Savings strategy

grumiofoundation

shmuli9 said:

Eccles04 said:
A couple of years ago after a house move I had a few thousand £'s left over. I the past when this happened now and then I just searched for a bank/building society paying a better interest rate than most and dumped the money there until such time as we needed a new car/boiler/whatever. However, no-one pays any kind of interest rate worth having anymore (has to be at least equal to inflation rate). Having done some research I discovered that there are a few fairly safe companies which regularly yield well above the inflation rate in the form of dividends and the government tax those divs at just 7.5% if they exceed £2k per annum. Next I needed to find a broker who would buy and hold shares for me super cheap and I found one - LSE who charges just £10 for buying/selling shares and nothing else. Also gives a lot of useful information on their website for free.The first company I bought was Legal & General who are safe as houses IMO and regularly pay around 6% in dividends. There are others of course and you will have to do your own research but it's a whole lot better than going to financial advisers or getting around 0.5% from the banks. Yes of course share prices can go up and down a bit even with "safe" companies but usually not by very much and if you ever need to cash in it's usually easy to hang around for a few weeks and jump in when the prices are a bit better.

Thanks for the tip @Eccles04 , I will have to see if I am comfortable spending the time to pick stocks when that isn't my primary concern. I'd prefer to have a more hands off approach while i focus on my career.

For a hands off investment a multi-asset fund ( <100% equities, see link for examples although a couple of years old now) or a global tracker (100% equities) would be the commonly suggested options to first look at. 

https://monevator.com/passive-fund-of-funds-the-rivals/
Global tracker - https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc/overview

You can also get 'ESG screened' global trackers if that is something you are interested in, don't invest in e.g tobacco, weapons
https://www.vanguardinvestor.co.uk/investments/vanguard-esg-developed-world-all-cap-equity-index-fund-gbp-acc/overview

Would echo previous posters that having a easily accessible emergency fund in cash (easy access savings account or premium bonds) is very, very sensible.

Eccles04 said:

A couple of years ago after a house move I had a few thousand £'s left over. I the past when this happened now and then I just searched for a bank/building society paying a better interest rate than most and dumped the money there until such time as we needed a new car/boiler/whatever. However, no-one pays any kind of interest rate worth having anymore (has to be at least equal to inflation rate). Having done some research I discovered that there are a few fairly safe companies which regularly yield well above the inflation rate in the form of dividends and the government tax those divs at just 7.5%

if they exceed £2k per annum. Next I needed to find a broker who would buy and hold shares for me super cheap and I found one - LSE who charges just £10 for buying/selling shares and nothing else. Also gives a lot of useful information on their website for free.The first company I bought was Legal & General who are safe as houses IMO and regularly pay around 6% in dividends. There are others of course and you will have to do your own research but it's a whole lot better than going to financial advisers or getting around 0.5% from the banks. Yes of course share prices can go up and down a bit even with "safe" companies but usually not by very much and if you ever need to cash in it's usually easy to hang around for a few weeks and jump in when the prices are a bit better.

Did your research not tell you that as long as you invest through an ISA/pension there is no tax to pay?

These companies aren't 'fairly safe'. Picking individual shares is higher risk than index funds. And also have to consider the time you need to put in to research each one (and for all the ones you then discount). 

Legal and general - yep safe as houses - ignoring of course the 50% drop Feb 2020 to march 2020 of course. Over a year later share price still below Feb 2020 peak. 

You have incorrectly narrowed your options down to savings, Financial advisors or individual shares. Ignoring passive index funds, multi-assets funds, managed funds.

As El_Torro posted earlier concluding whether a strategy has worked after a couple of years is not that helpful and your method may well outperform but posting comments about companies being 'safe' without clarification/giving a comparison is confusing/misleading.

I presume you have compared your performance vs some of the options in links above? How does it compare (factoring in your trading fees). Incidentally paying £10 per trade for a few thousand (presuming on multiple companies therefore <£1000 per trade) will be cutting into your profits quite a lot (including stamp duty need 2.5% gain just to break even on £1000). 

Eccles04

I have to say that there are some weasely comments here (possibly "financial advisers"). For a start stamp duty is 0.5% not 2.5%, it is important to be accurate in these posts. Also most people are aware that there are risks associated with investing in shares but those same risks also apply to so called tracker funds because they also are invested in shares, it is important to be accurate in these posts. Also of course tracker funds charge fees. Thus a tracker fund tracking the FTSE 100 for example, which many do would have sunk like a stone last spring because of Boris's panicdemic : from 7500 to 6500 or a loss of 15% so let's not pretend that trackers are less risky than ordinary shares. Oh and BTW, Legal and General still paid a dividend of around 6.5% in the midst of all that pandemonium last year.

eskbanker

Eccles04 said:

For a start stamp duty is 0.5% not 2.5%, it is important to be accurate in these posts. 

Being able to read is also important - nobody said that stamp duty was 2.5%, but the point being made was that when paying £10 dealing fees on £1,000 transactions, that's 2% for a buy and a sell, so, with the 0.5% stamp duty, that means that a gain of 2.5% is needed to break even, and hence the accurate comment:

grumiofoundation said:
Incidentally paying £10 per trade for a few thousand (presuming on multiple companies therefore <£1000 per trade) will be cutting into your profits quite a lot (including stamp duty need 2.5% gain just to break even on £1000).

grumiofoundation

Eccles04 said:

I have to say that there are some weasely comments here (possibly "financial advisers"). For a start stamp duty is 0.5% not 2.5%, it is important to be accurate in these posts. Also most people are aware that there are risks associated with investing in shares but those same risks also apply to so called tracker funds because they also are invested in shares, it is important to be accurate in these posts. Also of course tracker funds charge fees. Thus a tracker fund tracking the FTSE 100 for example, which many do would have sunk like a stone last spring because of Boris's panicdemic : from 7500 to 6500 or a loss of 15% so let's not pretend that trackers are less risky than ordinary shares. Oh and BTW, Legal and General still paid a dividend of around 6.5% in the midst of all that pandemonium last year.

If you take criticism as ‘weasley comments’ that must have an ulterior motive that is of course your pejorative. (I wouldn’t recommend it as a particles productive course of action though). 

Maybe in your rush to post a response to my weasling you didn’t read my post ? But the 2.5% comes from
£10 buying fee + £10 selling fee + £5 = £25
£25 = 2.5% of £1000.

I don’t see anyone claiming investing in trackers is risk free but it is by and large much less risky than buying individual shares (unless of course you buy so many individual shares you are de facto buying a tracker but at more cost). Although it is a fair point that sometimes gets glossed over a bit that a tracker is not a safe option but is often a safer option. 

Anyone suggesting someone should invest in just a FTSE 100 tracker would get short shrift on this forum too.

Although I don’t really see how a 15% drop in a FTSE 100 tracker vs a 50% drop in L and G really supports your argument that trackers are just as risky as individual shares (it actually supports the opposing argument). 

Legal and general may have paid a decent dividend, but it still fell 50% which i’m sure you just forgot to mention in your first post, rather than deliberately leaving it out because it didn’t fit the “safe as houses” narrative. 

jimjames

Eccles04 said:

I have to say that there are some weasely comments here (possibly "financial advisers"). For a start stamp duty is 0.5% not 2.5%, it is important to be accurate in these posts. Also most people are aware that there are risks associated with investing in shares but those same risks also apply to so called tracker funds because they also are invested in shares, it is important to be accurate in these posts. Also of course tracker funds charge fees. Thus a tracker fund tracking the FTSE 100 for example, which many do would have sunk like a stone last spring because of Boris's panicdemic : from 7500 to 6500 or a loss of 15% so let's not pretend that trackers are less risky than ordinary shares. Oh and BTW, Legal and General still paid a dividend of around 6.5% in the midst of all that pandemonium last year.

If you'd been on the forums for a while you'd see that it's unlikely that any of these posts are from financial advisers. I think it shows a level of inexperience that you're not understanding the risks and comparison between a tracker investing in 100 companies or buying shares in one company. A tracker fund and a share are not the same risk by any stretch. Many companies were seen as safe and paying good dividends until they didn't. A tracker won't reach zero but it's entirely possible for a share to be wiped out as investors in banks found out to their cost.

MaxiRobriguez

Eccles04 said:

let's not pretend that trackers are less risky than ordinary shares.

But they are.

Most people tend when they say risk are referring to the potential for loss. Individual shares have a higher chance of suffering extreme loss, including complete wipeout, compared to an index.

You mentioned the index fell 15% so that shows they're as risky as individual stocks, but three of my individual stocks fell over 50% last year.

El_Torro

shmuli9 said:

Can you tell me what you invest in? What platform and funds? I am looking for a hands off approach in the tracker fund department, and that extends to the get go. I'm a bit put off by the variety of options and prices...

I actually invest in 3 different platforms (including my workplace pension). As for funds, I have 4 multi asset funds and a global actively managed smaller companies fund. This is more complicated than it needs to be, but I am happy with my setup. Not to say that's right for anyone else, it's just what I've chosen.

My point is that me telling you what I do doesn't necessarily mean that you should do the same. If you're really pushing for a recommendation then I would say that as far as platforms go Hargreaves Lansdown isn't a bad choice (this is one of the 3 platforms I have). Their percentage fee is expensive but if you don't have a huge amount to invest at the moment it should serve you well for at least a few years. I also find their website to be user friendly and informative. Not that you need to have an account with them to access most of the useful information. 

As for which fund to go with, if I were to only own one multi asset fund it would probably be Fidelity Multi Asset Allocator. It doesn't have the high UK weighting that VLS has, the bond allocation is fixed (unlike HSBC Global Strategy) and unlike many other multi asset funds it does contain some smaller companies (whether the smaller companies holding is enough to make a big difference in the long term is up for debate). 

So that's my recommendation. Investing is usually best done with research though, so you understand the options and what is best for you. Just because I think this is the best way forward it doesn't necessarily mean that it's right for you.

Coveredinbees!!!!

Buy this book, https://www.amazon.co.uk/Millionaire-Teacher-Wealth-Should-Learned/dp/0470830069

You don't have to be a teacher.

csgohan4

Eccles04 said:

I have to say that there are some weasely comments here (possibly "financial advisers"). For a start stamp duty is 0.5% not 2.5%, it is important to be accurate in these posts. Also most people are aware that there are risks associated with investing in shares but those same risks also apply to so called tracker funds because they also are invested in shares, it is important to be accurate in these posts. Also of course tracker funds charge fees. Thus a tracker fund tracking the FTSE 100 for example, which many do would have sunk like a stone last spring because of Boris's panicdemic : from 7500 to 6500 or a loss of 15% so let's not pretend that trackers are less risky than ordinary shares. Oh and BTW, Legal and General still paid a dividend of around 6.5% in the midst of all that pandemonium last year.

No-one said trackers are risk free, but they are less risky than individual shares. Take VLS 100/HMWO  and say CINE/IAG which is riskier? Which has recovered ?

Your mention about L+G dividend yield seems out of context. Is your investing strategy on Income or wealth preservation or you just put that statement to prove something?

I also hope you are aware those tracker funds have recovered and indeed continued to go up beyond the pre covid levels. As with these trackers they are for the long term. Shares are generally short/medium term due to volatility, such as TSLA/NIO. 

Index tracker and income funds/IT are completely different I hope you are aware. 

Indeed it is important to be accurate in these posts

DireEmblem

I would look at maxing out your LISA as soon as possible.  You will eventually want to move out and get your own place.

The next part is tricky.  Generally the bigger deposit you have, the bigger(more expensive) property you can buy, or you can negotiate better terms, as your lenders risks are reduced.  I would work on that first.

Then I would look at your pension.  Google a pension calculator, and work out how much you could retire on, based on current contributions.  Would you be happy with that, or would you like to reduce your working life?  Also if your employer tops up any contributions you make, look at it as ‘free money’.

Then look at a S&S ISA, or offers on General investment Accounts and maximise the return from them.

I got:
Nutmeg: £100 bonus for investing £100 a month for a year.
Wealthify: £40 bonus for investing £400 for 6 months.
InvestEngine: £75 for investing £100 for a year.

Think of these offers as a ‘head start’ on your investment.  All you need to do is fill in some details so they can understand your risk profile.

Good luck and you are asking the right questions!