Halifax reg. saver v Investments??

oscar_uk_2

I went into Halifax to open their 7% regular saver (best buy as recommended by Martin) and the guy I spoke to said that he can't be much of a money expert if he recommended doing that...

I was a bit taken aback as I've a lot of faith in Martin's advice but he said to me he would happily open me one if that's what I wanted but there are much better things I could do with my money. He basically said even if I put in the max £250 each month after a year I would only earn about £90 in total. He basically told me that I should be looking at investing money over a longer period of time in one of their funds as that would give me a far greater return on my investment. He quoted the last three years as being 25%, 18% and 12% at the end of each year.

I know that these type of investments involve an element of risk but is he right, would I be better trying to "make my money work harder"???

ReportInvestor

Hi Oscar_UK

:rotfl:

Martin doesn't pretend to have opinions about investment. Neither does he give financial advice. Money Saving is not the same as investment - but it can help reduce charges when you do invest.

Any confusion arises from the difference between saving (where your capital is more or less guaranteed) and investment (where your capital is at risk).

We've just had a discussion on another thread where an IFA has criticised EdInvestor for suggesting you could rely on getting around 7% pa combined income & growth over the long term.

The average UK equity income fund for three years to April 1 2005 gained 9% in total (3% pa) . Active UK funds gained 5% total and UK tracker funds gained 2% total (0.5% pa).

So your Halifax adviser was putting his salesman's gloss on the subject. Anyone know it they get paid commission for unit trust sales?

lipidicman

If this guy had read the website he would realise that Martin's advice is spot on. I was doing exactly the same before I found this website.

You will only get about £90 after a year. Not because the product is rubbish, but because of the way it works. The key to maximising your return is to do as Martin advises! DRIP FEED from another high interest account.

The reason most staff think it is not good is because £3000 x 7% = £210. However, since you put £250 in a month your average balance is £1625. The key point here is that your money earns interest in the other account before you put it in. So get it in a 5% account and drip feed it and the effective interest rate will be between 5 and 7% (Forget the actual value now) The other problem with the Reg Saver is it is emptied after one year. HOWEVER that £3k is perfect for chucking into an ISA

My advice would be - Stick 3k in an ISA now, then DO THE REGULAR SAVER, or consider the halifax's monthly saver if you want to save more (5.35% and it can continue to grow, it doesnt empty after a year). After you have sufficient cash savings, consider the longer term investments. BUT LOOK WITH SCEPTICISM at anyone who is selling you investments. This guy wants his commision!

Any more questions, feel free. HTH.

oscar_uk_2

I think you're right, he was talking out of turn. What is his interest though in guiding me towards a different product when I was ready to give them my money anyway?

I do think that he genuinely believed the wisdom of what he was saying but I wouldn't know where to start. If I did choose to invest are Halifax the best people to do it with... it's starting to feel a bit too much like wandering into a casino...


...is it worth the risk?

lipidicman

Well, you have to balance the risk. I feel you should have maybe 3 months savings available to you instantly. Then you should have your full cash ISA allowance saved each year. Then maybe do some regular savers. Then maybe do some investing. If it all goes wrong you will still have your savings and you wont starve. Invest only what you can afford to lose. Even then I would be looking at low risk (eg bonds) to go in my Mini-stocks&shares ISA. I am pretty cautious though

I think Halifax have some good products. By all means take his advice - come away and think about it, do your research (and ask here too)

Good Luck!

oscar_uk_2

They want me to come in for a meeting to discuss saving. I did already do the first part; putting £3000 in the ISA. Should I tell them that I want to drip feed the reg. saver from another high interest account and get their oppinion or keep it to myself?


BTW I didn't write the signature at the bottom of my posts and don't know how it got there... it sounds horrible how can I get rid of it?

lipidicman

oscar_uk wrote:

BTW I didn't write the signature at the bottom of my posts and don't know how it got there... it sounds horrible how can I get rid of it?

At the top of the page click on 'userCP' - then go to 'signature' (left hand side on the menu I think). We all got random sigs when the software changed - I dont know why

Drip feeding is tricky as the money has to come from a non-halifax saver. And not many allow standing orders. Mine comes from my income, so I dont have to worry. Otherwise you need to move the money from your other saver, into the SO account (your current account) just before it is due to go out each month. Somebody else may have a better method for this, they are a cunning bunch here! You dont need to keep it a secret - but the halifax staff wont be much use on this subject, so dont bother discussing it with them.

Do the savings and then take some time to find out about investments. You may need to let us know a bit more about yourself (eg are you a higher rate taxpayer, have you sorted out a pension.......etc)

EdInvestor

Hi oscar

oscar_uk wrote:

I think you're right, he was talking out of turn. What is his interest though in guiding me towards a different product when I was ready to give them my money anyway?

When you put your money in one of their savings accounts, the bank pays you. They get to use your money for their own purposes - eg to lend to someone who wants a mortgage - but they have to pay you a fee for getting access to your money (that's the interest you get).

When you give them your money to invest,you pay them.They put the money into a fund and charge you a fee for that. The fund then invests your money and charges another fee. If you're lucky the shares they buy with your money will go up in value, so even though you have paid out this money in fees, you may still make a profit.

Personally I prefer to cut out the middleman and buy the shares direct and not pay any of these fees.That way all the profit comes to me.

oscar_uk_2

Thanks for all the advice so far. Here's my situation. I'm 27. I earn around £28,000 a year and my outgoings are minimal (£350 a month rent + normal living expenses). I've got credit cards and they're all 0% and currently sitting at around £8,000 in total. I suppose I've been mini-stoozing because my current account balances (Lloyds 4% int. rate, Abbey 1.5%) total around £10,000 plus I have another couple of years of graduate 0% overdrafts £2,500 in total available.

Money available from Current Accounts - £12,500

Interest Free CC Debt - £8,000 (could max out cards to £10,000)

I could pay off the cards but figure why bother while they're interest free. I want to start saving...

So I've put £3000 in the Halifax ISA and opened an Abbey esaver which pays 5.4 % and is linked to my current account. I figure I'll sweep surplus funds into that and then use it to drip-feed the Halifax 7% regular saver...

...sound good?

Should I max out the cards and interest free O/D and put the proceeds into the esaver. I'm a little bit worried about how it looks living in an O/D and having maxed-out cards when it comes to applying for a mortgage in the future.

grumbler

oscar_uk wrote:

...Abbey esaver which pays 5.4 % and is linked to my current account. I figure I'll sweep surplus funds into that and then use it to drip-feed the Halifax 7% regular saver...

...sound good?

Good. However, Abbey esaver pays 5.4% only on balances over £200K :eek: You have a little less - 5.1% - and this includes introductory bonus 0.5% for first 6 months. Be aware. Also it is worth using some other regular saver(s) in addition to Halifax one. See link in the blew box above.

Should I max out the cards and interest free O/D and put the proceeds into the esaver. I'm a little bit worried about how it looks living in an O/D and having maxed-out cards when it comes to applying for a mortgage in the future.

When it comes to applying for a mortgage total debt can matter, even if it is offsetted by savings. However, you can always use savings to reduce debt a couple of months before application. What is important now is to service debt properly and never miss minimum payments (I'd use DDs for this). Acting this way you only improve your credit history and your chances to get better mortgage deal in the future.

ReportInvestor

oscar_uk wrote:

I went into Halifax....and the guy I spoke to.... told me that I should be looking at investing money over a longer period of time in one of their funds as that would give me a far greater return on my investment. He quoted the last three years as being 25%, 18% and 12% at the end of each year.

That sounds as if he was celebrating a three year 80% return at the Halifax, if I have read your post correctly, and was using that as a sales pitch.

But look at the Halifax unit trusts for the three years to 1 June 2005 :eek: (Average unit trusts in that sector in brackets)

Halifax Corporate Bond +15% (+15%)
Halifax Ethical -3% (+4%)
Halifax European +2% (+6%)
Halifax Far Eastern +12% (+13%)
Halifax Fund of Investment Trusts +22% (n/a)
Halifax International Growth -4% (-2%)
Halifax Japanese -12% (-9%)
Halifax North American -14% (-14%)
Halifax Smaller Companies +30% (+24%)
Halifax Special Situations +8% (+7%)
Halifax UK All Share Tracker +7% (+7%)
Halifax UK Equity Income +5% (+10%)
Halifax UK Growth +7% (+7%)

That looks like an average of worse than +1% over three years. But in the context that the FTSE 100 has only just regained 3 year highs and at least the Halifax performance IS average - unlike some of the banks.

But you could have an interesting appointment ahead of you. We look forward to what he has to say in his defence .