Is it worthwhile investing £10k?

Blibble

Evening all,

Long time subscriber, though not often on this particular board!

My wife and I are extremely fortunate to have recently been gifted £30k by a close relative. Including existing savings this is, by a country mile, the most money either of us have ever seen in our bank account, and we're at a bit of a loss where to go from here so have considered investing a proportion of it.

In short, we have £50k total savings now. £9k is already tied up to landscape our garden, leaving £41k. We need to work out other priorities in the pipeline for a few years however expect to be left with between £10k and £20k, depending on how we go about these other priorities.

We're therefore looking for some general advice from the board, specifically - 

a) Is it possible AND worthwhile investing £10k compared to sticking it in an ISA?
b) If it is worthwhile, are there generally fees / charges for an IFA to set up that investment, as neither of us is comfortable with the DIY route?
c) How does the return on investment stack up against an increased pension contribution, and a smaller take-home pay each month? We're both mid-to-late 20s FWIW with fairly low pension contributions to date. O/H is also leaving her job in a month, which is clouding the whole picture further!

Thanks for reading, and any very general advice or experience appreciated.

El_Torro

Sticking it in an ISA is a form of investing. If you put it in a Stocks & Shares ISA instead of a Cash ISA anyway.

Giving £10k to an IFA is not a good idea. The fees they would charge you would eat into quite a few years worth of returns. I suspect that if you tell an IFA you want to invest £10k with them they will tell you that this value is too low for them to get involved.

If you are putting £10k into your pensions then this is probably the most tax efficient thing you can do as you will get tax relief on the way in and probably won't pay much tax on the way out. The downside being that it will be quite a few decades before you're allowed to access the money.

If you want to invest with easy access to your money then a S&S ISA is pobably the best route. I know you said you don't want to DIY, though it doesn't need to be complicated. You could just put it all in a global tracker or multi asset fund and ride out any volatility (best to invest for 10 years or more).

If you do decide to DIY then it's worth doing some research (asking follow up questions on this thread can be considered research) so that you know what you're getting yourselves into.

bostonerimus

First pay off any high interest debt you have. 

Then put (and keep) 6 month’s to a year’s spending in the bank for emergencies. 

FYI an S&S ISA is an investment and I suggest if you go that route you put the money into a low cost multi-asset fund with a high percentage of equities sold by one of the big fund firms like Vanguard, HSBC, iShares etc. you do not need and IFA as it’s easy to open such an ISA with one of the large platforms.

However, it’s probably better for you to make extra pension contributions because of the tax advantage.

Blibble

Thanks both for the above, it may well be the right thing to do is to split the remainder between increased pension contributions & some form of investment, but obviously only we can make that decision.

Thanks, too, for dissuading me from the IFA route (which was my preference, actually!); we have a really good local IFA who has helped re-mortgage our house to jump on the best initial rate, but appreciate the fees involved in investing a relatively small amount wouldn't make that route viable.

I've never really fully investigated the S&S ISA route, which is to my detriment as it looks to be a good gateway in to investing. I've had a nosey at Halifax's offering (purely because our main bank account is with them) and have a couple of questions - 

a) Can you invest in *any* company on the stock market whatsoever? 
b) If so, is that advisable compared to a fund or portfolio of companies?
c) What sort of fee rates are competitive for S&S ISAs? Halifax offers £9.50 "per trade" (what does this mean, sorry?!), £2 per scheduled investment, and a £36 p/a flat admin charge (which, I'm guessing is self-explanatory?)

Cheers all, greatly appreciated.

colsten

You should not invest in individual companies/stocks but use a global multi-asset fund such as one of the Vanguard Lifestrategy or Vanguard Target Retirement Funds, or a HSBC Global Strategy portfolio.

For investments, read up about passive investing and choose a platform with the lowest fees (unlikely to be Halifax).

You might also want to consider one of the Robo investment apps such as Wealthify or InvestEngine as they select the investments based on a risk assessment they carry out with you, but they are likely to have higher charges.

El_Torro

If you're new to investing and you are looking at individual shares rather than funds you're essentially trying to sprint before you can crawl. Buying individual shares can work, with a lot of luck and a lot of micromanagement. Many experienced investors will tell you that funds are simply a much easier and safer way to invest. 

To give you an idea, the long term return of a global tracker (invested 100% in equities) is about 7% per year, including inflation. We don't know what the future will bring of course (it may be less than 7% per year for the next 10 years, then again it might not) but historically investing in a well diversified fund gives much better returns than cash. If you invest in the right individual shares you could earn a lot more than this. Of course if you pick the wrong shares you could also lose a significant amount of money.

I don't have recent experience with Halifax, though they don't seem to be a bad platform for buying funds. There are various articles on the internet comparing platforms,for example here: https://monevator.com/compare-uk-cheapest-online-brokers/

Monevator is a very good site in general, with lots of information on how to invest, especially passively in tracker funds.

colsten

A word of warning: if your donor dies within 7 years of gifting you the money, some or all of it will still form part of their estate and inheritance tax might become due on it. Make sure you know where you stand. https://www.gov.uk/inheritance-tax/gifts

Type_45

What I would personally do:

Open a S&S ISA with Halifax, who you already bank with.

Invest your money in Vanguard Life Strategy 60% Accumulator.

As you bank with Halifax, my understanding is that you will also be able to see your ISA on their app.

MX5huggy

A) yes just about any UK share, but you should not buy any individual shares at all see B

no it’s like putting all your money on single number on the roulette wheel or you might choose  say 4 numbers you still likely to loose. The suggested FTSE All World Index options from Vanguard and HSBC is like putting your money on Red Black and 0 you have totally spread the risk in the case of Vanguard across 6900 or more shares you have a tiny bit of Apple and Facebook and a really tiny bit of Topps Tiles and some obscure bank in South Africa and everything in between because no one knows what will be the best so you buy everything. 

C) There’s Platform fees then then Fund fees then trading fees. So Halifax platform fee is £36. Fund fees vary by fund and are the same which ever platform you use low fees are 0.15% going up to 1.5% plus. Trading fees are the cost of buying and selling the funds.

Vanguard charge 0.15% platform fee so they are cheaper than Halifax until you hold £24k or more. Vanguard charge 0.23% for their FTSE All World tracker. They don’t charge any Trading fees (as long as you choose to invest at the next trading point which is once a day) as you are investing for the long term whether you invest at 9:50 one morning or 14:30 will make no difference if it saves you the trading fee.

https://monevator.com/best-global-tracker-funds/

https://www.vanguardinvestor.co.uk/

MX5huggy

If you put “B” then a bracket ) you get a

colsten

Type_45 said:

What I would personally do:

Open a S&S ISA with Halifax, who you already bank with.

Invest your money in Vanguard Life Strategy 60% Accumulator.

As you bank with Halifax, my understanding is that you will also be able to see your ISA on their app.

Having current and/or savings accounts with Halifax is absolutely no reason why you would choose Halifax as your investment platform. There is also no need to see your investment every time you check your current account.

If a Vanguard Fund is indeed the OP's choice, the most cost-effective platform would be Vanguard. Platform costs are critical, especially if the investment is only £10K.