Investing For The Future!

GjrBartlett

Good Afternoon.

I'm posting this thread to take advantage of the wealth of knowledge thats out their from all you fellow MoneySavers!

I wish to start investing in the stockmarket, making regular contributions over the next 10+ years (probably longer) to pay off an Interest-only mortgage I currently have on my Investment property.
I currently owe £69k at 5.74% (0.24% above BofE) Base Rate Tracker for 2yrs with BOS, which is due to be paid off in Dec 2032, the property is worth at present £80k.

What is the best and most tax-efficent way to start buiding a lump sum to pay this off?

Investing into S&S Isa's? What are the the advantages of investing in S&S, inside an ISA wrapper?
As I have a long time frame to invest for, is it worth investing into Funds or Individual Shares?
Taking into account the above question, does anyone have any recommended websites to do some research into theses funds or shares?

All advice is greatly appreciated....& if you require any further information regarding my current financial situation, please do not hesitate to ask.


GjrBartlett

smithson55

Go and see two different Independent Financial Adviser firms near you. See http://www.unbiased.co.uk/ An ISA will save you from Capital Gains Tax in the future. Funds are safer than individual shares (eg Northern Rock). The safest route (not necessarily most profitable but it could be) is to use your monthly payments to decrease the loan - you "earn" 5.74%pa on that with no risk at all.

Curious_Moose

I use Hargreaves Lansdown http://www.h-l.co.uk/

They give a discount on most funds you can invest in and I've found them helpful when I've had a query. The website is good and gives a lot of useful information on fund performance, charges, managers etc.

I have an ISA with them and spread the monthly contribution between several funds.

Anyway, that was my 2 cents.

GjrBartlett

Thanks for the replies,

Unfortunately I can't make overpayments to the mortgage so that rules out the first option.

As for the second option, Can anyone recommend any other broker/fund supermarkets to use to minimise charges, ease of use for relative novices?

What is the best way to acheive diversification in a portfolio? Any ideas how best to do this to ensure I stay within my current risk profile (Medium to High, As I have a long time frame to invest over).

I'm looking to invest approx £250 pcm, whats the best way to split this capital?

Thanks in advance............

dunstonh

What is the best way to acheive diversification in a portfolio?

Sector allocation with percentages allocated to each sector that average out to match your attitude to risk. That can then be fine tuned to utilise the higher or lower risk funds within the sector. Then periodically rebalance the portfolio to keep your risk profile.

GjrBartlett

Thanks Dunstonh

For someone with my risk profile (Medium to High), what would you suggest a typical sector allocation would be?

Thanks in advance........

dunstonh

You need to put your medium/high risk views in context as medium/high will mean different things to different people.

On a generic risk scale, medium/high would put you in the range where you wouldnt worry if you suffered a 50% loss. So, are you happy to accept a 50% loss or not?

GjrBartlett

Perhaps not quite 50%!! Maybe more like 30%.

dunstonh

30% would make you balanced/medium with perhaps a trend to use lower risk funds in their respective sectors.

To put the risk in context, a FTSE tracker (All share or 100) is a medium/high risk investment and that lost 45% over the last stockmarket crash (crash not really the right word as it was a prolonged decline).

The newbie error to make is to think you can only have medium risk funds but that isnt the case. It doesnt stop you using higher risk funds but you would need to offset that with some lower risk funds so its averages out. e.g. using a fixed interest fund or property (bricks and mortar) fund for one bit and using Natural Resources or BRIC for another.

Typically, you can have £1000 per fund (if single) or £50pm per fund (if regular). There are exceptions and ways to get £500 or £20pm. So, depending on how much you want to invest you may be restricted to how diverse you can make your portfolio. In these cases a fund of funds may be the better option. FoFs are more expensive but they allow greater diversification as they buy into funds themselves. Ideal for the small investor who cannot spread their money as far albeit at a cost.

jamesd

Using a stocks and shares ISA will let you ignore capital gains tax when buying and selling and tax on distributions or dividends so that's the first choice. Hargreaves Lansdown are very competitive for unit trusts, OEICs and SICAVs, others probably a better choice if you want individual shares or investment trusts rather than funds.

If you did want to invest outside the S&S ISA for some reason, the Halifax Sharebuilder service is likely to be the cheapest option.

GjrBartlett

Many Thanks for the replies.....

I will certainly start to have a look at some funds over the next few weeks & I've already been in touch with Hargreaves Lansdown, the application for their Vantage ISA is in the post!

Further question though...

Someone with my risk profile (Balanced/Medium), What would be a suitable split across sectors for diversification & what sectors would people recommend at this time? And how do I find out the typical risk of each sector?

(I've been on H&L Website, is their Wealth 150 a good place to start for research?)

Thanks in advance.......