Great Hunt: Are you interested in investing your money?

Former_MSE_Sam_M

With savings rates in the toilet, more people are looking to invest their hard-earned cash, which involves risk.

We’d like to hear your opinions, eg, what are the most important things to consider before starting?

Have you been tempted by investing before but then decided not to?

Or are you a committed investor with tips to pass on?

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Elisecas

So I currently earn a decent salary that I do not take for granted and that I know could disappear at any moment (having been made redundant twice before and also been seriously ill). So while I have th salary I am basically taking everything I don't need and using it as wisely as I know how. This means I know I can manage on a lower income but also makes the most of what I have.

And yes I know that makes me very lucky but it may turn out that I earn less than you think. When I was earning £14k a year (a long time ago) I was finding ways to save £200 a month thro sheer necessity.

Anyhow here's what I'm doing with the extra money.

I was using it all to overpay the mortgage until someone pointed it how comparatively cheap the mortgage is. But in the words of Julia Roberts, I'm a safety girl, so I put 40% as a mortgage overpayment. I put 15% into a regular saver account with my bank as that gets me 3% guaranteed. The rest goes into a stocks and shares ISA wrapper with Hargreaves Lansdown and is spread across three funds focused on income returns that they have labelled with a star and a plus. (See how technical I am). I have it set to automatically reinvest the income. I have thought about soemthing like Nutmeg which apparently sorts out exactly what to invest in too but I'm happy for now with what I have.

The key thing for me tho, is to move it all at the start of the month when my mortgage gets paid. I know I can always dip into those savings for bigger bills or a holiday or whatever, but I'm less inclined to do so when they have already moved accounts.

zsolmanz

Opened a new account with Cavendish and set up a monthly regular saver into a S&S ISA.
It's only £200/month, half of which goes into two passive index funds and the other half into four active funds (but no total fees higher than 1.25%). I have a lot of 'exposure' to the US and UK, a little Global, and very little of anything else - I'd like to add a passive index for Asia at some point.

Money first went in on the 17th, but my portfolio is currently valued at £199.44 due to fees.
It's disconcerting to have less money than you put it - hoping it goes up at some point!

DragonQ

Until recently I never thought it was worth it: I have a pension that I contribute a lot to, and my cash was earning nearly 5% on average (between current and regular saver accounts) until the interest rates dropped last year. Now I'm only earning ~3.6% on it, and that's while I still have my FlexDirect account active. Without that it'll drop to ~3.3%.

So yeah, crappy interest rates combined with the recent robo-investing cashback offers spurred me into finally setting up a S&S ISA. Even overpaying the mortgage seems rather pointless, unless it's to drop to 60% LTV or less; yes, the calculators on the internet say it saves tens of thousands, but just having that money in a 3% account for two decades instead will earn you more than that so you're not really saving anything unless your mortgage rate is high, or you have more cash than is allowed in those current accounts. Even then, S&S seems like a better bet on paper.

Reaper

For novice investors... investing regular sums over a long period of time into funds (rather than individual shares) is the best and safest way to invest.

Over the long term investments beat savings. Remember crashes come along regularly every few years so don't panic when they do. They are nothing to worry about. Don't be tempted to pause investing while they are going on - it's when prices are at their cheapest.

You need savings too so you are not forced to sell at a bad time for an unexpected cost.

edinburgher

Ignore the scare stories from people burned by some of the famous pension scandals of the last few decades. While they have had a terrible impact on the lives of thousands, the landscape has changed since then and there are far more checks and balances to protect investors now.

A defined contribution pension (i.e. you put in £x a month and invest in funds/shares) is just a tax efficient wrapper that saves you money.

Accept that you will need to invest for your future unless you have a guaranteed source of income such as a defined benefit pension, or are planning for a very quiet retirement.

tain

We're saving for a mortgage, but could be saving for another year or two before we really have enough. So our savings are just sitting around not doing an awful lot.

We've been tempted by investing, but we're concerned about losing money (obviously), but more importantly - if we needed to withdraw the money at short notice, before any investments have had a chance to do what they should. If we needed our money just as our investments have taken a downturn (but will almost certainly go back up higher), we don't really have the luxury of waiting.

edinburgher

tain wrote: »

We're saving for a mortgage, but could be saving for another year or two before we really have enough. So our savings are just sitting around not doing an awful lot.

It's often said that you should only invest for needs that are 5+ years away.

Savings aren't really supposed to 'do' anything - they just sit there quietly racking up until you reach your short term target and then spend them.

Saving and investing fulfill different needs, it's important that we have a sensible expectation of what our goals are before choosing to do either.

crmism

I was an Investment Manager responsible for setting up and managing private client portfolios, and began dealing on my own account as far back as the mid-1980s.

Too many people fear the stock market, largely through unfounded rumours about losing all their money overnight. If they dip their toes in, they go for insurance policies, unit or investment trusts, almost all of which under-perform and are costly in terms of fees and hidden charges. They will happily shop or deal with big companies every day of the week, but don't trust them sufficiently to buy shares in them. Instead, they keep their money on deposit, earning rates of interest lower than the rate of inflation, but don't realise their savings are being eroded in real terms. If they have a company or private pension scheme, they don't seem to realise that the providers put most of their pension funds into shares in order to protect schemes against inflation.

My advice to any first-time investor is a. to avoid stock/share ISAs, as the tax savings are wiped out by charges, b. avoid managed funds, as they generally under-perform, and c. begin by buying shares directly in a business they know - such as a bank, high street store etc. That way, they avoid management costs, and can see how dividends grow. They should ignore fluctuations in share prices, look to the longer-term, sit tight every time a crisis is reported, and look to buy more shares when that occurs. They should also spread their money gradually over various market sectors.

Net dividend yields are far more attractive than deposit rates, and the government has encouraged more investment into shares with the introduction of the Dividend Allowance. The total return from a selection of "blue chips", ie dividend and share growth, will always outperform cash in the medium/long term.

fun4everyone

crmism wrote: »

My advice to any first-time investor is a. to avoid stock/share ISAs, as the tax savings are wiped out by charges, b. avoid managed funds, as they generally under-perform, and c. begin by buying shares directly in a business they know - such as a bank, high street store etc.

I am no expert but your "advice" is absolutely terrible.

DragonQ

tain wrote: »

We're saving for a mortgage, but could be saving for another year or two before we really have enough. So our savings are just sitting around not doing an awful lot.

We've been tempted by investing, but we're concerned about losing money (obviously), but more importantly - if we needed to withdraw the money at short notice, before any investments have had a chance to do what they should. If we needed our money just as our investments have taken a downturn (but will almost certainly go back up higher), we don't really have the luxury of waiting.

I wouldn't even consider putting money away when you think you're close to buying a property. Guaranteed interest and instant access is far more important at that stage. Once you're on the property ladder it's easier to start thinking more long-term.