Starting out in investing

peterp85

Hi all - I am after some investment guidance please... I am fairly risk adverse, but with the poor savings rates available I feel I need to to be at least trying to achieve 5% on my savings.
I have no high interest debts and a fixed rate mortgage. I have 50k in premium bonds as an emergency fund and 20k not doing much that I am looking to start off investing with. I have £200 in a month going into work share scheme with a good option rate. Would look to drip feed another £250 into a S&S isa.
Will be looking to move house in 6-8 years and use the money towards that.
Thank you and any tips on an investment approach to take would be greatly appreciated.

tacpot12

My advice would be to look for a large (in terms of capital), well-diversified, global, mutual fund with low charges, and then find a platform with low charges to hold the fund in a S&S ISA. 

El_Torro

Since you’re risk averse and plan to use the money in 8 years or less to buy a new house one option, if your mortgage lender allows it penalty free, would be to overpay your current mortgage. It allows you to build up a bigger deposit for your next house at least.

investing will most likely give you a much better return than overpaying the mortgage, though should really be invested for 10 years or more. Also with investing you can lose money if you’re not careful and do silly things like selling when the markets drop.

Don’t let me dissuade you from investing if that’s what you really want to do. You’ll need to do some research if you want to get it right though.

Thrugelmir

peterp85 said:

 I feel I need to to be at least trying to achieve 5% on my savings.

Given you are risk adverse and the money is for a defined purpose within a short time frame. I'd lower your expectations. As there's no certainty that you'll make a positive return. Only risk what you can afford to lose. 

Another_Saver

Overpaying your mortgage is great if you want to use this money for a house deposit because it's like you're saving at your mortgage rate.

For 6-8 years, and if you know you want the money for a house deposit, and given your risk profile, imho you should not be thinking about investing at all.

But there are 2 specific reasons as well.

1. Is given current stock market valuations and your short timeframe the chance of making a loss, or not making a profit of at least your mortgage rate between now and then is material.

2. Is you said low risk. The only way to invest low risk is to buy bonds, or a multi asset fund that includes bonds. Say you go for Vanguard lifestrategy or HSBC global strategy, the return you'll get from the bonds element of the funds (i.e. in vanguard lifestrategy 60, 40% of the fund so bonds, in HSBC global strategy balanced it's usually 30-40%) is the yield to maturity of a global bond index fund, currently about 0.7%, and that's before fees. If your mortgage is any higher than that, say 2%, it would be like borrowing at 2% to lend at 0.7%.

Alexland

Agree with most of the posters above - getting a likely 5% return in this low interest environment requires taking a lot of investment risk which is amplified by the short timescales before you need to use the money. As such if overpaying your mortgage gives a better return than you can get in cash savings it might be the smartest move. £70k is a lot of cash to be holding. Investing over the longer term using pensions etc is a much lower risk way of taking advantage of the stock market.

ElephantBoy57

peterp85 said:

Hi all - I am after some investment guidance please... I am fairly risk adverse, but with the poor savings rates available I feel I need to to be at least trying to achieve 5% on my savings.

Try this test to measure your risk level. I got 39 medium/high

https://www.standardlife.co.uk/investments/tools/investment-risk

csgohan4

risk adverse and medium/high return don't mix, OP you need to set your expectations lower. 

Maybe premium bonds would be more suitable?

Old_Lifer

If you are set on investing,  I would agree with   tacpot12   but if you are planning a house move  in the next few years  I would avoid the stock market,  since when you need the money  there is the risk that you could find you have less than you started with.

Albermarle

What is your pension situation and your age ? You might well be better increasing regular contributions to your pension rather than starting a S&S ISA. 

peterp85

Albermarle said:

What is your pension situation and your age ? You might well be better increasing regular contributions to your pension rather than starting a S&S ISA. 

I'm 35, contributing 1200 a month to a pension (maxed out employer contributions).