Investing newbie

Daliah

Sandra97 said:

@tebbins I'm looking for an investment which will automatically invest in a range of things for diversification such as some stocks, bonds, cash etc. to reduce risk does that help? My terminology isn't perfect sorry as I mentioned right at the start this is new to me and I'm learning.

sounds very much like you are looking for a passive investment. See the Monevator link I posted above.

masonic

Sandra97 said:

@tebbins I'm looking for an investment which will automatically invest in a range of things for diversification such as some stocks, bonds, cash etc. to reduce risk does that help? My terminology isn't perfect sorry as I mentioned right at the start this is new to me and I'm learning.

The correct terminology is multi-asset, but it was clear enough from the context what you meant. In addition to Daliah's link, there is also https://monevator.com/passive-fund-of-funds-the-rivals/

which tebbins also posted above. There have also been quite a number of threads discussing other (actively managed) wealth preservation funds here, for example:

https://forums.moneysavingexpert.com/discussion/5709276/wealth-preservation-funds-its

https://forums.moneysavingexpert.com/discussion/6005884/capital-gearing-trust

https://forums.moneysavingexpert.com/discussion/6342502/buy-capital-gearing-trust

It would be remiss not to at least mention the robo-platforms, although they aren't held in particularly high regard in these parts: https://www.moneysavingexpert.com/savings/stocks-shares-isas/#doitforme

[Deleted User]

@Daliah yes a passive investment is really what I'm looking for, I haven't had chance to look at the links in any great detail yet and these are big decisions for me so I'm aiming to give it all proper attention, I will read them all shortly. Thanks to you and everyone again for providing feedback so far it's fantastic.

[Deleted User]

Okay I've been reading up and it seems the sensible split is 60:40 equity to bond split if I've understood that is generally a less risky split. Managed funds seem to be no better than unmanaged funds but will cost more. So what I think I'm looking for is an unmanaged fund, here's the next bit I'd like to know. The equity and bonds, who decides what these are made up from? Is there a platform I go to and say I'd like a global equity fund, or an ethical fund, or UK fund etc. and they pick the specific companies? When I've looked at some platforms they scream out how good they are but I can't always get to the bottom of why they're saying that and what the facts are behind their hype.

tebbins

60:40 is what general wisdom considers to be "probably fairly balanced and sensible for most people in general".

To answer your last post, by asking "who decides" what you're asking for is a managed fund, i.e. a fund that is managed by a fund manager who is trying to do something, and in order to that something with their fund they research and pick what shares, bonds or other instruments to buy with the fund's money.
With a passive/index-based/tracker fund or ETF, the "something" the fund is trying to do is to track and index. For example a FTSE 100 index fund will track the FTSE 100, which is an index - i.e. a list - of the biggest 100 companies traded on the London stock exchange. There is still legally and technically a fund manager, but their job is just to make sure the fund tracks the index as well and as cheaply as possible, while also making a profit for the company that runs the fund (e.g. HSBC, Vanguard, iShares etc.). They are not picking anything specific or trying to do anything clever or special.

For a globally diversified, 60:40 fund (or near enough to 60:40), give this page a read: https://monevator.com/passive-fund-of-funds-the-rivals/.

You will also need to pick a platform and decide what type of tax wrapper to use - ISA or SIPP. There are sections of the MSE website about Stocks & Shares ISA and SIPP platforms.

For example, you could open an S&S ISA on Vanguardinvestor.co.uk and buy an amount of Vanguard Lifestrategy 60. I'm not recommending for or against that, simply illustrating that that is one way you could do this.

It's important to remember that the -

- type of account you open i.e. general (taxable), ISA or SIPP

- the platform, and your account on the platform, and

- the funds or other investment instruments

that you buy are all seperate. For example with a "normal" savings, you may have an online login with the bank or building society, it may be a savings account or a cash ISA, it may be easy access, a notice account, or fixed term.

With investing - 
- the platform is the bank/building society
- the type of account can be a general (no special tax status), ISA, SIPP or a LISA with some platforms

- the extra step with investing is, once your money is in your account on the plaform, you then need to do something with it, i.e. buy a fund. E.g. I have an S&S ISA on a platform called iWeb, on that platform I hold some shares including Berkshire Hathaway, Tesla etc.

I hope I've managed to make sense without oversimplifying too much.

older_and_no_wiser

masonic said:

It would be remiss not to at least mention the robo-platforms, although they aren't held in particularly high regard in these parts: https://www.moneysavingexpert.com/savings/stocks-shares-isas/#doitforme

Yes, you may want to look into InvestEngine. They charge a 0.25% annual management fee ongoing. They will offer different ETF based funds and do the rebalancing work for you to fit with your investing approach (risk appetite) by allocating varying percentages of equities (stocks), bonds, cash and even gold/silver. It's a "fire and forget" approach.

I would also recommend (as others have) the multi asset approach. eg.

HSBC Global Strategy (Cautious, Balanced, Dynamic or Adventurous)
Vanguard LifeStrategy (20, 40, 60, 80, 100)
Blackrock MyMap (4, 5, 6)

Please research as others have said. Take time to look into the websites, read the allocations and splits of each fund type. Understand the rationale behind each flavour of fund.

Check out YouTube channels:
    Damien Talks Money *
    Conversation of Money
    PensionCraft
    That Finance Show *
    James Shack

Each of these has videos for beginners and they all explain things in plain English. The asterisks are the channels which have a nice humour content - which I found really useful for learning from! 

[Deleted User]

I love a humorous informative YouTube video, those channels are on my list for this weekend thanks!

RyanHello

When you learn the stock market is run on debt, it really does open your mind.

To put it simple: When interest rates are low / 0% , debt is a lot cheaper. That debt gets pumped into the stock market.
When interest rates rise debt becomes more expensive, the stock market crashes. 

Rinse and repeat every few years.

masonic

RyanHello said:

When you learn the stock market is run on debt, it really does open your mind.

To put it simple: When interest rates are low / 0% , debt is a lot cheaper. That debt gets pumped into the stock market.
When interest rates rise debt becomes more expensive, the stock market crashes. 

Rinse and repeat every few years.

It's really just bond markets that are intrinsically linked to interest rates. Companies with a lot of debts will face higher costs when rates are high, but the stockmarket involves selling equity for cash, rather than debt. Interest rates well above current levels did not prevent stocks rising.

The transitions between regimes will tend to be turbulent, as mindsets have to change.

tebbins

RyanHello said:

When you learn the stock market is run on debt, it really does open your mind.

To put it simple: When interest rates are low / 0% , debt is a lot cheaper. That debt gets pumped into the stock market.
When interest rates rise debt becomes more expensive, the stock market crashes. 

Rinse and repeat every few years.

... I don't think any part of that post has any merit at all.
1. The last time interest rates were this low was WWII.
2. There is more to capital markets and economic cycles than simple monetarism.
3. This "cycle" does not rinse and repeat every few years. The BoE has been around since the 1690s, there is UK stock market data back to the same time (https://globalfinancialdata.com/stocks-for-the-very-long-run-the-uk-100-and-327-years-of-british-equity-history, https://fredblog.stlouisfed.org/2019/12/how-has-the-u-k-stock-market-fared-lo-these-past-300-years/).

That said there is some evidence and theory behind your general point that low rates good / high rates bad for equities.