Investments Advice, Guidance

Gareth2020

I currently have the Halifax Share Dealing Sharebuilder Account - I am a group based colleague so it makes sense as i have no fees for regular investment.  Currently my investment portfolio is bank based.  I will be diversifying in my next regular investments into other industry.  My current set up looks like this:

• PCF Group
• Barclays
• Lloyds Ord 10p Share
• Lloyds Banking Group 9.75 Non-!!!!!! IRRD Pref 0.25

Have only around £1100.00 invested with the bulk being in Lloyds Shares, as I think with more stability these shares should rise.  Although can anyone tell me what the Lloyds NON-!!!!!! Shares are? these were bought by mistake as I misread the title, and hold approx £250 in these.  Are these worth it? Should I buy more? What is it?
I also have a Scottish Widows ISA investing monthly into the environmental portfolio.  Does anyone know anything about this? Again about £500 in this? 

I also regularly invest in Legal and General Ethical Fund.

As you can tell im quite new to this and would like any advice etc. I have read widely but there is loads of information its just knowing what to do with it  

eskbanker

Investing in one narrow sector within one country is very limited diversity (practically none tbh), so most on here would advocate a far more balanced approach, encompassing global coverage across all major industry sectors, and probably other asset types as well.

Not sure what you've been reading thus far but I'd usually recommend starting your research at sites suited to inexperienced investors, such as:

https://www.moneyadviceservice.org.uk/en/articles/investing-beginners-guide
https://www.hl.co.uk/beginners-guides/investing
http://www.monevator.com
http://kroijer.com/
http://diyinvestoruk.blogspot.com/
https://www.ifa.com/indexfundsthemovie/

as well as bearing in mind a number of key points of principle:

1. Only consider investing once you have adequate accessible cash reserves.
2. Only invest if you're happy to commit for at least 5-7 years and preferably 10-15 or more.
3. Diversify - ignore individual shares, etc, and concentrate on collective investments that spread your eggs over many baskets. Global multi-asset funds are a good place to start, available from the likes of HSBC Global Strategy, Vanguard LifeStrategy, Blackrock Consensus and L&G Multi-Index.
4. Choose what you want to invest in before considering which platform to hold it/them on.
5. Keep an eye on ongoing costs for funds and platforms - they shouldn't be the primary consideration but can make a noticeable difference over the long term.
6. Use a Stocks & Shares ISA as a tax-efficient wrapper to avoid liability for income and capital gains tax.

Gareth2020

Thanks Esk! From what I read individual shares haven't been too favoured! Would you recommend or know of any funds that might be worthwhile to check out? Financially I'm OK so don't kind sticking £200-300 a month into shares 

eskbanker

Gareth2020 said:

Would you recommend or know of any funds that might be worthwhile to check out?

Bullet point 3 of the list in my post suggests some generalist multi-asset options likely to be suited to those without the time, inclination and knowledge to construct bespoke portfolios....

Gareth2020

That time on a Friday night! Perfect! Going to go and check these out! 

bowlhead99

The Lloyds shares are 'preference' shares. To simplify things: ignoring customer deposits, Lloyds as a banking group gets finance from the investment market in three main ways:

1) Bonds and loans. This is pure debt, owed by Lloyds to the people who lent the money. If you buy a bond or loan note, Lloyds is your debtor and owes you the money back plus an agreed amount of interest per year per bond. The bonds will be redeemed (paid off) at some specified future date and in the meantime the bonds trade on a market so can go up or down in value. But the repayment is contractual, as long as they are solvent you can sue them for the money if they don't pay you on time.

2. Equity share capital. These are the 'ordinary' shares listed on a stock exchange which give you ownership of the company and a right to vote on various company matters as well as receive dividends if it's decided that they should pay them. As an owner of the company you will receive your share of whatever is left on a winding up, or your share of the proceeds if someone else comes along and buys the whole company. The value of the shares on the stock exchange fluctuates more than the bonds and is much riskier to own - because if the company is doing badly the bondholders and other creditors get their contractual cash flows before the owners get anything, so there may not be anything left for ordinary shareholders if something bad happens to the company. 

3 Preference share capital. The shares you bought are preference shares with a fixed rate of dividend which means they get paid out before (in preference to) the ordinary shares. However you are only entitled to get a fixed dividend per year ahead of the ordinary shares holders (they can't pay any dividend to ordinary shareholders if they don't pay your fixed agreed dividend first), and on a sale or winding-up you will only get back the nominal value of the shares, rather than what the ordinary shareholders get (what they get is all the rest of the residual value of the entire business after the debts have been paid and preference shareholders paid off).

The 'non-cumulative' aspect means that although they are supposed to pay a semi-annual fixed dividend of 9.75p per share per year (split into two payments of 4.875p in May and November), if they decide not to pay it one year, they don't need to pay double to catch up the next year. When Lloyds got bailed out by the government some years back and told they couldn't pay dividends for a while, the payments simply stopped and the value dropped a lot because of the uncertainty about if or when they would recover from turmoil and be able to start paying again. 

So, 'prefs' are riskier than bonds (whose interest coupons would still be paid if the company is generally solvent because the bank would find it very difficult to borrow money again if they had a reputation for missing interest payments), but they are less risky than equities because you will get the full 9.75p dividend for a given year if the ordinary shareholders get anything at all, and because you get paid before ordinary shareholders in a wind up or takeover - so they didn't lose 90% of their value in the global financial crisis, like ordinary shares did.

But the bottom line on what you should do is perhaps that the LLPD shares you have are not what you intended to buy, and do not have as much long term growth potential as ordinary shares, so logic dictates you should sell them. They will generally go down in value as interest rates rise because their fixed rate of payment (9.75p per share per year) is less attractive when rates on cash and loans are higher. 

On the other hand, there is a reasonable spread between buying and selling prices because the market is much less liquid than the ordinary shares, and the fees to sell a small amount will be a chunk of the value, so selling them is not a great prospect. They're not a terrible thing to hold because they're less risky than the ordinary shares, and the rate of cash payment isn't too bad at all for the risks being taken compared to other high yield investment opportunities.

I have several thousand Lloyds pref shares in my pension and shares accounts and they are not the worst thing to hold for a small part of your portfolio, otherwise I wouldn't have them. You could mentally write them off and just harvest the dividend and they would probably eventually pay for themselves. However if you didn't want this sort of niche investment in the first place, it might be simpler to just dump them - and use the resulting cash to buy whatever mixed asset fund is more suitable, after you've done some more reading.