New Investor Help

thelastusername

Now I know there is probably no guarantee on investments..... but I have recently been left £300,000 and wish to make some investments.
I have seen a "Salesman" from SJP and already seen the high costs. 
I know nothing about investing so think a managed fund would probably be best 
Any advice on some alternatives..... i looked at nutmeg but as a advert popped up but have no idea if that type of method of investing is a good way for a new person to investing.

thegentleway

I would suggest speaking to an independent financial advisor. You should be able to find a local one which will have much more competitive rates than SJP.

csgohan4

https://monevator.com/

You could also consider doing it yourself and save all those fees

Park in a NS&I income bonds for now/ premium bonds for now until you have made your decision for which funds to invest, then max out your isa allocations each year. 

Consider maxing out your pension contributions too

Albermarle

I know nothing about investing so think a managed fund would probably be best

If you know nothing how do you know what would probably be best ?

Combining the two posts above , I would say see a local IFA for a couple of years and during that time learn more about investing with a view to DIY at some point .

dunstonh

I know nothing about investing so think a managed fund would probably be best 

It probably wouldn't be.

 i looked at nutmeg but as a advert popped up but have no idea if that type of method of investing is a good way for a new person to investing.

Great for small amounts. Not for larger amounts.   You are going to need multiple tax wrappers and annual CGT allowance use, Bed & ISA, bed & pension (potentially).   

Bobziz

Every day's a school day. What does the Bed in Bed and ISA stand for please ? never come across this term before, so thanks for the heads up. Looks like a useful mechanism. I understand that there used to be a bed & breakfast too, and it had nothing to do with holiday accommodation. 

thegentleway

https://www.youinvest.co.uk/isa/bed-and-isa

bowlhead99

Bobziz said:

Every day's a school day. What does the Bed in Bed and ISA stand for please ? never come across this term before, so thanks for the heads up. Looks like a useful mechanism. I understand that there used to be a bed & breakfast too, and it had nothing to do with holiday accommodation. 

When investing 'unwrapped' outside tax-protected products, you have to pay tax on capital gains (net of losses) and only get a certain annual exemption above which you pay tax. If you invest £100k and it goes up by 10% a year, and you don't sell any of the investments to cash them in... then after a while you will have a really big gain when you do eventually sell, and only have that one year's annual exemption to set against the gain. It would be smarter if you were able to sell a little bit of the investment every year, making a gain that fits neatly into your exemption (or not much above it) and thereby take the advantage of all these annual exemptions (over £100k of exemption over ten years) rather than just one lot of exemption at the end.  But the problem is, you don't necessarily want to get rid of the asset, because you still want the investment.

If there were no rules to prevent it, an individual whose £100k investment had turned into £110k of value would be able to pop down to the stockmarket at 4.29pm just before closing one day, perhaps near the end of the tax year, sell the £110k of assets making a gain or loss for tax purposes compared to what he'd originally paid for it... and then at 8am the next morning, go back to the stock market and buy back the exact same asset for the same or similar amount, £110k. With the end result that he could say that he had sold his asset and made a capital gain; but practically still have the exact same assets, just with a new higher allowable cost (i.e. "I've just paid £110k for these shares" instead of "I paid £100k for these shares last year").  Likewise he would be able to create a quick 'loss' by selling something for less than he paid for it, but immediately buying it back so that in practice, he still had it, but tells the tax man he had lost money on his investment. That practice would get the nickname 'bed and breakfasting' - stop holding the asset, go to bed, and buy it back after breakfast.

HMRC came up with a rule to prevent abuse of allowances and tax reliefs whereby they match new purchases with investments in the same shares that you sold the same day or in the last 30 days, to prevent you pulling a fast one and temporarily getting rid of your assets while almost immediately getting them back again. So bed and breakfasting no longer really works - you could sell Fund A and then use the proceeds to buy Fund B (making a gain or loss on the sale of A) but you couldn't sell Fund A and buy back Fund A and still say you had made a gain or loss by selling A, because you still have it really.  So a straight 'bed and breakfast' is not effective to create a tax gain or loss on demand and be able to manipulate your tax outcomes to maximise all the reliefs and allowances available.

However, if you or the OP are looking to keep your eventual taxable gains on £300k of assets as low as possible - while still benefiting from the growth in the assets over the long term - it is still possible to use related concepts.  So for example, each year you're getting a new ISA subscription allowance so you can sell some of the assets that aren't tax protected each year, make a gain, and buy the same sort of assets again but in the ISA.  As your purchase would be in a tax-free environment, the re-purchase wouldn't be matched with the sale, so the sale would be treated as a genuine disposal, making a gain from which some or all of it would be able to use up some of your annual CGT exemption. You would still end up with the same assets but now they would be in an ISA.  So, 'Bed and ISA' instead of Bed and Breakfast.

A similar concept would be, sell your unwrapped assets, make a gain or loss, put the proceeds into a pension (e.g. SIPP), and buy back the same assets again.  Bed and pension, or bed and SIPP.

Or sell some unwrapped investments, making a gain or loss, give the cash proceeds as a present to your wife, then your wife immediately buys back the same assets that you used to hold. The family still own the assets but the repurchase was made by a different person from the person who had just made the sale, and the two transactions won't be matched. So you effectively get away with bed-and-breakfasting, and now your wife owns the assets with a new higher base cost (because she bought them in the stock market at today's prices rather than the price from x years ago), so when she sells them there would be less of a gain than if you had kept them for several more years and sold them yourself.   That 'trick' would be 'bed and spouse'.

Bobziz

Fantastic explanation, thank you @bowlhead99. I guess if you were particularly pleased with the performance of your investment then you could pub and ISA or party and pension ! going to bed seems a slightly underwhelming response to a decent gain.

badger09

Bobziz said:

Fantastic explanation, thank you @bowlhead99. I guess if you were particularly pleased with the performance of your investment then you could pub and ISA or party and pension ! going to bed seems a slightly underwhelming response to a decent gain.

Doesn't that depend on who you go to bed with, and what you do when you get there?

carry_on_saving2

Another ingratiatingly grateful poster for bowlhead99, think someone needs a holiday 😉