£5000 to invest

TemporaryUsernameMay2020

col81 said:

I am new to it I simply want something to put £1000 into plus then the monthly money that I can watch daily that I wont lose much on with a plan of around 2 years to keep it running. It's a minefield. I have premium bonds now never drew a bean. Plus it's boring and I'm open to a bit of a gamble. I get there is low medium high risk but I dont want to have put 4k in and have £1500 at the end if you get my drift. Advice appreciated 

You can watch the price daily, but that is not a very effective way of limiting losses. Partly because there could be a crash on a single day; recently, we had a crash (defined as a fall of 20% or more) over several weeks in February and March, but sometimes, it could happen on a single day (as happened back in 1987). But more importantly, because selling out after a large fall is not a great strategy; for instance, if you'd sold in March, you'd have missed out on the significant recovery we've had since then (not yet a full recovery to the pre-crash level).

The better way to limit losses is to choose a suitable level of exposure to shares, and stick to it. Certainly don't buy individual shares, because any one share could even become worthless, or at least lose most of its value. But if you use a fund which gives you well-diversified exposure to shares (1000s of them, from dozens of countries), then a rough rule of thumb is that the worst case might be a fall in shares of about 50%, after which you could reasonably expect a recovery, though it could take months or years.

For instance, if the maximum (temporary) loss you could stomach is 30%, you could pick a multi-asset fund which puts 60% of your money into shares (and the other 40% in bonds, which are relatively stable in value — they can fall, but not nearly as much as shares can).

However, the 2 years plan you mention is not really long enough. Shares sometimes go up, sometimes down; you could get a good or bad 2 years. But you couldn't be at all confident of doing better than staying in cash over so short a time. Over longer periods, such as at least 5 years, or ideally at least 10, the ups and downs of shares start to even out, and you could be more confident, though still not certain, of doing better than staying in cash.

grumiofoundation

col81 said:

I am new to it I simply want something to put £1000 into plus then the monthly money that I can watch daily that I wont lose much on with a plan of around 2 years to keep it running. It's a minefield. I have premium bonds now never drew a bean. Plus it's boring and I'm open to a bit of a gamble. I get there is low medium high risk but I dont want to have put 4k in and have £1500 at the end if you get my drift. Advice appreciated 

You are highly likely to lose money investing in individual shares over 2 years, far more likely than if you invested in a balanced, diversified portfolio with a sensible timescale. 

Investing in individual shares is very high risk. 

2 years is a very short timescale. 

You will be watching daily, so this presumably means you will jump in and buy/sell when you see price fluctuations? How will you know when to buy/sell?

You may well make money, but you may well lose a large chunk of the capital - are you happy with this?