I have 50K and I want to make it grow - help!

toastcrumb

I have £50000 savings.

I have a permanent job (lower tax band) in London that just about keeps me above water with rent, bills etc. If I lost all my savings tomorrow I'd still be able to keep myself afloat, although I'd barely be able to save (if at all). I don't own any property and don't intend to with house prices as they are today.

So, I want to make these savings work as hard as I can. What could I do to make this money grow as much as humanly possible? I am open to investing, but to give you an idea of my attitude to risk, here is my current plan:

Invest around 20K in the following company:

http://finance.yahoo.com/q?s=NTDOY.PK

Boy, did I wish I'd had the money to do this 1 year ago. I'd use a Maxi ISA to shield me from tax. I'd cut my losses if the initial 20K withered to 15K.

I'd spend around 5K clearing debts and put the rest into savings accounts as per Martins instructions here:

http://www.moneysavingexpert.com/savings/which-saving-account

What do you reckon? I want this 50K to make as much as possible, without sabotaging my chances of getting on the property ladder someday.

All comments and suggestions welcomed. Thanks!

Aegis

Ok, I'll comment on individual parts of your post...

toastcrumb wrote: »

I have £50000 savings.

I have a permanent job (lower tax band) in London that just about keeps me above water with rent, bills etc. If I lost all my savings tomorrow I'd still be able to keep myself afloat, although I'd barely be able to save (if at all). I don't own any property and don't intend to with house prices as they are today.

First things first, build yourself a comfortable amount of money to live off in case your income disappears suddenly, or any expenses suddenly crop up. Ideally you need about 3-4 months salary set aside to deal with unexpected issues. Cash ISAs and high interest instant access accounts are generally quite good for this.

So, I want to make these savings work as hard as I can. What could I do to make this money grow as much as humanly possible? I am open to investing, but to give you an idea of my attitude to risk, here is my current plan:

Invest around 20K in the following company:

http://finance.yahoo.com/q?s=NTDOY.PK

Wow... You want to put 40% of your total worth into a penny share? That would generally be considered ultra-high risk, so even if you balanced out the rest of your portfolio with JUST deposit-based investments, you'd still be higher risk than most people would prefer.

You might want to reconsider this strategy a little, and at least diversify your asset-backed investments away froma single company's shares. Yes, it would be great if the company doubled in value over the next couple of years, but if it loses value, it's going to have a very large impact on your overall worth AND might put you off investing for life.

Out of interest, what stock exchange is that listed on?

Boy, did I wish I'd had the money to do this 1 year ago. I'd use a Maxi ISA to shield me from tax. I'd cut my losses if the initial 20K withered to 15K.

If we could all invest in hindsight, we'd all be rich. Just remember that past performance isn't necessarily a guarantee of future performance. Penny shares are an exceptionally risky and volatile investment, and certainly not ideal for someone new to dealing.

I'd spend around 5K clearing debts and put the rest into savings accounts as per Martins instructions here:

http://www.moneysavingexpert.com/savings/which-saving-account

This I feel should be your second action after setting aside your emergency funds.

What do you reckon? I want this 50K to make as much as possible, without sabotaging my chances of getting on the property ladder someday.

All comments and suggestions welcomed. Thanks!

I think you should reconsider your penny share idea and should look at other options for getting involved in the stock market without such incredibly high risks.

If you want more information on less risky alternatives, search for unit trusts, managed funds, OEICs, High Yield Portfolio (I think that's correct anyway), and also the terms "risk profile" and "asset allocation".

Aegis

Hang on, is that company a subsidiary of the larger Nintendo?

That makes it less of a risk, but still not something I'd ever thing about investing solely in!

toastcrumb

Hi Aegis, thanks for your reply. That company is Nintendo, and they are now the third most valued company in Japan. They are listed on the Nikkei stock market. I agree that investing solely in one company is a risk, however I don't know much about the stock market. I do know a lot about the games industry, though (worked in it for 5 years) and looked at other companies in the sector. Nothing currently seems likely to provide returns as great.

Aegis

I couldn't quite work out what the various suffixes meant, so I assumed it was a subsidiary. Especially since the ticker symbol suffix wasn't one I'd seen before. As it happens, it's not great news...

If your ticker symbol has had letters added to it such as .PK, .OB or .OTCBB, this means the stock has been de-listed and is no longer trading on the exchange on which you purchased it, but rather on the less liquid and more volatile over-the-counter market. More specifically, a .PK indicates that your stock is now trading on the pink sheets, while an .OB suffix or .OTCBB prefix represents the over-the-counter bulletin board. A stock that has been de-listed is like a baseball player who has been sent from the major leagues to the minor leagues. For some reason, the stock is no longer worthy of trading on a major exchange such as the New York Stock Exchange or Nasdaq, probably because it failed to maintain the exchange's requirements. (To see these requirements, see What are the listing requirements for the Nasdaq?)

It doesn't seem to change the increasing value possibility, but it does appear to increase the risk and volatility, and with a low cost per share already, that volatility will be pretty huge.

Even if this was the best company in the world at present, I'd undoubtedly be suggesting diversification as I mentioned above.

egamar

Aegis wrote: »

Quote:
I'd spend around 5K clearing debts and put the rest into savings accounts as per Martins instructions here:

http://www.moneysavingexpert.com/sav...saving-account
This I feel should be your second action after setting aside your emergency funds.

This is probably my cautious nature speaking, but I'd always clear my debts first. Why? Because then suddenly my disposable income increases, I am less vulnerable if I'm tight for money, and if I'm not, I can save more! I'm assuming that emergencies could be covered by reacquainting oneself with debt!

Of course, it depends so much on circumstances, if I were young, single, could pack everything I own into two bin bags, could doss on a mate's floor if I couldn't afford to rent etc etc things would be very different than if I were a 55yo father of five!

egamar

toastcrumb wrote: »

I agree that investing solely in one company is a risk, however I don't know much about the stock market. I do know a lot about the games industry, though (worked in it for 5 years) and looked at other companies in the sector. Nothing currently seems likely to provide returns as great.

Errrm .... lots of 'great' companies' shares don't always perform well on the stock market, especially when hot and volatile winds are blowing around traders' ankles.

There are lots of safer investments, some with a history of excellent returns, some not so excellent but sound.

I can only concur with and reinforce with the advice you've been given that investing a significant proportion of any portfolio in one vehicle is folly. Unless you're happy to lose it all, and like playing roulette and betting your shirt on one number.

There is also the argument that if you work in the same sector (worse - for the same company) as your investment, both your job and your investment is at risk when the sh*t hits the fan. Enron, anyone?

Remember, a hot wind blew 6000 miles away, and Northern Rock (a fundamentally sound solvent business) fell from £12 to £2 (and some bits of muy portfolio lost a bit too!).

Let's not argue about why this was and whether it's relevant to Nintendo, the point to note is that virtually 90% of this company's value disappeared 'overnight': the same can happen to your investment.

You did say you wanted to make your money grow: in which case nurture it, don't expose it to unnecessary risk. Can you afford to lose 90% of your investment? If you can, go ahead and good luck! .

Aegis

egamar wrote: »

This is probably my cautious nature speaking, but I'd always clear my debts first. Why? Because then suddenly my disposable income increases, I am less vulnerable if I'm tight for money, and if I'm not, I can save more! I'm assuming that emergencies could be covered by reacquainting oneself with debt!

The reason I put it that way round is simply because I think it's a good idea to have emergency funds in place in case you run into a problem you absolutely need money immediately for. Admittedly most people can probably use a credit card for such occasions, but if you need money for something above your credit limit (I have a fairly low credit limit at the moment, for example), then it's useful to have a stockpile of cash for such emergencies.

However, the logic of your way round works for me too. After all, why spend money on debt interest when you don't have to, right?

In this particular case, it's probably not going to make a huge deal of difference given that the emergency fund and the debt clearance can probably occur more or less simultaneously, with any longer-term investments coming later.

Of course, it depends so much on circumstances, if I were young, single, could pack everything I own into two bin bags, could doss on a mate's floor if I couldn't afford to rent etc etc things would be very different than if I were a 55yo father of five!

Very valid point, and one I'll have to bear in mind next time!

toastcrumb

Just to be clear, the debts would be cleared simultaneously along with any investment I make, so technically I'm clearing them first.

Can I afford to lose 20K? Not really, but I've got 25K as a backup which would keep me afloat, that's more than enough emergency money.


I am young (25), not single but not the sole provider in my household.

I'll definitely look to diversify, Nintendo aren't going down any time soon but that doesn't mean the entire Nikkei can't. Does anyone have examples of sound investments with excellent returns?

Is it worth hiring an IFA for this sum of money?

Aegis

If I didn't know exactly what I was doing, I would definitely consider asking an IFA for help.

My personal opinion is that for long term growth, a diversified portfolio of funds is always nice. An adventurous portfolio would have a reasonable percentage of your assets in high risk/return sectors while maintaining a base in the more stable funds to protect you from losing too much (and also to keep you within your risk profile!).

Since you mentioned that if 25% of your share price was depleted, you would get out, that probably puts you at a much lower risk profile than one you would expect of an investor putting all his invested money into a single penny share of a delisted company!

purch

The link you posted is not for Nintendo Co. the 3rd most valued Japanese blah blah etc etc

By the way I think they are listed on the Osaka Topix exchange