Investing - Where to start?

andyhicks88

Hi

So I'm at the point now where I think I have too much in savings and probably need to start moving some into investments, especially as we start to see the savings rates reduce and interest start to dwindle. I'm not completely new to investing, I popped a couple of thousand into a S&S ISA last year divided between a couple of ETF's and these seem to have worked out OK so far currently sitting at about +18% at time of writing but I have to say i think I'm lucky that worked out ok so far because I didn't really know what I was doing there and just picked those ETFS because I'd heard them mentioned a few times on money sites. They are the vanguard ESG Global All Cap and Investco FTSE All World btw.

Seeing as those two are performing ok I kinda thought about just replicating them in a general investment account and also adding to them in my ISA in the new tax year, but I'd be interested to get some opinions on any better options. I'm gonna take a wild guess that they aren't the very best bets and people have better ideas. 

eskbanker

andyhicks88 said:

I'd be interested to get some opinions on any better options. I'm gonna take a wild guess that they aren't the very best bets and people have better ideas. 

Trouble is, there's no such thing as 'best' or 'better' in a vacuum, and options can only be evaluated in the context of what you're actually trying to achieve.  It sounds like you're simply measuring success according to the size of the return, which can only really be done after the event - +18% is a decent return but it's been over a very short period of high market performance, so there will have been plenty of other investments that will have delivered higher returns, but probably at higher risk, and conversely, if markets had fallen since last year, many other products would have performed better than global equity trackers.

jimjames

andyhicks88 said:

Seeing as those two are performing ok I kinda thought about just replicating them in a general investment account and also adding to them in my ISA in the new tax year, but I'd be interested to get some opinions on any better options. I'm gonna take a wild guess that they aren't the very best bets and people have better ideas. 

You're probably better off having investments inside your ISA and cash outside it rather than using a GIA.

1) You'd expect investments to grow more over the long term
2) Capital gains tax is now on a low threshold of £3k per year
3) Keeping track of CGT liability can be a pain which is avoided with an ISA

andyhicks88

eskbanker said:

andyhicks88 said:

I'd be interested to get some opinions on any better options. I'm gonna take a wild guess that they aren't the very best bets and people have better ideas. 

Trouble is, there's no such thing as 'best' or 'better' in a vacuum, and options can only be evaluated in the context of what you're actually trying to achieve.  It sounds like you're simply measuring success according to the size of the return, which can only really be done after the event - +18% is a decent return but it's been over a very short period of high market performance, so there will have been plenty of other investments that will have delivered higher returns, but probably at higher risk, and conversely, if markets had fallen since last year, many other products would have performed better than global equity trackers.

Thankyou for your reply. 

Yes I'm sure there would have been options that gave me a higher return and of course it's only been a year but given that they performed ok so far my instinct, not having any expertise in this area at all, is simply to use these funds again for further investments. I just don't really know what funds are wise choices and which aren't or which are seen as good opportunities ect apart from some bit's I've picked up on placed like this so my feeling is I need some advice really before starting to plow a considerably larger amount of money into investing than my current couple of grand. I'm not a risk taker generally so my only real hope out of it is that I can grow my money at a higher rate than savings rates I guess,

Albermarle

Do you have any pension provision? Depending on the type these are often invested already.

Alexland

andyhicks88 said:

Investing - Where to start?

Start by having a good think about what type of assets you want to own eg global equities, fixed income bonds, gold, etc and then in what % proportions given their historic volatility profile, current valuations and likely future returns.

Then you can be more specific about each asset class eg do you want your global equities to have emerging markets, should it be an active concentrated portfolio or a broad cap weighted index tracker, etc.

Finally select a fund/etf and platform combination to get you that exposure for your account valuation and contribution pattern.

Maybe you want to hold a fund (in the desired %) for each asset type or maybe you want to hold a single fund that gives you a ready made portfolio. Or maybe you just want to go 100% global equites and accept the risk of long deep crashes that take years to recover.

andyhicks88

Thankyou all. For full disclosure I have about 85k currently in cash savings, by the end of the year I'll probably have 100k. I'm quite aware that is far too much to have in cash savings only but historically I'm an extremely cautious person who has always viewed he guaranteed return of fairly high savings rates the last few years as a better option than investing. I dare say had I been a bit bolder and dipped my toes into investing earlier I'd be a lot better off but that was just my mindset. It's also worth mentioning that it's only really since after the pandemic that I even really started looking after my money and taking advantage of the best savings rates ect. As someone who is a few years away from 40 now I can say that not looking after my money properly in my 20's and early 30's I dread to think actually how much money I've failed to accumulate and how much better off I would be now. Looking at it now there has got to be a way in which 85k is earning more than 2 or 3k a year.

I think I need to keep it simple, I'll probably look to add the full 20k into my current S&S ISA come April and keep thee current portfolio, though I suppose I should diversify it somehow so I will look into that.

Actually another thing, where do dividends come into this, should I maybe look into trying to generate some dividend income too?

Alexland

It's a good time to be a cautious investor as cash interest rates are currently providing an above inflation return and it's possible to lock in for a few years with fixed interest savings accounts or by investing in bonds. You could even get treasury issued inflation linked bonds that pay a good return. There really is no need to take more risk than you might be comfortable with to get a fair return on your money.

Stock market returns have been awesome in recent years but you can't eat the same cake twice so nothing is certain for the future and markets are looking a bit overvalued by historical metrics so the outlook for future returns looks less positive. The likely additional return for taking risk now looks low in the medium term if stock market are overvalued and the risk-free rate is high.

Have a think about your investing objectives for example are you putting money away for retirement, helping kids, etc as that will influence the types of accounts you might benefit from and what level of risk is appropriate to accept for the number of years the money is likely to be invested for. In particular if you are accumulating cash are you paying unnecessary tax which could be avoided with a higher rate of pension contributions?

In terms of dividends they don't matter much while you are in the accumulation stage they would usually just get reinvested into buying more investment units.

AlanP_2

Albermarle said:

Do you have any pension provision? Depending on the type these are often invested already.

I'll echo this question.

If you are thinking of building a nest egg for retirement then pensions must be in the mix. You also say you are new to investing, does that mean you don't have and never have had a DC pension? If the answer to either of those is No, I've got a pension then you are already an investor and need to consider how any other investments complement those in the pension.

Look at things holistically not in isolation considering the situation across the whole family unit (if there is a partner / children), mortgage, ambitions, desires etc.

If you objective is to "invest in something" as opposed to "save in cash" you are on the right lines with what you are doing but if your objective is to "build a retirement pot so that I can retire at 50" or "build a pot so I can buy myself a Porsche for my 50th" or whatever then you need to give it a bit more thought. If you don't have an objective then neither we, nor you, can say that what you are doing is "better" or "worse" than an alternative.

LL_USS

Is it good to move to S&S now as the stock market is in trouble people selling out a lot at the moment?

eskbanker

LL_USS said:

Is it good to move to S&S now as the stock market is in trouble people selling out a lot at the moment?

Take your pick from the conflicting adages of 'buying the dips' and 'catching a falling knife'!

In general it's a fool's game trying to time the market, so if investing is right for you then it's typically best to ignore short term fluctuations and invest as soon as you have the funds to do so....