12k to invest into funds

Lama_glama

Hello everyone,

First post in the forum, lots of things to say! I`m glad I have joined the community, and I would like to greet everyone in the forum.

I have 12k which I would like to invest in something which can provide me with growth, and I am willing to take some risks. I see Vanguard and mutual funds are popular. Could you suggest a company/fund to invest in?

I am 33 years old, I have a joint mortgage with a family member (40% deposit paid, 2.24% interest atm, we owe 57k each). The other side is not willing to overpay the mortgage, as is saving for other projects and this will not change any time soon. I make roughly 35k to 40k per year + car benefit. 10% salary goes into a pension fund (company puts 5%, I put 5%).

I have a single access ISA with Nationwide (cash ISA, 1.3% interest, 1 withdrawal/year after interests drops) where I keep some money. I would like to keep a little bit there as emergency fund which is easy to acces, but to begin investing 12k long term into something which can provide me with some growth and keep adding every month money to it.

I opened the cash ISA in Nationwide, how do I open the stocks and shares ISA? Can I open it though the company I buy the fund from?

Sorry for the lengthy post. Have a nice evening and thanks in advance for any help.

Mr.Saver

To maximize returns, I'd use S&S ISA for investments and easy access savings account for emergency fund. This is because interest earned under PSA is tax free anyway, they don't need to use the limited ISA allowance. Plus, the investments have higher potential to grow, and keep them in the ISA means the returns are always tax free.

For a beginner, a good starting point is the Vanguard LifeStrategy (VLS) funds. Depending on your risk attitude, you can choose from between the VLS 20 (which is 20% equities and 80% bonds, equities are riskier than bonds), 40, 60 and 80 (80% equities and 20% bonds). You could go for VLS 100 (100% equities) if your are adventurous, but there are better options if you prefer riskier funds.

If you decided to buy only Vanguard funds, the Vanguard Investor's S&S ISA is very attractive.

Alexland

Does your employer offer salary sacrifice to save the NI on additional pension contributions?

Or if basic rate and under 40 have you considered a S&S Lifetime ISA for a 25% bonus (up to £1k per tax year) on investing towards retirement costs from age 60? AJ Bell YouInvest offer a low cost LISA for occasional lump sums. If you act quickly you can add £4k in the last few weeks of this tax year then another £4k at the start of next tax year. You can still invest in low cost Vanguard funds via the AJ Bell YouInvest LISA wrapper.

Alex

Lama_glama

Hi Mr.Saver, hi Alexland, and thank you very much for your suggestions.

I will look into both options. I am trying to learn as much as possible, but I still have a long way to go.

The Vanguard Investor's S&S ISA seems like an easy to do plan. I would just need to check the various funds and decide which one to pick, as you say depending of my risk attitude.

I do not have the salary sacrifice. Regarding the S&S Lifetime ISA the only thing which discourage me is that if I am not wrong in order to keep the bonus I would need to wait until 60 (I already bought a property), and I still have a long way to go. Though the 25% bonus is massive and would be really helpful.

Should I go into the 40% bracket next year would you recommend raising my pension contribution over the 5%? (Company puts 5% maximum). In my company they use Aegon. They enrolled me when I got hired. At the moment I got Aegon Scottish Equitable Cautious Lifestyle.

I am paying 1% managing fee every year. I would have put the link to the Morningstar rating but the forum does not allow me to (probably they would like to avoid new users to spam).

I could have chosen the "Scottish equitable balanced lifestyle" or the "Scottish equitable Dynamic Lifesyle pension fund".

I could switch though I see the last two are rated 2 stars only on Morningstar which I wonder if it would be a good idea to make the change.

What do you think about it?

Thanks again for your help. Any feedback would be really appreciated.

sashacat

Please could you help me as well.
I am aged 70 and want to invest on a regular basis. I already have sufficient money to live comfortably and have enough savings. I know nothing about investing in funds or stocks and shares. I really just want to leave some money for my grandchildren.
I see that you recommend Vanguard. Would that be a good idea for me?
Is it a UK firm/fund. Thank you.

Alexland

Lama_glama wrote: »

The Vanguard Investor's S&S ISA seems like an easy to do plan. I would just need to check the various funds and decide which one to pick, as you say depending of my risk attitude.

If investing for the long term (eg 15+ years) the important thing to remember is that you are aiming to beat inflation and fees. So for example if your average annual 'nominal' investment returns are 5%, you have fees of around 0.5% and inflation is 2.5% then your 'real return' increase in spending power is 2%. So reducing your fees by only 0.1% increases your real return 5%.

The following Vanguard economic outlook might be of interest:
https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/vanguard-economic-market-outlook-2019

Lama_glama wrote: »

Regarding the S&S Lifetime ISA the only thing which discourage me is that if I am not wrong in order to keep the bonus I would need to wait until 60 (I already bought a property), and I still have a long way to go. Though the 25% bonus is massive and would be really helpful.

Having 'a long way to go' is usually an enormous benefit when investing as it means you can ride the market ups and downs with more certainty of a positive outcome. The LISA early access penalty might also help you 'stick with the plan' through times when your portfolio is devalued and the 24x7 news tells you the world is going to end.

Lama_glama wrote: »

Should I go into the 40% bracket next year would you recommend raising my pension contribution over the 5%? (Company puts 5% maximum).

Do you want to pay 42% tax and national insurance when, as a pensioner, you could under current rules draw 25% tax free and likely only pay basic rate tax on the 75% as income? Even some of the 75% might be tax free as the state pension doesn't use up all of the personal allowance.

Lama_glama wrote: »

In my company they use Aegon. They enrolled me when I got hired. At the moment I got Aegon Scottish Equitable Cautious Lifestyle. I am paying 1% managing fee every year.

Sounds expensive are you sure your company hasn't negotiated a discounted fund unit class? If not do you have any options to occasionally transfer lump sums into a SIPP while still remaining a contributing member? Generally speaking over the long term cautious funds don't beat inflation and at your age a more adventurous fund might be more suitable.

Alex

Alexland

sashacat wrote: »

I am aged 70 and want to invest on a regular basis. I already have sufficient money to live comfortably and have enough savings. I know nothing about investing in funds or stocks and shares. I really just want to leave some money for my grandchildren.
I see that you recommend Vanguard. Would that be a good idea for me?
Is it a UK firm/fund. Thank you.

It might be better to start a new thread as your needs are very different from the OP?

Vanguard are one of the world's largest asset managers and are owned by their US customers - a bit like a building society. You could have your own S&S ISA (or could contribute to a Junior S&S ISA opened by the parents) investing in a balanced fund such as LifeStrategy 60 which is likely to maintain spending power relative to inflation over the next 5-10 years. In a bad market crash the value could fall around 25% from current valuations so you would need to be comfortable that you would hold your nerve and not sell low. For anything lower risk you might as well stick to child cash savings products.

Alex

sashacat

Thank you Alex. You have given me a lot to think about. I will talk to their parents and look into Vanguard

Alexland

sashacat wrote: »

Thank you Alex. You have given me a lot to think about. I will talk to their parents and look into Vanguard

Be aware, depending on their age, they may already have a Child Trust Fund account.

Lama_glama

Thank you very much Alexland.

I will change the fund I am investing in for my pension. I will check what Aegon offers.

Yes they take 1% to manage the fund (it is also written that it should be 1.5% but it is reduced to 1% because I am making contributions). I work in a small company (lesser than 20 people) so unfortunately I do not think we have a good deal in place.

You know the worst thing is I have paid 40% tax in previous years but if I understood correctly in order to get 40% tax relief you got to make a "tax return" which I never made, so I only ended up with a 20% tax relief even when I paid 40% taxes. I thought it was something which was being done automatically. My mistake.

Also I read the article "Vanguard economic outlook". It looks like they do not expect a recession this year, but the outlook for the next years do not appear to be very bright. How would you invest/which funds would you pick in this scenario?

Thank you very much.

Alexland

Has whoever is responsible for selecting your workplace pension scheme reassessed the market recently?

It sounds as like your employer has been operating Relief At Source rather than Net Pay where you would only be taxed on your income after pension contributions so get automatic higher rate tax relief.

https://www.moneyadviceservice.org.uk/en/articles/tax-relief-and-your-workplace-pension

It might be worth making enquiries with HMRC to see if you can claim back the historic higher rate tax relief. Someone else more familiar with the Relief At Source pay method might be able to confirm.

Finally with a low growth 10 year forecast you need to keep your costs very low, be tax efficient, make higher contributions and take material equity risk while still holding some bonds for rebalancing opportunities.

Alex