Some advise about investing small amount please

belbelbel

I am considering investing, though never done so before. As have been quite risk averse. However wish to try to increase my pension pot and have more options for the future.

Therefore would appreciate some advise, as I am unsure if a S&S ISA is suggested over investing directly into the market and with my budget I can only invest £50 a month. Can I query:

  1. As a newbie with no experience, would S&S ISA be more sensible?

  2. I will be coming into a small amount of money (£5k) in the new year. Would it be best to invest this as a lump sum or divide by 12 and drip feed over the year?

  3. If do drip feed can monies be held in cash within S&S account/ S&S ISA rather than bank current account (where likely to get spent on other things!)

  4. I have seen that Trading 212 is popular as no fees, however are there other providers/ platforms that people would recommend

Thank you so much in advance 😀

Dazed_and_C0nfused

belbelbel said:

I am considering investing, though never done so before. As have been quite risk averse. However wish to try to increase my pension pot and have more options for the future.

Therefore would appreciate some advise, as I am unsure if a S&S ISA is suggested over investing directly into the market and with my budget I can only invest £50 a month. Can I query:

  1. As a newbie with no experience, would S&S ISA be more sensible?

  2. I will be coming into a small amount of money (£5k) in the new year. Would it be best to invest this as a lump sum or divide by 12 and drip feed over the year?

  3. If do drip feed can monies be held in cash within S&S account/ S&S ISA rather than bank current account (where likely to get spent on other things!)

  4. I have seen that Trading 212 is popular as no fees, however are there other providers/ platforms that people would recommend

Thank you so much in advance 😀

If this is money for your retirement why aren't you using a pension?

For a lot of people (basic rate taxpayer now and in retirement who don't have £1million+ pension pots) a pension has a 6.25% advantage over an ISA.  See example below, which ignores investment returns (you can generally invest in exactly the same things in an ISA and a pension).

You don't get any tax relief with an ISA so £100 added remains £100 and your don't have to pay any tax on it so you get £100 when you take it out.

But add £100 to a pension (using the relief at source method) and you get £25 in basic rate tax relief.  So a pension fund of £125.  But when you take it out you only get 25% tax free (£31.25) and if you are a basic rate payer in retirement you pay 20% tax of £18.75 on the remaining £93.75.  Net result is you paid in £100 and get back £106.25.

belbelbel

To add I have an emergency fund, have less than 10 years on mortgage and too old for a LISA... as know from reading other threads that these may be queried 🙂

kimwp

As dazed says, if it's for retirement, then you should consider pension options.

Investing inside a stocks and shares ISA is investing directly in the market, it's just doing it so there's no tax to think about (and tax on general investments are reasonably complicated, so best avoided if possible)

Re your 5k, some people like to drip feed money into there investments, but it's usually better to get it all in as early as possible - on average, the market goes up.

InvesterJones

1. A S&S ISA is just a wrapper - you can directly invest in the market within the wrapper still, it just means you never pay tax on the gains (currently). Definitely preferable to investing in a General Investment Account because even though there are personal allowances at 0% tax, if you invest for a long time then you might start making enough gain for it to be taxable if it was outside of a wrapper. 

As mentioned though, since this is for a pension, a SIPP should be considered as well. SIPPs have (currently) an even better tax advantage, the disadvantage is you can't access them until you're 55-57, so if you might need it sooner then an ISA would be better.

2. Depends on your psycology - if ups and downs concern you then drip feeding helps counter the fear as you can tell yourself 'if it goes down, my next payment will get greater value'. In the long run though you are hoping that the trend is upwards, in which case getting the money in sooner should be optimal, and it is in about 2/3rds of all timing cases. 

3. Yes, and some platforms will give you interest on the cash held. This might change in the future, but for now that's the case.

4. By amount invested I don't think T212 is the most popular, but popularity shouldn't be the reason for your choice. There are other zero fee platforms, and also ones that are low fee. If you're interested in ETF and can be careful with what you select, T212 is fine. If you are interested in non-ETFs then dodl are good for small amounts. In the future iWeb might be the best of both.

wmb194

Apart from having no account fees, zero commission and paying competitive interest on cash balances, the good thing about T212 is that it offers fractional shares. This is particularly good for small amounts: when you invest £50 you invest £50 and not £48.56 or something annoying like that.

MEM62

belbelbel said:

I am considering investing, though never done so before. 

You probably have done it before if you have a pension.  

belbelbel said:

As have been quite risk averse. 

We see this comment a lot as a reason people have not invested.  The irony is that not investing can have greater risks than investing.  Investing carries a risk rather than being risky.  You should invest according to your tolerance for this.  Not investing carries other risks - for example, savings do not generally keep up with inflation and are unlikely to return as much as equities in the long term.   

Outside of my pension I use funds - in my case much of it in the VLS100 within an ISA.  
         

Eyeful

In the UK to give financial advice requires having appropriate qualifications.
All you will get on this forum is guidance,

1. Savings means cash in the bank/building society

    Investing  means you are putting your money at risk; Think shares, bonds, gold etc.

2. Use tax shelters wherever possible in this order (a) Pension (b) Cash ISA's (c) Stocks & Shares ISA's

3. Have an emergency savings account to cover at least 6 to 12 months of household bills and car/boiler break downs.

4. Any money you know you will need within the next 5 year should be held in either

(a) NS&I, where it is protected 100% as you are loaning  money to the UK Government. 

(b) Bank or building Society Account on the FSCS list where it will be protected up to £120,000.

5. Before investing make sure you have cleared any high interest debt such as credit cards etc.

6. Investing is for money you know you will not touch for at least 10 years.
The longer you invest for the higher the odds of winning the game..

7. Academic research repeatedly shows that most "active fund managers" after charges are applied,

    do not beat a MAJOR  GLOBAL WORLD INDEX like the FTSE All World or ACWI.

8. Investing can be made as simple or as complicated as you like. Stick to "Simple Investing"

9. SIMPLE INVESTING IN DETAIL (advantages, easy to understand  & implement)

(a) First watch this: https://www.kroijer.com/

(b) Then read these:

 https://monevator.com/passive-fund-of-funds-the-rivals/

https://monevator.com/best-global-tracker-funds/

10. Anything to do with money, has some form of risk attached,. It's just the size & type of risk that changes.
 That includes low risk savings accounts protected by the FSCS Savings Protection up to £120,000.
Here the risk is inflation. This is where the same amount of money buys less as time goes by.
Graph of RPI% 1948-2025:
https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

11. The markets are very high at the moment so drip feeding your money in equal amounts over the next 12 months makes sense. This is called “pound-cost averaging” in the UK (and “dollar-cost averaging” in the US)

12. Three well known S&S ISA providers that will allow you to drip feed low monthly amounts are
(a) Hargreaves Lansdown (b) Fidelity Personal Investing (c) AJ Bell . Others are avaiable.

13. Brokers that charge no fees, just claw back the money from you in other ways that is not so obvious.
Think about it. If they did not charge you for their service in some way, they would quickly be out of business.

14. Remember There is no such thing as a "FREE LUNCH" someone has to pay for it.
A business will make sure its not them but you.

Hope you find this helpful.

belbelbel

Thank you so much everyone, for guidance and information. Very much appreciated

Newbie_John

You said you're too old for LISA so must be 40+ and that your mortgage has 10 years left.

As an alternative you can invest in your mortgage by overpaying it - let's say you're one 5% rate, that's 5% earned/saved - with no chances of losing money.

Otherwise the £50 a month, £600 a year won't make up much - total invested over 15 years would be £9000. 
And then if you're lucky you could double it to £18k but if you're unlucky you may end up losing half and have £4500.

Dicentra

Newbie_John said:

You said you're too old for LISA so must be 40+ and that your mortgage has 10 years left.

As an alternative you can invest in your mortgage by overpaying it - let's say you're one 5% rate, that's 5% earned/saved - with no chances of losing money.

Otherwise the £50 a month, £600 a year won't make up much - total invested over 15 years would be £9000. 
And then if you're lucky you could double it to £18k but if you're unlucky you may end up losing half and have £4500.

And if invested in a SIPP, £50 + tax relief per month (£62.50) to invest, hence the benefit over S&S ISA.