Where to Start?

FUNDSS

Hello all,

New to the forum. To cut a long story short, I'm in my mid20s with a decent sum saved up (I obviously won't disclose on here). I'm keen to invest in funds/REITs/ISAs but I'm not sure where to start...or even where to start looking! :rotfl:

There is almost too much information out there, and a lot of the advice that is out there, though decent, tends to be quite Americanised (I am from the UK). Obviously, I am looking for low cost options that are low risk that will produce good long-term outcomes, as per the advice. But where/how do I find these, and when I do, how do I decide they're the right investment for me? On top of this, the prospect of Brexit/a Corbyn govt/both make personal finances even more complicated. :mad:
Could anyone please share some pointers to get me started? Any advice would be fantastically appreciated! :beer:

george4064

(Apologies if you have done this already) but you need to take a step back, look at the bigger picture and think about what your financial goals are. For example saving up for your first property, your wedding or whatever, and also timescales to these particular events. In addition, do you have any debts that might be better to clear before investing? Do you have a sufficient emergency fund in cash to cover any short to medium term costs that might arise (such as need a new boiler, car issues, you get made redundant).


If you have done all this, and you're ready for investing I would suggest keeping it simple and going with a globally diversified fund. At your age I'd go for a 100% equity fund, but you might want to go for a global multi-asset fund which will invest in other asset classes to diversify a bit more and potentially reduce risk (and therefore reduce potential returns).


Good places to read through are:


www.monevator.com


Vanguard Life Strategy Funds
BlackRock Consensus Funds


Tim Hale - Smarter Investing

MallyGirl

FUNDSS wrote: »

Hello all,

New to the forum. To cut a long story short, I'm in my mid20s with a decent sum saved up (I obviously won't disclose on here). I'm keen to invest in funds/REITs/ISAs but I'm not sure where to start...or even where to start looking! :rotfl:

Starting point - you don't invest in ISAs. You can put investments in ISAs as they are just a tax efficient (on the way out) wrapper.
How's your pension provision - if any of your savings are towards a nicer retirement then that should be looked at. They are tax efficient on the way in.
Investments are for the long term - 10 years plus. Will you need any of the money sooner than that?

Albermarle

On top of this, the prospect of Brexit/a Corbyn govt/both make personal finances even more complicated.

I would not worry about this aspect too much for three reasons:
1) The outcome is unpredictable
2) Investing is a long term business, and in 10 years time there will be a totally different business and political situation
3) What happens in UK has minimal influence on global markets .

More important is what is your pension situation?, as this has to be an important part of any financial planning/investing strategy.

DrSyn

Short version.

Savings:- Means putting money in a Bank or Building Society where you can expect to get back what you put in. Make sure it is covered by the FSCS protection (up to £85k at present). Also in NS&I which is a loan to the UK government.

Investing:- Means long term gambling with your money, with the hope of getting out more than you put in. There are no guarantees, your money is at risk. Long term means 10 years or more.


1, Have an emergency fund to cover car/boiler brake downs etc.

2. Clear debts (so you are not paying high interest).

3. Think of starting a pension.

4, Think of your investment goals.

5. Watch both of these before starting to invest:-

http://www.kroijer.com/
https://www.ifa.com/indexfundsthemovie/

6. A good place to consider investing is a low cost Global Multi Asset Fund, such as one of these:-


Vanguard Life Strategy
HSBC Global Strategy
L&G Multi Index Funds
Blackrock Consensus
Architas Passive

These have wide diversification while minimising risk, at low cost.

Vanguard Life Strategy (VLS) seems the most often mentioned.

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link


7. If you do invest, place the fund inside of a Stocks & Shares ISA.

Audaxer

FUNDSS wrote: »

There is almost too much information out there, and a lot of the advice that is out there, though decent, tends to be quite Americanised (I am from the UK). Obviously, I am looking for low cost options that are low risk that will produce good long-term outcomes, as per the advice.

It's good that you're in your mid-20s and looking to invest for good long term outcomes. You are right to look for low cost options, but if you are investing for the long term of say over 20 years, you won't get the best returns with low risk investments. For example a good start would be a low cost, globally diversified multi asset fund. One example popular on here is the Vanguard Life Strategy range of funds. You can choose versions with either 20%, 40%, 60%, 80% or 100% equities. The 20% equity version includes 80% bonds so it is the least risky in that it is less volatile, but it is much less likely to produce higher returns over the long term rather than the versions with higher levels of equities. That is why most investors with years of investing ahead of them will choose to have portfolios with higher percentages of equities. If they are investing regular monthly sums in the funds, when values drop it is actually to their advantage as they will then be buying units in the fund at cheaper prices.

There are other popular globally diversified multi asset funds like HSBC Global Strategy funds and L&G Multi Index funds. A good place to start researching low cost investing is on the Monevator website.

FUNDSS

Hello, I know this is a late reply, i do have a quick question here about the Vanguard LifeStrategy funds. Can I please ask why they are particularly recommended? For example, I found on Vanguard a FTSE Developed World excluding UK which has, over the last few years, provided better returns. (Unfortunately as a new member I cannot post the link!)

Is there any particular reason for this?

MaxiRobriguez

And to point out people don't buy Vanguard funds because they outperform, they buy them because they match market gains and do so whilst being cheap to buy and easy to understand.

Half the battle with your investment choices is growth, the other half is reducing cost.

iglad

FUNDSS wrote: »

Hello, I know this is a late reply, i do have a quick question here about the Vanguard LifeStrategy funds. Can I please ask why they are particularly recommended? For example, I found on Vanguard a FTSE Developed World excluding UK which has, over the last few years, provided better returns. (Unfortunately as a new member I cannot post the link!)

Is there any particular reason for this?

please note that are far better performing funds out there, yes they will cost more but you will have far greater gains than Vanguard who everybody raves about as they are cheap but performance is about 1/3 - 1/2 of the best performing funds over most periods. For someone young like yourself who's got about 40 years of investing ahead of themselves go for an active fund. The extra growth will also be compounded, which no one seems to mention. I suggest that you do your own research check out the best performing funds in each sector or region you are interested in.

If you are unsure then take a global approach. However it's really about you doing some research. I find the money observer performance tables to be a good place to start for the basics.

https://www.moneyobserver.com/funds

sendu

iglad wrote: »

please note that are far better performing funds out there, yes they will cost more but you will have far greater gains than Vanguard who everybody raves about as they are cheap but performance is about 1/3 - 1/2 of the best performing funds over most periods. For someone young like yourself who's got about 40 years of investing ahead of themselves go for an active fund.

Actively managed funds that currently have high returns are unlikely to beat the market average over the long term. According to Morningstar research, for example, the best predictor of ultimate fund performance is merely having a low OFC.

Why? Because the currently above-average funds are only doing so due to luck, not due to skill of the active management. When the luck runs out, they fall back below average performance, and overall their performance will be average minus their OFC.

Do not chase returns by picking the active fund with the highest % return from last year. If you pick and switch funds on this basis, you will be constantly buying high and selling low, which is an excellent way of destroying your wealth.

To actually benefit from these active funds that end up having above-average returns, you need to invest in them while their returns are low (or when they are new), then sell when they hit their peak.

The problem, of course, is that no one has the magical foresight to be able to do this.

(There's a small chance that 2 of the famous UK fund managers might have actual skill, but their funds are getting too big now and those constraints suggest their days of outperformance are numbered, even if they have skill and not luck.)

DrSyn

iglad wrote: »

I suggest that you do your own research check out the best performing funds in each sector or region you are interested in.

If you are unsure then take a global approach. However it's really about you doing some research. I find the money observer performance tables to be a good place to start for the basics.

https://www.moneyobserver.com/funds

This research is looking backwards. It will not tell you what funds will give you the best returns going forward.

If all it took to pick tomorrows winners was to pick yesterdays best funds, investing would be so easy.

Also jumping from one best fund to another best funds incurs charges which will reduce any profits, as will the higher fees that these so called "best funds" will charge. Over 20 years that is a large amount of profit that will be lost.

Have a play with this and calculate your T-Rex Score:-
https://larrybates.ca/t-rex-score/

There may well be a few active star fund managers who will consistently perform better than an index but this will before all charges and fees are applied.

Trying to find those funds that consistently do better than their index over 20 years is like looking for a needle in a hay stack because over the long term funds revert to the mean.

Academic research keeps finding that after charges passive funds produce better returns than there equivalent active funds.


You pays your money and takes you pick.