How would you save spare 1.5k per month🤔

samps1973

Hi,

I have worked out my finances and have a spare 1.5k per month.

I am 51 years old and aim to save for a minimum of 10 years. My mortgage is currently 1.59% for another 2 years.

I’ve got a Trading 212 and Revolut account and have been looking at the different options. I have also been reading about investments but I am a novice.

The savings will be for a mixture of early mortgage payments, a buffer if I lost my job for some reason and if these aren’t required then I would use the interest to help in later life. These are my thoughts.

£700 pm cash isa at 4.9%

£400 pm S&P 500 stocks & shares isa
£200 pm into a pie of 10 top performing companies in the US ( Nvidia, Apple etc ) and change to S&P 500 if it doesn’t work out.
£200 pm Bitcoin. I know that this would have capital gains tax and a £3000 threshold. Also I am a higher earner so would pay 24% tax on the profits. I think with this if it does rubbish I pay no tax or if it does really well I pay tax but it will be worth it. Just my opinion but I think this will grow to be a minimum $1m coin one day.

or

£1100 S&P 500 stocks and shares isa
£200 Top 10 US (as a bit of a gamble)
£200 Bitcoin 

Also, anything I earn over £50,270, I put into my nest pension so that I receive 20% relief at source and i claim the other 20% from hmrc. I will also be investing or saving the money I get back from hmrc 

I thought instead of putting it into a cash isa which is only 4.9%, putting it all into the S&P 500. The S&P 500 is currently at 25% for 1 yr. In the unlikely event that the S&P 500 was to drop to below 5% in a year, pull out then put the 20k isa limit into the cash isa and return the rest to my bank account and re asses my choices.🤔

So there are my thoughts.

You are welcome to rip my thoughts apart 😂 and reassemble with your thoughts.

Thanks for any help in advance. 

What would you do?

Archerychick

If these savings are for early mortgage repayments and are your emergency funds, then putting these into investments might not be the best place. Typically you’d want to be happy to leave that alone for at least ten years, a minimum of five so I’m not if that’s the sort of time you were thinking. if you are happy to invest then it’s likely that pensions will be your best approach here as this will beat investing outside a pension wrapper due to the tax relief.

Emergency funds should be in cash savings, this could be isa or non isa depending on your tax status. E.g. if you’re a higher rate tax payer your psa is lower.

For cash savings, I’d suggest a mix of easy access - you can currently get 4.9% via Trading212 which is a flexible cash isa, and regular savers (the higher is paying 8% currently). There is a good thread here on these, but you can also see the list here - https://moneyfactscompare.co.uk/savings-accounts/regular-savings-accounts/

jimjames

Why have you separated out the US stocks and the S&P ISA? Surely you'd want to have everything inside an ISA to reduce tax? The S&P is already very tech heavy so it would seem a very high risk strategy to increase that.

You've also not made any mention of pension? As a higher rate taxpayer that's normally the most effective so is that already sorted?

samps1973

Hi @Archerychick, thank you for your reply.

The savings are for early mortgage payments and emergency funds. My job is quite secure and I was going to maybe invest for 10 years minimum. I may at that point pay off what is left on my mortgage. I just want my savings to work as hard as possible. In 10 years there could be a nice amount in there with the S&P 500. If I do need emergency money, but I wouldn’t touch it unless I had too I could dip into the investment as there is no fees to do this, there no fx fees on the S&P 500 in the UK. I have the VUSA and I think there is a very small fee that Vanguard take in the background.

I forgot to mention that anything I earn over £50,270 I put into my pension with best and get 20% relief at source and I claim the other 20% from the hmrc. I will be saving or investing anything I get back from the hmrc.

If I put more into the pension, I would only get the 20% relief at source but then would have to pay tax on the way out when I withdraw. Also the money would be tied up. At least my savings are tax free in the cash or stocks and shares isa and Is accessible. 

I’m sure there is many better ways to manage the 1.5k per month. I’m just trying to find the best way before payday at the end of Jan

thanks

badmemory

I think another question is do you feel lucky.  Some people are, some people aren't.  I am neither.  I have premium bonds that are keeping up with normal interest rates as just below 5%.  Fairly easy access which is good for an emergency fund.  Locking into a fixed term could be a problem but that depends on what you really need access to & how much notice you are likely to have.

samps1973

Hi @jimjames , sorry I didn’t mention my pension in the 1st post but I’ve put it in my second post. 

I’ve also edited my first post and it’s there now.

The S&P 500 and the pie with 10 of my favourite stocks are all within the stocks and shares isa so tax free. The stocks I have chosen are ones like Nvidia, Apple and Tesla etc. if it was to do well my returns would be good but if not I’ll transfer it into the S&P 500 or cash isa.

thanks 

Archerychick

samps1973 said:

Hi @Archerychick, thank you for your reply.

The savings are for early mortgage payments and emergency funds. My job is quite secure and I was going to maybe invest for 10 years minimum. I may at that point pay off what is left on my mortgage. I just want my savings to work as hard as possible. In 10 years there could be a nice amount in there with the S&P 500. If I do need emergency money, but I wouldn’t touch it unless I had too I could dip into the investment as there is no fees to do this, there no fx fees on the S&P 500 in the UK. I have the VUSA and I think there is a very small fee that Vanguard take in the background.

I forgot to mention that anything I earn over £50,270 I put into my pension with best and get 20% relief at source and I claim the other 20% from the hmrc. I will be saving or investing anything I get back from the hmrc.

If I put more into the pension, I would only get the 20% relief at source but then would have to pay tax on the way out when I withdraw. Also the money would be tied up. At least my savings are tax free in the cash or stocks and shares isa and Is accessible. 

I’m sure there is many better ways to manage the 1.5k per month. I’m just trying to find the best way before payday at the end of Jan

thanks

We both do exactly the same on pensions - it’s a sensible move. 

I’d be nervous about putting my emergency funds into investments though, I have mine in cash savings - some in regular savers because of the interest rate but mostly in ISAs because I want the tax wrapper otherwise I’ll be giving more back to HMRC.

If you’re not currently using your isa allowances, then I’d be looking a S&S isa. As to how that is invested I can’t really help with, but I’m sure someone more knowledgeable will be long to offer their thoughts.

Albermarle

 In the unlikely event that the S&P 500 was to drop to below 5% in a year, pull out then put the 20k isa limit into the cash isa and return the rest to my bank account and re asses my choices.🤔

Why do you think the S&P 500 dropping is an unlikely event, especially as it has gone up so much?
What is unlikely is that if it does start to drop, that the drop will be as low as 5%.
What is your plan B if it drops say 25% ?

mr._prude

If I have that spare cash each month I would save 50% in cash,  at the next dip or crash I would look at increasing my index funds/shares.

If investing in the top 10 US sharesI would diversify this with a global index fund.

Would not put.more than 10% into crypo currently have about 5%.

Only my options not advice.

400ixl

How on track is your pension for providing what you need when you want to retire?

jimjames

samps1973 said:

The S&P 500 and the pie with 10 of my favourite stocks are all within the stocks and shares isa so tax free. The stocks I have chosen are ones like Nvidia, Apple and Tesla etc. if it was to do well my returns would be good but if not I’ll transfer it into the S&P 500 or cash isa.

thanks 

Unfortunately that sounds like a classic sell low, buy high strategy. If it's not performed for 1 year (or whatever) then selling at a low price will lock in that loss. Did you sell when the markets dropped 5% last month? If not, over what timescale would you measure?