thinking was the more I can diversify my investments the better?

As it stands I am still paying off the remainder of my debt, once that is cleared I will start to build up an emergency fund, of like you say 6 months living expenses.

Linton

Diversification is why multi-asset funds are recommended. They invest in a wide range of different assets scattered across the world including property and bonds as well as shares. And you can buy funds in small quantities. Putting say £100K of borrowed money into one single asset such as a BTL isnt great diversification unless you have a larger amount invested in different assets elsewhere.

Muhren

The idea would be to have the BTL in conjunction with a multi-asset fund. So by October 2017 I would have around £18K in funds as well as a BTL. I would continue to put between £250-500 into a share save each month and once matured transfer to another multi-asset fund.

I know that property prices can go up as well as down but the potential growth in value of property to me seems to outweigh the risk.

I was talking to my dad about this and the anecdote from his solicitor who works on settling estates told him that in his experience property has always come out on top over other investments. I know this is only one persons view but it has got me thinking.

Malthusian

If you've got £18k in multi-asset funds and (say) £100k in a BTL, then you've got 85% of your investment portfolio in a single asset class, in a single example of that asset class. Possibly geared up. That's very un-diverse.

A BTL may well do better than equities if you keep it well maintained, don't struggle to find tenants, don't get hit by subsidence problems and the like. Higher returns are the least you'd expect given the extra risk you're taking on, plus the extra work involved.

Remember the fact that property as an asset class would be expected to rise in value does not mean that all properties can be expected to rise in value. Just as the fact that equities rise in value does not mean that if you put all your money in one single company, it can be expected to rise in value.

It's your money and if you fancy a second job as a landlord then all power to you, but if you don't have a special reason to prefer property over other investments then I wouldn't be inclined to bet so heavily on it.

Muhren

So I have now paid off the remainder of my debt and have built up an emergency fund which I will continue to add to until September when I will move back into my house.

I am still reading into investing but I am looking to start dripping feeding around £100 a month using CSD as the platform. As I am looking at investing for around 30 years would I be better off going for a SIPP over an ISA?

economic

since you dont own your own home i would suggest you either invest in BTL or your own home. ignore what others have said. most people who own their own home have most their wealth in that property anyway so undiversified also.

if you can buy at least a 2 bed home so you cn get a lodger or get a BTL in an area you would want to move into in future so you can convert btl to own home if needed.

Muhren

Sorryif I didn't make it clear, I am currently at home with my parents and renting out my house whilst I was paying my debts off. I have now done and will be moving back into the house once the tenant's contract expires in September.

george4064

Muhren wrote: »

As I am looking at investing for around 30 years would I be better off going for a SIPP over an ISA?

I would always recommend topping up your ISA, as the money is more readily available vs a SIPP (which has pension restrictions).

Continue with your employer contributions and put in as much as your company will match up to, and put the rest in an ISA.