Mutual fund advice

Manesova83

Hi all, rookie investor here looking for a bit of advice during unpredictable times.

I'm 35 and only recently starting investing. I now have a fair chunk of my money in mutual funds, with the majority in the VLS60. My plan was to stick whatever I have left at the end of the month into these - usually between £500 and £1500 - and hopefully have it grow enough to be more useful to me down the line. I can't be any more detailed than that - life is full of surprises, and who knows what the world will be like by the time I'm 50 or 60.

I have the majority of my money in a limited-access savings account at 1.5%, which I plan to use to pay off my mortgage when my fixed term ends in five years' time.

I also have a cash reserve in case I lose my job or something big needs fixing.

My questions is, in such volatile times, do you think it's sensible to continue investing leftover money in funds? It seems to me that we're coming to the end of a great run, and I'm getting involved at just the wrong time. While I know investing has to be a long-term approach, and that the market generally grows over long periods of time, do you advise ploughing ahead regardless of volatility and potential short-term losses? Basically, what I'm asking is: is the stock market still the best option for someone wanting to grow their money over a the medium-to-long term, even if the timing seems a bit off?

While I'm in fairly good financial shape, with the prospect of being mortgage free at 40, I am expecting my first child early next year and am therefore more aware of the risks involved.

Bravepants

It looks like you have your ducks in a row regarding savings and emergency fund.



If you have 20 or 30 years until you need the money then "yes" you should continue to invest by drip feeding monthly.



Downturns and volatility are an investor's friend because when prices are low you are buying units cheaper than you otherwise would, and therefore getting more units for your money. If you were to go out and buy a used car and you had the choice from two of the same make, model, year, condition and mileage and one was more expensive than the other, which one would you buy? The cheaper one right?



I also use VLS60 as a core investment and I drip feed monthly with £1000. It's money that I will eventually use in retirement by drawing down a few percent a year. I'm therefore hoping there is a downturn in prices because, even though I have a few 10s of thousands invested, I am still accumulating and therefore would prefer to buy more units for my money.



You will read lots of similar responses on this thread.

Bravepants

One more thing....a basic personal finance rule of thumb is to "pay yourself first", i.e. stash your investment at the start of the month, not the end.


That way you can setup a regular monthly savings plan and just forget about it, rather than wait to see what you have left at the end of the month and "make do" with that.



Also, with automatically investing a constant monthly amount you don't have to manualy intervene at the end of the month to adjust the amount, reminding youself about your investments and sub-consciously creating worry and the feeling of the need to meddle with your approach.


Pick a fixed amount and invest it monthly for, say a year, then review at the end of the year and adjust the amount accordingly, or even make an additional lump sum payment from spare cash.

Voyager2002

You might consider a little bit of "contrarian" investing in addition to your mainstream activities. Look at Orbis, for instance. Also stock-market investing, but a fair chunk of it goes to stocks and markets that have not done well in recent years and so might do well if things change.

Thrugelmir

Manesova83 wrote: »

I have the majority of my money in a limited-access savings account at 1.5%, which I plan to use to pay off my mortgage when my fixed term ends in five years' time.

Mortgage products normally allow overpayments to be made. If your mortgage interest rate is higher. You'd be better off overpaying as soon as you are able.

poppy10_2

If you are only 35 and are looking to hold until you are 60, you should really be in VLS 80 or even 100. VLS60 is for those closer to retirement or who might need access to the cash within 5-10 years

dharm999

Timing the market is a mugs game, so better to be in it, if you are looking at the long term, and accept the highs and lows. There was a really good interview just this last week with Terry Smith, and he touches on the folly of trying to time entry and exit out of the market.

Are you maxing out pension contributions? Have you thought about the extra costs of having a new baby? It is expensive, and any surplus income may soon disappear. Will your partner or you stop working, resulting in a big drop in your household income? If not, have you factored in child care costs?

If, after all those considerations, you still think you have surplus income, then I would max out pensions, for me, my partner and the new baby, then put money in a diversified tracker.