First time investor (Low risk for £30k)

MisUrdd

I am due to inherit £30k and would like to invest it wisely, thinking long term and low risk if possible.

Any advice will be greatly appreciated as I am new to investing (apart from having an ISA)!

eskbanker

Before investing, ensure you have an emergency 'rainy day' pot of something like 6 months living costs in cash form, e.g. savings or current accounts.

Rules of thumb for investing include not to invest money you might need in less than ten years (so hope your definition of long-term is consistent with this) and also to diversify as much as possible. Novice investors will often start with multi-asset funds, which are spread over numerous geographies and market sectors to minimise risk. The Vanguard Lifestrategy funds are quite popular but others are available from the likes of L&G and Blackrock - also read up on sites like Monevator to get a grounding in investing terminology.

AlanP_2

Is your ISA a cash ISA or a Stocks & Shares ISA?

How long is long term to you? Investments like S&S will typically deliver returns of ~3-5% above inflation over periods of 10 years plus but with lots of volatility as prices fall and then rise again - just think of the news a week or so ago about the FTSE dropping 2-3% per day.

The best approach is to look at your overall financial situation - mortgage, dependants, partner, pension, employment, savings, debt etc. and then consider what areas need to be addressed.

For example most on here advise that you have a "cash emergency fund" to cater for suddenly being made redundant, or a new boiler or something as you don't want to sell investments to live on just as they take a dive.

If you decided that investments are what you need then your 3 choices are inside a S&S ISa, in a Pension or standalone.

S&S ISA limit is £15,240 per year and growth is tax free.

Pensions attract tax relief at your marginal rate so very useful if you are a higher rate taxpayer but cannot be accessed until 55+.

Standalone means you would need to account for any dividends received (and possibly pay Income Tax and also potential Capital Gains tax to pay once sold.

Both are extremely remote possibilities on 30k I would think but as I do not invest outside a Pension or ISA I am not 100% familiar with all the rules.

Whichever option you choose the underlying investments can be the same.

Low Risk = Low Returns generally in this field, to get a return above the 5% you could get on that sum from high street bank current and regular saver accounts you need to take some risk that prices will go against you at some point (and they will). If you don't sell at that low point you can reasonably expect prices to recover and make your pot grow again.

That is assuming you spread your investments around and don't plump for £30k of single company shares as that is very high risk as the company could go bust. A spread across a number of funds that invest in 100s of companies across the globe counters that "all eggs in one basket" risk, or even a multi-asset fund that diversifies the investments for you (Vanguard LifeStrategy, L&G Multi-Asset ranges for example.

(I must learn to type faster, beaten to it).

eskbanker

AlanP wrote: »

(I must learn to type faster, beaten to it).

Only because yours was a far more comprehensive answer!

Sam_J12

As the above posters have mentioned, the time scale of your investment is crucial. For a short term investment (e.g. 1 year) stocks and shares are one of the most risky investments and cash one of the safest. In the long term (e.g. 25 years) this flips around and stocks and shares become one of the least risky investments and cash becomes more risky (due to inflation destroying the value).

If you will need the money within the next year or two, keep it in cash in the highest return bank accounts you can find (current accounts and regular savers). If you want invest for the long term, use a stocks and shares ISA or consider overpaying as much as possible into your pension fund to benefit from tax rebates and possibly additional employer contributions.

If you think you will need the money at some point in between, then I would consider investing part of it in stocks - I don't agree with the poster above who says that if you want to spend the money within the next ten years then don't invest in stocks. I think this is close to throwing away money as stocks are very likely to do better than cash on, say, a 5 year time scale.

MisUrdd

Thank you all for your replies.

The ISA I already have is a cash ISA and I do intend on the investment being long term (10+ years).

If I were to invest in stocks as well as pension & perhaps another/different ISA, what should I look at?

Thanks again for all your advice.

bigfreddiel

Just go for a Lifestrategy 80 or 60 in an ISA.

Need to know more Google vanguard Lifestrategy.

Cheers fj

masonic

bigfreddiel wrote: »

Just go for a Lifestrategy 80 or 60 in an ISA.

If recommending 60-80% equities, some further exploration of "low risk if possible" is warranted. OP, if in a couple of years you discovered your £30k was only worth £20k, how would you react?