Helping parents with investment

monaymadlol

Hi, my parents in their early 60s, no mortgage or debts, are not money savvy. They're cash is languishing in low savings rate. I'm trying to persuade them to get a s&s isa, a tracker of some sort, to leave in for 5-10 years. I think they'll be able to put in at least 100pcm. They are worried of losing cash even though markets will outperform cash over time. I think they're not well enough read into the topic.

Any suggestions on Best products etc out there? I'm thinking a VGLS product or HSBC GS, or some sort of ftse 100/250 tracker?  Any any basic sites to show them not to be so frightened? I know it's later in the day for them, but there's still time

Albermarle

They're cash is languishing in low savings rate.

How low? Maybe if they had a fixed rate /period account it would pay better with no risk . 3 years will pay about 1.25% ( was more until recently)

What is their pension situation ? It might better to add the £100 pcm to a pension than a S&S ISA.

monaymadlol

My mom retires in few years and will get 18k net per annum plus whatever state. Dad works couple hours a day, since retiring few years ago and gets state and work pension, don't know exact figures. They have a number of cash savings/isa I understand, but I barely take notice of rates myself since I invest in physical assets and trackers.IIts fine they keeping some in there, but I want to try get them to move any new excess money they don't need for 5-10 years into a balanced tracker.

Malthusian

monaymadlol said:

Hi, my parents in their early 60s, no mortgage or debts, are not money savvy. They're cash is languishing in low savings rate. I'm trying to persuade them to get a s&s isa, a tracker of some sort, to leave in for 5-10 years.

Why?

"Because savings rates are low" or "because a diversified stockmarket investment will outperform cash in the long term" is not an answer. That's like saying I should buy a Ferrari and in response to my answer "I don't want a Ferrari" saying "But your Micra is slow and a Ferrari would be faster, therefore you are wrong to not want a Ferrari".

Why do they need higher growth over 5-10 years?

If they don't, then leave them to it. If they don't value the higher growth of stockmarket investments, they will panic when markets go down and blame you for it.

Mutton_Geoff

monaymadlol said:

no mortgage or debts .. are not money savvy

Is that a paradox or an oxymoron?

grumiofoundation

monaymadlol said:

Hi, my parents in their early 60s, no mortgage or debts, are not money savvy. They're cash is languishing in low savings rate. I'm trying to persuade them to get a s&s isa, a tracker of some sort, to leave in for 5-10 years. I think they'll be able to put in at least 100pcm. They are worried of losing cash even though markets will likely outperform cash over time. I think they're not well enough read into the topic.

Any suggestions on Best products etc out there? I'm thinking a VGLS product or HSBC GS, or some sort of ftse 100/250 tracker?  Any any basic sites to show them not to be so frightened? I know it's later in the day for them, but there's still time

FTSE 100/250 is investing solely in the UK. A global tracker is more diversified therefore less risky, not all your eggs in one basket (not dependant on UK economy). 

I agree with some of the questions above - If they want to invest why a S and S ISA not a pension? That way they benefit from tax relief.

Secondly do they really need/want to invest? With, form what you say, guaranteed >36000 26000 (edited) income, no mortgage, no debts why would they need to?

steampowered

This is a good article which clearly demonstrates what risk is involved with stock market investments: https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

It clearly illustrates, based on what has happened over the past 60 years or so, what are your chances at losing money on the stock market. As shown, if you are invested for 1 year, the probability of making a loss is about 25%. If you are invested for more than 13 years, the probability of making a loss drops to zero..

Linton

Be careful!  I suggest you do not go down this route. On other boards on this site I have seen many sad tales about families being split apart by money.  Dont forget it is their money for them to do with as they wish, if it's not what you would do, so what? Would they agree they need more income at the cost of possible extra stress?  How would you explain things if your parents followed your advice and there was another 2008-type crash.  You could well get the blame.

Voyager2002

steampowered said:

This is a good article which clearly demonstrates what risk is involved with stock market investments: https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

It clearly illustrates, based on what has happened over the past 60 years or so, what are your chances at losing money on the stock market. As shown, if you are invested for 1 year, the probability of making a loss is about 25%. If you are invested for more than 13 years, the probability of making a loss drops to zero..

I suggest that the OP encourages his parents to read this article and then does nothing more: they are the ones to decide on their own risk tolerance and it is pretty clear that even a global tracker is above that level.

The calculation of 0 probablity of loss on investments held for longer than 13 years requires commentary: clearly this does not mean that loss is impossible, and the risk involved might still be more than some people are willing to take. And of course the parents may need all their money within 13 years...

Old_Lifer

'They are worried of losing cash'       'can leave it for 5-10 years'

Sounds like they are not yet comfortable with the idea of stock market investments.    Will they panic and sell if there is a large fall  (or even a not so large fall) ?     Does  5-10 years really mean 5 years ?

dunstonh

Hi, my parents in their early 60s, no mortgage or debts, are not money savvy. They're cash is languishing in low savings rate. I'm trying to persuade them to get a s&s isa, a tracker of some sort, to leave in for 5-10 years.
 I think they'll be able to put in at least 100pcm. They are worried of losing cash even though markets will outperform cash over time. I think they're not well enough read into the topic.  Any suggestions on Best products etc out there? I'm thinking a VGLS product or HSBC GS, or some sort of ftse 100/250 tracker?  Any any basic sites to show them not to be so frightened? I know it's later in the day for them, but there's still time

To be fair, I don't think you are not well enough read into the topic and are in no position to dish out bad advice to your parents.   It just risks trouble later one.

You are all over the place with your suggestions.  Multi-Asset, a dire FTSE100 tracker, a very high risk FTSE250 tracker.....

For a monthly contribution, 5 years is way too short. Even 10 years is not ideal.  15 should really be the minimum.

If you take a typical 1-10 risk scale with cash =1 and 10 = highest risk mainstream investments then why are you trying to take them 1 to 10 in one fail swoop?     They are cautious and they should invest that way. 

Why are you looking at ISA and not pension?  It is quite possible that a pension wrapper is better than an ISA wrapper.  Have you considered that?

Yes, they probably should consider some investing if they have excess cash. They are taking on other risks that they have not thought about (inflation risk and shortfall risk).  However, it doesn't mean they should go and throw it in very high risk options.