Investment for Dummies

FailedTeacher

Merry Christmas All!

Been a lovely Christmas Day but that hasn't stopped me from working for a hopeful promotion in 2018 and to work hard to achieve wealth.

One the pieces of advice I get told, hear and read all the time is invest. But the reality is I don't know where to begin, I am in my 20's, married and about to become a home-owner.

To myself, investment would be over-paying my mortgage and adding value to the property. Reduce the amount of overall interest I pay, live more years mortgage free and hopefully sell for higher than I bought the property.

But is there more I could be doing? I understand investments is a long-term game,especially if you are playing it safe and using small sums of money. I am fortunately in a job that pays commission which means I can have extra funds to play with.

Any advice would be appreciated But please bear in mine I am young'un with no experience in investing nor do I know anyone who does so.

Kindest Regards,

bostonerimus

1) Spend less than you make (ie Mr Mcawber had it right) and do a detailed budget to track spending.
2) Pay off any high interest debt, pay off the credit card in full each month
3) Save 6 months spending to an emergency cash account.
4) Try to save 20% of your gross salary, hard I know but start with something and work your way up
5) Max out your workplace pension, SIPP etc. If you have a final salary plan that's great otherwise buy low cost multi-asset investment funds like Vanguard LifeStrategy or an asset allocation with index funds and rebalance.
6) Maximize ISA then go onto regular investing accounts...still only using low cost index funds or multi-asset funds.
7) Avoid individual shares, actively managed funds and investment trusts, they are expensive and often risky.
8) Don't fret about investment performance.
9) If you have a mortgage consider making extra payments.
10) Be cynical about advice as it comes with biases. Educate yourself, read the bogleheads.org wiki

BananaRepublic

That's mostly sound advice from Boston, especially point 10, even though I might argue with some details. You would do well to get a book on investing. Even if you do not want to get into the nitty gritty, it helps to have an overview.

One key element is compound interest. So if you invest and get 7% a year growth, after ten years your money almost doubles, ignoring inflation. So the earlier you start the better especially for pensions.

Big_Dogg

You will never go far wrong, imo, in overpaying your mortgage. Especially at the moment.

As far as investing in stock market goes, do your research carefully. Read some of the classic books, which you can find easily on Amazon. A good start and the simplest I’ve read is Naked Trader by Robbie Burns (isa millionaire).

If you buy your own shares, you will make mistakes now and again. The key is not to be stupid, and learn from them..

chucknorris

Big_Dogg wrote: »

You will never go far wrong, imo, in overpaying your mortgage. Especially at the moment.

My average mortgage rate is just over 1%, my average dividend income is about 4%, it makes no sense at all to currently pay down my mortgages.

Big_Dogg

Depends how long you have left on your mortgages, whether you can see into the future to know how interest rates will rise and when..

If you only have a few years left, I’d agree. But if you’re younger and looking at double digits, that’s a different matter. All imo.

chucknorris

Big_Dogg wrote: »

Depends how long you have left on your mortgages, whether you can see into the future to know how interest rates will rise and when..

If you only have a few years left, I’d agree. But if you’re younger and looking at double digits, that’s a different matter. All imo.

No it doesn't depend on that, I could pay my mortgages off tomorrow if that was the right thing to do, but currently it isn't the right thing to do.

Of course you will come back with something like...'not everyone is in that financial position', my response would be that if they are younger and don't invest in their future, they never will be, if they don't take on risk when they are younger.

Big_Dogg

Good for you. But I was really talking about the OP..

chucknorris

Big_Dogg wrote: »

Good for you. But I was really talking about the OP..

But you addressed it to me, and anyway my edit addressed that, as I guessed your retort would be something like that. It really depends how much ability you have, and how much faith you have in your ability. It is OK to play safe, but it depends on how much ambition that you have, playing safe would have never satisfied my ambition.

FailedTeacher

Thanks for your answers Gentlemen and/or Ladies - there is no need to quibble over Mortgage Repayment Philosophy.

We are doing much of bostonerimus' list and think that overpaying is the best way forward - I have another thread about income streams and that is geared towards making as much of overpayments that we can.

I think investments is something we may stay clear from to be honest - I feel I am looking for shortcuts to wealth but I think that given my current skillet and position - I'm probably best suited to investing in my home for a start.

We are young and just getting our first mortgage, interest is 4.8% which is uncomfortably high but that is life for 5% deposit and 5 years fixed interest. Using the OverPayment Calculator I can't see how Overpayments should not be our priority!

I really appreciate your advice, thank you

firestone

bostonerimus wrote: »

1) Spend less than you make (ie Mr Mcawber had it right) and do a detailed budget to track spending.
2) Pay off any high interest debt, pay off the credit card in full each month
3) Save 6 months spending to an emergency cash account.
4) Try to save 20% of your gross salary, hard I know but start with something and work your way up
5) Max out your workplace pension, SIPP etc. If you have a final salary plan that's great otherwise buy low cost multi-asset investment funds like Vanguard LifeStrategy or an asset allocation with index funds and rebalance.
6) Maximize ISA then go onto regular investing accounts...still only using low cost index funds or multi-asset funds.
7) Avoid individual shares, actively managed funds and investment trusts, they are expensive and often risky.
8) Don't fret about investment performance.
9) If you have a mortgage consider making extra payments.
10) Be cynical about advice as it comes with biases. Educate yourself, read the bogleheads.org wiki

some good advice but point 7 may be true about expense but they may not be any more risky then an index fund - and i speak as someone with both