Investing as an alternative to savings

Ojb

Is it possible to use investing as an alternative to getting 2-3% in a savings account?
I would also like it to be a hobby and get involved in reading the money sections in the papers and choosing companies I think will be successful.
I have a few ideas of companies I'd invest in and would maybe trade once a month or every few months. Probably have £500 to £3000 per trade and build up the portfolio.
As I said I'd like to get involved a little rather than just use a fund and sit back.
Is there a suitable platform for me to build up a portfolio of shares at a low cost?
I'd like it to prove me an increasing asset as well as some dividends to go towards retirement.
Many thanks
Ojb

AnotherJoe

Ojb wrote: »

Is it possible to use investing as an alternative to getting 2-3% in a savings account?
Yes of course but it wouldn't be a good plan. YOu should have money in savings accounts and investments. Different purposes.

I would also like it to be a hobby and get involved in reading the money sections in the papers and choosing companies I think will be successful.
If you mean following tips, that's a terrible idea as you'll lose money

I have a few ideas of companies I'd invest in and would maybe trade once a month or every few months. Probably have £500 to £3000 per trade and build up the portfolio.
Or the portfolio will fall.

As I said I'd like to get involved a little rather than just use a fund and sit back.
I've done both I woudl recommend a fund and sit back. There is a middle way, pick funds in areas you think will do well, lets say sectors like healthcare or energy, or geographies such as asia or emerging markets. Still long term though,

Is there a suitable platform for me to build up a portfolio of shares at a low cost?
I'd like it to prove me an increasing asset as well as some dividends to go towards retirement.
Then you need to be thinking long term plus take teh tax benefits of a "retirement account" aka a "pension" such as a SIPP.

Many thanks
Ojb

I recommend you start by reading the Monevator website.

Buying and selling individual shares for small amounts is a mugs game.
I've been buying and selling for a long time and am gradually moving towards funds (and similar) with very few individual companies and even those are long term holds, say 5 year plus.

MarkBargain

While there is no harm in investing a small amount of money in a company you personally know and like, it is a risky game and for proper returns I would always look to funds. You can have fun with those by picking funds by different providers (some active, some passive), in different countries, in different sectors (e.g. technology or property) and with different ethical screens. Have a play around on https://www.markets.iweb-sharedealing.co.uk/funds-centre/fund-supermarket/

Bravepants

Time to deploy my ever evolving set of beginner bullet points based upon my own experience and non-expert findings (comments/adjustments always welcome)...

Start with bullet point number 1 and then choose other bullets as appropriate, or consider them in order:

• Pay off any non-mortgage debt first, then

• Start with 3, 6 or 12 months outgoings (maybe even swap the word "outgoings" for "salary") as an emergency fund in some sort of (or several) instant access account. Find out about current accounts, regular savers etc. and the interest rates they provide. With all savings and investments use the principle of "pay yourself first", that is, put money aside when you get paid, not at the end of the month saving what's left over - because there probably won't be!

• Make sure you have any cash needed for expenditure in the short term, such as house purchase deposit, replacement car, wedding (don't overspend on this) etc., and

• Figure out how your work pension works, and how much extra your company contributes for any additional contribution you make, pensions (work, private or SIPPS) are particularly good if you are a higher rate tax payer. On the subject of pensions…

• Be very aware of pension transfer scams! Even the ones that mention bone fide financial companies. Anyone promising you "guaranteed" returns is likely a scam artist, especially if the returns they are promising are double figure percentages, i.e. 10% or more! Remember you cannot, and nor can anyone on your behalf, legally take money out of a pension before pension age!

• Buy or borrow a copy of Tim Hale's "Smarter Investing", and once you have point 2 and point 3 in place:

• Check out www.monevator.com, particularly the passive investing section, and,

• Read up about the tax advantages of Stocks and Shares ISAs and SIPPS, and

• If considering retiring early check out www.mrmoneymustache.com and https://theescapeartist.me for inspiration, then

• Stash as much as you can, monthly (taking advantage of "pound cost averaging"), in a global index tracking fund , or a multi-asset index fund (or fund of funds - read up online about these). As you get older switch to funds that contain a lower percentage of equities and higher percentage of bonds (read up online about these, but Tim Hale talks about it too) depending on your tolerance for risk. Keep it simple and stick to one or two funds until you have £100k or so.

• Whatever fund(s) you plan to invest in make sure you don't pay too much in annual fees; a good passive index fund should be around 0.5% or so, including platform charge, active funds (those managed by humans) are around 1% to 1.5% but try to keep close to 1%. In no way pay 2% in annual fees for any of your investments!

• If having considered the above you are unsure about making your own investment decisions then seek the advice of an IFA (Independent Financial Advisor) - the word "Independent" is very important here, avoid Financial Advisors who want to sell you a product owned by the company for whom they work!

• Learn about the concept of a "phased" retirement, using certain pots of money to carry you through periods before work pensions or SIPPS become payable at Normal Retirement Age (often referred to as "bridging the gap") and/or think about actuarial reduction if appropriate.

• Learn to use Microsoft Excel (other spreadsheet software is available) and write yourself a retirement planning spreadsheet, and finally…

DrSyn

You all ready know from your previous post

https://forums.moneysavingexpert.com/discussion/5995405/beginner-to-investing

the reasons why many think what your trying, is not the best approach for a beginner, so I will not repeat them here.

You can do your research for platforms here:-

https://monevator.com/compare-uk-cheapest-online-brokers/

http://www.comparefundplatforms.com/compare.aspx

bostonerimus

Saving and investing compliment each other and you should be doing them both. So you should have money in the bank and saving accounts giving you a couple of percent interest. You should also have money invested in the stock and bond markets to grow over many years. Most people do this inside pensions and maybe a stocks and shares ISA and it is a long slow process, but will eventually give you financial security.

Your desire to trade shares is very seldom successful and most people lose money because of hubris and inexperience. So educate yourself and make use of your company pension and ISA allowance to build up a portfolio of funds over a number of years.

Also the fastest way to make money is to cut your spending, so do a budget and every pound you save is a guaranteed 100% return and that is hard to beat.

jonnygee2

I would also like it to be a hobby and get involved in reading the money sections in the papers and choosing companies I think will be successful.

Don't make a hobby out of your savings.

Sure, either set up a virtual account or a small pot and start experimenting with money you can afford to lose.

For long term savings, put them in a managed fund. If you really want more involvement / risk, split them between some index trackers.

seacaitch

Ojb wrote: »

get involved in reading the money sections in the papers and choosing companies I think will be successful

Unfortunately, posters here and on previous threads are, wisely, not telling you what you want to hear.

I'll add to that: paying much attention to what journalists in newspapers write about investment matters is quite likely to be damaging to your wealth, not additive, and as such I'd generally recommend avoiding reading this sort of stuff, unless your goal is to gain some insight into what the mainstream, consensus "popular" opinion might be, ie. as an input to a contrarian strategy.

Becoming an experienced, successful investor is largely about learning to cultivate an unexciting, methodical approach.

With maybe a few exceptions, the stuff you read in newspaper finance sections will very often not be conducive to this, and may encourage you into behaviours that will be detrimental to returns.

As has already been mentioned, I'd recommend first getting some sensible long term investment plan in place via broadly diversified (global) funds.

Then, *if* you really have a strong interest in direct investment, begin reading up on the subject; be aware this is a very large subject domain and to establish for yourself a useful level of knowledge may require a very large commitment of time and effort, reading stuff that most people find extremely boring, for example learning how to read company accounts.

In order to enjoy success via direct investment in individual companies it's essential that you have some sort of "edge" over other investors as a whole. This is very difficult, as "investment" is one of (if not the) most competitive field(s) in human life.

If you don't believe me, listen to Ray Dalio, who noted last week*:

"“First of all, the main thing I would worry about as an amateur investor is whether you can win at this game. I strongly doubt that you can,” he wrote. “I believe that competing in the markets is more difficult than competing in the Olympics, because there are more people trying to make money doing it and it’s a zero-sum game, yet most people think that they can do it. However, history has shown that only a small percentage of the players of this game walk away with a lot of money and most lose money.”"

One area where can be possible gain an edge is in under-researched areas of the market, such as small-to-micro cap companies, but you should be aware this is also extremely dangerous territory for investors, with most losing money - and many losing lots of money.

Many private investors operating in that field often believe they have an edge, but they don't and are simply gambling. Hence, most lose, and lose a lot.

If that appeals, go ahead!

It's not impossible that you could make a success of direct investment in companies, but the likelihood of you over the longer term exceeding the returns available from a sensible constructed globally diversified portfolio are very low. That's the reality.


* https://observer.com/2019/05/ray-dalio-bridgewater-investing-tips-reddit-ama/

Albermarle

I think reading the money sections of newspapers is a good start to learning about things financial , perhaps less so nowadays with the internet but still useful as a starting point .
It's better than not reading them at all and remaining in total ignorance on the subject , like probably 75% of the population.
On the other hand any specific recommendations for shares etc should be studiously ignored, as already said.