26 Years Old, Is my savings plan good?

enthusiasticsaver

Having read through the thread I am glad you have taken the advice about pensions on board and opted back in.  It is essentially throwing money away not to pay into one when you consider employer contributions and tax advantages. 

I also agree that unless you have an urgent need for the savings and providing you have some emergency savings then a Stocks and Shares ISA is worth considering. A global low cost diversified fund is a good start. I personally would not consider BTL or HMO  due to fears of dodgy tenants, expensive maintenance and landlord legislation and lack of tax advantages. 

Ch1ll1Phlakes

Aiden8889 said:

Exodi said:

Aiden8889 said:

I appreciate you taking the time for the responses. I suppose I am banking all this on the most ideal scenarios so yeah I probably am being naive and it does sound like something from the Facebook reel playbook.

No problem, I appreciate you being so receptive. People don't usually respond well to people challenging their views whereas you're clearly open-minded and I think that's fantastic and will prove beneficial for you.

On the lodging idea, I'd encourage you to read a few threads on here, just to get more of a feel about it. 

Aiden8889 said:

I've asked my company about the pension today. It's currently 5%/3% but there's a new scheme coming in May 2026 where it will be 5%/5% so I will opt in now and then opt out and into the new one when that comes around.

Fantastic news! Absolutely smashes any other form of saving/investing.

Aiden8889 said:
I should edit the bit about taking it out of my savings, I of course know pension contributions are deducted (as per AAT lol) from gross pay first I just didn't know about being able to take a lump sum out of a private pensions early and you are right I'm essentially throwing ~70 a month in current value away.

There are several ways to contribute to a pension. It can be taken from either gross pay (confusingly referred to as a 'net pay' arrangement), or more commonly for workplace schemes from net pay (know as 'relief at source', where tax relief is added to your pension pot) or salary sacrifice (which is technically neither as the employer reduces your salary and increases their own contribution).

Aiden8889 said:

I'm going to try make some time to look into these Stocks and Shares ISAs (I don't have a trading 212 cash ISA but that was the plan... I guess not now)

I suppose the next question is when the ISA gets to £85,000 would you start a new one?, as you are only FCFS protected to £85,000.

Fantastic news - definitely worth researching. It's not sensible nor effective to try build your fortunes off savings account.

If you decided to invest, the FSCS protection isn't really relevant to investments. If the provider ever went belly up, they would (eventually) just transfer the shares you own to another provider. You own the shares, they just hold them for you, they couldn't just sell them and put them towards their own debts.

For cash held in an ISA - I would not recommending holding this much in cash in the first place. If you do, yes I'd recommend spreading it across institutes if you want FSCS protection.

Aiden8889 said:
I'll put most of it in but I'll probably keep about £10,000 in a easy access saver just in case my car packs in, need a deposit for a home etc.

That's why it's important to work out your goals before taking any decisions. It's unnecessarily risky to invest if you envisage needing the money in a few years - the markets go up and down (but trend up over the long term) and you wouldn't want to risk them being down if you 'need' the money in the short term. Any money invested should, in my opinion, be planned to be invested for at least 10 years.

I think it's imminently sensible to have an emergency savings pot. You can increase the return on this by cycling the funds through regular savers (several paying 7-7.5%).

Thanks, I suppose I came for advice so I'm better off listening to what you're all saying and the general conscientious here seems to be that the Stocks and Shares ISA is one of the best set and forget strategies.

I thought it was a lot more complicated than it really is though I've had a bit of research and it seems like diversification through ETFs seems to be a good set and forget strategy.

I've got a Trading 212 ISA now but haven't invested yet...

I'm thinking of going 50% Vanguard FTSE Developed World Acc and 50% Vanguard FTSE Emerging Markets Acc

Obviously you aren't all fortune tellers but S&P looks good but it's been too good for too long and I think blending those gives me a nice expense ratio and I guess buying developed world is still giving some to the US just not all of it.

Just to mention on the ETFs you're thinking of choosing for the developed and emerging markets those splits are entirely up to you but the common split would be 90% developed and 10% emerging. 50% in emerging would be seen as higher risk.

Exodi

Aiden8889 said:
I've got a Trading 212 ISA now but haven't invested yet...

I'm thinking of going 50% Vanguard FTSE Developed World Acc and 50% Vanguard FTSE Emerging Markets Acc

Any reason to invest in them both separately?

As I said before, common global index funds include:

VWRP - Vanguard FTSE All-World (Acc)
https://www.trading212.com/trading-instruments/invest/VWRP.GB

ACWI - SPDR MSCI ALL COUNTRY WORLD UCITS (Acc)
https://www.trading212.com/trading-instruments/invest/ACWI.GB

FWRG - Invesco FTSE All-World (Acc)
https://www.trading212.com/trading-instruments/invest/FWRG.GB

These are 'All World' funds, meaning they invest in the Developed World and Emerging Markets.

If you wanted to invest in them separately, 50:50 would be an uncommon mix.

Generally people might want to invest in line with global market capitalisation (the concept being, if the companies in America are worth 18.5x more than the companies in the UK, you probably want to put 18.5x more money in the US than the UK). These index funds do this balancing without you needing to.

Currently Emerging Markets make up maybe 11% of Global market capitalisation. Putting 50% of your money in would mean you're extremely optimistic on the future of countries like China, Taiwan, India, etc (or at least, more optimistic than the market is).

Personally I wouldn't try to predict what might happen in the future, so slapping your money in an All World fund is likely the be the safest and easiest. I appreciate you might not have intended to be bullish on EM, and just suggested 50:50 simply because there are two funds.

The other thing to consider when investing in multiple funds is re-balancing. Let's say you decide you want to invest 90% of your portfolio in the Vanguard FTSE Developed World Acc and 10% in Vanguard FTSE Emerging Markets Acc. Let's say that translates to £9000 in the former and £1000 in the latter.

6 months go by and Developed World has grown by 5% and Emerging markets has decreased by 5%, so you now have £9,450 in DW and £950 in EM, with a total balance of £10,400. The problem is, as a percentage your DW holding is now ~91% and your EM is ~9%. To re-balance back to your original weights, you would need to sell £90 in DW and buy £90 in EM.

You also have not considered bonds or alternative asset classes. This isn't a problem, but it's worth noting that diversification doesn't just mean not going all in on one company, or one country like the S&P500. It also means considering investing in bonds, gold, etc.

People generally start with very little bond exposure in their portfolio and gradually increase this as they near the point they need the money (generally retirement). Bonds are typically seen as lower growth but lower volatility than equities.

Aiden8889 said:

Obviously you aren't all fortune tellers but S&P looks good but it's been too good for too long and I think blending those gives me a nice expense ratio and I guess buying developed world is still giving some to the US just not all of it.

All World funds will comprise of nearly 2/3rds US and the S&P500 makes up about 80% of the US market cap, so investing in an All World fund would still see over half of your money invested in S&P500 companies. Don't even get me started on saturation in the S&P, the top 7 companies S&P500 make up ~35% of the index...