18 years old with £10,000 sat in a bank account... what is the best option

Redgrape54

Exodi said:

Please be aware when investing in the VLS products (and target retirement funds) that they have a significant home bias.

VLS100 invests 25.1% in UK equities, whereas metrics like the FTSE All World Index put UK equities at 3.89% of global market capitalisation. Some may deliberately choose to over-invest in the UK, but personally I'm not one of those people. I am not particularly bullish on the UK...

I do understand the distribution of the funds. I'm relatively confident in the turn around in the UK economy in the next 4-5 decades, because of this I'm okay with the large bias in the UK.

Investing into the FTSE VWRL is something I have in mind of doing in the near future. However, a 60.2% allocation into the US is still extremely significant (although a huge market).

There really isn't a huge distribution... Being a world fund. Where all returns would be mainly determined by the performance of the US market anyway, no matter of the rest of the growth in the other regions. Especially when the rest of Europe is pretty interconnected to the performance of the US (15.2%). Having that in mind why wouldn't you just invest into the VUSA?- where you can take full advantage of the American growth.

I'll read further into those links. 

Redgrape54

Exodi said:

What risks are you talking about? It sounds that perhaps you are referring to a Stocks & Shares LISA rather than a Cash LISA? It's important to be clear as 3-4 years is not a great time frame to be thinking about punting money on global equities and some may suggest it wiser to put your money in a Cash LISA instead of a S&S LISA.

Also I would try not to overthink about the erosion of your 'purchasing power' due to inflation. House prices and inflation don't run parallel to each other - and most economists expect that while inflation remains high, house prices will decrease (due to interest rates being raised to combat inflation > mortgages become more expensive > more expensive mortgages = less people able to buy > less demand = lower prices).

I was referring to the risks of a stocks and shares LISA. In your opinion, what are best interest rates/providers for cash LISAs at the moment?

That is a good point. However, it doesn't really apply to me in the same way as a first time buyer, I don't have the sale of a house to be used as leverage.
I won't be able to afford the rising mortgage prices especially as that correction could take multiple years. With that lower wage jobs aren't being raised with inflation, potentially meaning I wouldn't be able to even get a mortgage?? The overall cost may be lower but the interest rates on the mortgage will be quite ridiculous. 

Albermarle

I was referring to the risks of a stocks and shares LISA. In your opinion, what are best interest rates/providers for cash LISAs at the moment?

I do not think there is an exact comparison table available, but the number of LISA providers is quite small ( both cash and S&S) so easy enough to check.

Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

Redgrape54

enthusiasticsaver said:

If you want to buy a house and are a first time buyer then a LISA is a good option to check out.  Advice on Investing in stocks and shares is regulated so we are unable to advise on particular funds.  The main thing is not to invest outside your appetite for risk and diversify as much as possible.  The VLS funds are popular on here but do lean towards the UK.  What the performance of the stock markets will be for the next three or four years though is anyones guess.  If you are definitely going to need the £10k within the next 5 years then you need to be aware that investing on the stock market risks the capital.  It may be somewhat ameliorated by the 25% government bonus on the LISA but you get that bonus if you invest in a cash or fixed term isa as well as stocks and shares isa. Only you can decide if you are willing to risk loss of capital weighed against loss of value due to inflation.  Also house prices go up and down and not necessarily at the same rate as inflation or stock market indexes. 

Thanks for your response. I have a lot of research to dig into.

I think I've come to the conclusion from these comments, that potentially I may hold up on investing that money, and finding a better interest savers acc. As it'll probably benefit me to have that money easy access. - Due to having the goal of purchasing a house.                                                                                 

Redgrape54

duckson said:

My 18yr old son has an AJBell LISA and buys AJBell's own balanced fund monthly. It seems to a decent balance given we don't know when he'll be wanting to use it (guessing at least 7 years).

He also has a Vanguard S&S ISA buying their FTSE Global All Cap.

I've been looking at these AJBell LISAs, what I didn't like were the buying and selling fees of each investment, especially when I'll be investing monthly. Even the managed funds had higher management costs being from 80%-90% - Still relatively low? Yes! But I guess every percent counts. I kind of like the look of some of Nutmegs S&S LISAS.

The FSTE Global fund is definitely something I want to invest into.