Investing for the long term

clsmooth48

I would argue that the best time to invest is always right now. It’s not timing the market, it’s time in the market as they say. Would I recommend putting in a lump sum? Well It depends on the person. If they’re glued to the percentage returns daily (bad idea) I’d probably drop £2K now and £2K in a month and the final £1K the following month to ease their way into it. You could spread it over a few more months with slightly smaller investments if you like. The risk with this if we could well be at new all time highs again in a months time and the following months but if it’s the OP’s first investment, they might feel more comfortable with this strategy especially with such a short window.

The OP also needs to be able to stomach being 50% down at any stage in the cycle.. that could be next month, that could be in 3 years or it could be in 5. Statistically speaking, the percentage of rolling periods with positive returns for the S&P500 between 1926 and 2018 was 87.89% for 5 years. This reduces to 83.72% after 3 years and 75% after 1 year.

Consider this to mean that the S&P500 as an example, has historically risen 75% of the time and fallen 25% of the time over the past 100 years. Past performance is not a guarantee of future performance etc

benbay001

max_bosher said:

clsmooth48 said:

You should consider a low cost passive global equity accumulation fund such as is offered by Vanguard. You’d do even better if you can make monthly contributions over the 5 years..

Will do, I won't be able to make monthly contributions as I am a student unfortunately 

If youre a student and you have a student loan you couldnt do much better than to simply pay off any student loans.
Equities have historically achieved about 8% and most metrics point to markets being toppy right now so probably not a bad time to be out of the market.
A guaranteed 5.6% is a really good return on investment.

grumiofoundation

benbay001 said:

max_bosher said:

clsmooth48 said:

You should consider a low cost passive global equity accumulation fund such as is offered by Vanguard. You’d do even better if you can make monthly contributions over the 5 years..

Will do, I won't be able to make monthly contributions as I am a student unfortunately 

If youre a student and you have a student loan you couldnt do much better than to simply pay off any student loans. 
Equities have historically achieved about 8% and most metrics point to markets being toppy right now so probably not a bad time to be out of the market.
A guaranteed 5.6% is a really good return on investment.

This is frankly awful advice. 

The only situation in which I could give you the benefit of the doubt is if you don’t understand how the student loan system works! 

https://www.gov.uk/repaying-your-student-loan

Paying off a student loan is not a guaranteed 5.6%.

The key reason for this is you may not ever end up paying back the full amount,

Without any info on course, career prospects etc best assumption to make is that the OP will not actually pay off your student loans (most predicted not to, and if they do theywill be in a highly paid career). Therefore paying off will ‘most likely’ cost the OP money in both the short AND long term. 

Even in a situation where you can be pretty sure you will pay it back there is an argument to keep it, especially when you are younger, since you are likely to be able to make better use of the cash in hand - for example investing or more widely applicable saving for a deposit (esp. using LISA). 

Personally I don’t see that paying off a “loan” than you may not pay back (it’s better to think of it as a tax rather than a loan) before you have even started your career is sensible. 

Albermarle

If youre a student and you have a student loan you couldnt do much better than to simply pay off any student loans.

If it actually was a loan ( like from a bank) that had to be paid back , regardless of your circumstances,  then this advice could make sense.

However as explained above for the large majority of people with a student 'loan' . paying it off is a bad idea.

mrlegend123

max_bosher said:

I am looking at investing a lump sum of money to keep in a account for around 5 years, especially in a stocks and shares isa. Currently looking at investing in a Halifax one and debating between a S&P 500 ETF or a Vanguard fund for the whole US index
Also open to any other ideas?

mad to invest in the s and p at a CAPE of over 32......