Stock market investment help appreciated

Charlton_King

Hi folks

My wife and I are both newly retired and in a position to invest a fair sum for the (family's) future. Deposit rates being as dire as they are at the moment, we're wondering whether there may be a way of making an investment in shares which would be reasonably likely to do better on a like for like basis.

We're not looking to make spectacular gains and would hope to avoid anything too risky. We would need this to be managed for us as we have neither the time nor the expertise.

No idea where to begin researching. Very willing to provide any further relevant information. Any suggestions..?

ValiantSon

What sort of timeframe are you looking at? How long you can leave the money without touching it is a big factor.

Do you have other cash savings that you can draw on in the event of an emergency?

Do you have a mortgage? How much is owing? What interest rate? How long is your current deal for?

What are your pension arrangements?

What do you mean by, "avoid anything too risky"? If your investment lost 40%, say would you panic and sell, or would you be sanguine and acknowledge that within a few years the value should have recovered?

Charlton_King

Thanks for the reply.

Answers for you:

Indefinitely but certainly 3-4 years minimum

Yes

No

Already taken care of - this would be a separate matter

'Anything too risky' means that a 40% drop would be distinctly worrying - we would be looking for something likely to grow steadily, if perhaps modestly.

System

Shares do not grow steadily!

Charlton_King

Economic wrote: »

Shares do not grow steadily!

Well, I was thinking of some kind of mixed portfolio, as chosen by a competent intermediary/broker, which might be likely to produce that effect or something close to it.

jimjames

Charlton_King wrote: »

Well, I was thinking of some kind of mixed portfolio, as chosen by a competent intermediary/broker, which might be likely to produce that effect or something close to it.

You're probably looking at funds not shares to perform this function. But as above they are still based on shares so growth isn't linear and probably won't meet the "grow steadily" criteria. Long term they should still go up more than inflation just not in a straight line. Different funds will have different risk levels which gives an idea how much the maximum they are likely to drop at any point is but less risk is likely to equate to lower growth as you'll have more non share assets in there.

Still worth doing though and you could balance the risk by holding cash instead of mixed portfolio. So if you had £20k to invest then £10k in something that could drop 40% and £10k in cash would reduce the exposure to 20% drop on the overall £20k sum.

ValiantSon

Charlton_King wrote: »

Thanks for the reply.

Answers for you:

Indefinitely but certainly 3-4 years minimum

Yes

No

Already taken care of - this would be a separate matter

'Anything too risky' means that a 40% drop would be distinctly worrying - we would be looking for something likely to grow steadily, if perhaps modestly.

Honestly, 3-4 years is too short a timeframe to use investments. There is a very high risk of a stockmarket crash within that timeframe (as there always is - it is nothing to do with the markets at the moment). The crash isn't the important issue, but rather the lack of time to recover from it. Really, you need to be looking at more like a minimum ten year timeframe for investments.

The question about pensions was more about the possibility of using a pension wrapper to hold the investments in as there are tax advantages to doing it this way, rather than whether or not you had pensions. However, given your timeframe. the wrapper doesn't matter as investments don't seem suitable.

Stock markets don't produce steady gains. Values go up and down: they are volatile. You can reduce the volatility by holding relatively small amounts in equities (shares in companies) and a lot more in bonds, but this approach will produce lower returns and over your timeframe is still probably not worth considering.

I don't think that investments are really what you are looking for. I'd suggest that you want to try and maximise the interest you can earn in savings accounts. This can be done by making good use of:

Interest bearing current accounts:

Nationwide FlexDirect (5% on £2,500 for 12 months). As a couple you can have three (£7,500).
TSB Classic Plus (5% on £1,500 indefinitely). As a couple you can have three (£4,500).
Tesco (3% on £3,000 indefinitely). As a couple you can have four (£12,000)

Regular savers - especially those linked to current accounts:

First Direct (5% on £300 p/m). Requires First Account. As a couple you can have two.
HSBC (5% on £250 p/m). Requires Advance Account. As a couple you can have two.
Santander (5% on £200 p/m). Requires Santander 123 Lite, Santander 123, or 123 Credit Card. As a couple you can have two.
M&S (5% on £250 p/m). Requires M&S Account. As a couple you can have two.
Nationwide (5% on £250 p/m). Requires Nationwide FlexDirect Account. As a couple you can have two.

From this point I would suggest looking at fixed rate accounts, but I wouldn't take one for longer than a year, as rates will change, but are unlikely to go down, so you can re-evaluate what is best in 12 months time.

Linton

Are you looking for growth over time or an ongoing income?

If your aim is growth, 3-4 years is too short a timescale for stock market investments as there is a moderate chance you will end up with less money than you started with. You need to be thinking in terms of 5 years as an absolute minimum and planning for perhaps at least 10.

Assuming you want growth you would be better off investing in one or more diversified funds that invest across the world rather than individual shares. Such funds will typically hold 100's of different shares and so would not be unduly hit if one share collapsed in value. Choosing a small number of individual shares is a good way to lose money.

How much money are you thinking of investing? Above say £50K-£100K then you could usefully seek professional advice from an IFA. Less than say £5K, it may not be worth the effort.

Despite the caveats, investing in the worlds stockmarkets can be far more lucrative than cash interest - in the past year my growth investments have increase by about 12%. This sort of number is not unusual, but you must be prepared to accept a major fall occasionally. Note that significant falls in the past have always been followed by a recovery, it only took a few years for the worlds markets to recover from the 2008/2009 crash

I am afraid steady safe growth at rates significantly above cash interest is not readily available. Higher returns imply higher risk of a fall. To control the risk you should hold significant amounts of non-share investments or cash alongside your share investments.

Investing for income is a bit different, though you cannot avoid some risk.

Heedtheadvice

You do not mention the approx amount of money. That could have a bearing on what you might consider!


If it was in the order of £10k then safe things like cash accounts (those few current accounts that pay over inflation) could be your best option. Slow and steady growth with little risk. You would however need to manage yourself. Some account give you slightly better interest for longer term commitments -really though only on a par with current inflation and a big risk that inflation increases significantly and you lose out!


£100k and above might be a different story as you could then start diversifying somewhat. Still make use of the cash accounts (you could safely invest £20k or so just better than inflation so will not set the world alight. Shares (collective investments -selected open or close ended funds) might make a decent riskier investment - if you could envisage a longer term or can stay invested until and general downturn can be ridden out!
If you are not forced to sell during a market downturn (and thus can wait till markets recover) considering most general volatiity is short term or a year or two for bigger market falls then the possibility of the "40%" (an example only!) drop could be irrelevant, and the impact modified by the cash holding.
It must be said though that short term market investment are generally not a good idea and period of 5 to 10 years is better to allow the above scenario to be effective.


You need to be realistic about what would be acceptable to you and only then make a decision. Whilst stock market investments can give excellent returns they are not guaranteed -and avoid any that say they are!!

Charlton_King

I've seen a poster on different thread talk about stocks and shares ISAs through e.g. Hargreaves Lansdown... and I notice the blurb on their website mention 'ready made portfolios' managed by them.

Neither my wife nor myself have any ISA investments at the moment. Might this be a way to go or at least start?

ValiantSon

Charlton_King wrote: »

I've seen a poster on different thread talk about stocks and shares ISAs through e.g. Hargreaves Lansdown... and I notice the blurb on their website mention 'ready made portfolios' managed by them.

Neither my wife nor myself have any ISA investments at the moment. Might this be a way to go or at least start?

Unless your timeframe can be extended then I'd not invest. If it can, then I'd look elsewhere. HL portfolios are an expensive way to invest. If you are certain that investing is for you despite all the notes of caution, then I'd suggest you look at multi-asset funds like Vanguard LifeStrategy; HSBC Global Strategy; L&G Multi Index; Blackrock Consensus.