5K to invest...

in Savings & Investments
16 replies 31.8K views
Legacy_userLegacy_user Forumite
0 Posts
MoneySaving Newbie
Hi everyone,

What can I do with 5K - with a mind to investing... My aim (typically ;) ) is to gain the highest possible return. At the moment the money just sits in an 'instant access savings account'

Thanks in advance.


Nids.
«1

Replies

  • DiggingOutDiggingOut Forumite
    770 Posts
    Depends on how much risk you are willing to take.

    Highest possible return is the lottery, but risk may be unacceptable.

    Lowest return is a current account paying 0.1% -- very safe.

    An entire range of risks/possible returns in between. No one can answer your question without an idea of how willing you are to risk losing your money (or part of it) to gain a higher return.
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
  • SystemSystem Forumite, Community Admin
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    Point taken and in that case i need to break my request down:

    1. How can i gain max return by not taking any risk (i.e. not willing to lose any money)

    2. Or alternatively what can i do if i'm prepared to lose SOME of my money (but no more than say a third)

    Cheers

    Nids
  • DiggingOutDiggingOut Forumite
    770 Posts
    No risk options:
    1. Cash ISA.  4.85% Abbey Postal.  Tax free.  Maximum investment £3K/year per person (so if married, can put it all in ISAs).
    2. Cash ISA fixed rate.  Not sure what the best deals are here.
    3. Savings.  6% is the highest, but this is taxable.  So unless you have a non-taxpaying spouse whose name you could put it in, this is not as good as the ISA.
    4. Fixed rate bonds.  Ties up your money for 1-3 years.
    5. Premium bonds.  No risk of losing your money, but there is the risk of not getting any return at all.  Also the chance of getting the big one.
    6. NS&I GEBs.  Martin's article:
    http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1081137796,10029,
    (Requires locking up your money for five years.)

    <edit: that link doesn't work, you'll have to copy and paste it into your browser address.  Wish someone would explain to me why that happens, and how to fix it.  Makes me feel stupid every time -- maybe that's not a bad thing. ::)>

    <edit: hyperlink fixed, cheers to the person who pm'ed me on how to do this. So simple I feel stupider than before :D:D>

    Others will probably have other suggestions as to safe places to put your money, and I'll leave the risky ones to someone else as well.

    Suggestion:  You could put the third you are willing to lose on the lottery and the rest in one of the safe options above. ;D ;D  (That is NOT a recommendation, I never gamble myself). ;)
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
  • laminkilaminki Forumite
    140 Posts
    nids

    it gets even more complicated.

    You say you are prepared to risk a third.

    Does that mean you are prepared to take a third of your money and put it into an investment where you COULD lose the lot?
  • SystemSystem Forumite, Community Admin
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    Erm yes I would, but obviously, would want to invest in something with considerably better odds than, for example, winning the lottery ;)
  • DiggingOutDiggingOut Forumite
    770 Posts
    Certainly an option would be a shares ISA, maybe an index tracker that just tries to match the index (low fees, you won't beat the market, but you won't do worse than it, either).

    A FTSE100 tracker is not likely to lose more than 1/3, and could do quite well. FTSE250 or all shares might carry a slightly higher risk (and potentially higher gains).

    You could also track the US market, although risk is higher because of potential currency fluctuations. Based on past history, the US$ is low compared to the pound right now, so if you bought in now presumably currency fluctuations might work for you rather than against you -- although past history on currency rates is no guarantee of the future.

    For a little more risk, and again potentially higher returns, you could invest in Japan.

    A step further out (and nearer the edge) is to invest in a Far Eastern fund -- investing in places like China, Korea, Singapore, Indonesia. You could make a killing here -- or you could end up dead meat yourself. This is probably beyond the 1/3 risk threshold -- you could easily lose 1/2 or more of your money investing here. And likewise you could double your money quickly.

    You could invest in Russia if you really feel adventurous. Lots of money to be made here -- unless Putin decides he doesn't like the people running the companies you invested in, throws them in prison, and slaps creative taxes on the companies. The key is to get out at the right time and buy an English football club.

    You could put half of your money in a mini cash ISA (safe) and half in a mini shares ISA in one of the adventurous places. Or you could put it all in a maxi shares ISA in one of the "safer" places -- there is plenty of risk in shares, but you are not likely, IMO, to lose more than 1/3 in an index tracker in the UK or US markets.
    I have five stars! This doesn't mean that I know anything about any of the things I post. I could be a raving lunatic, or a brilliant genius, or just some guy on the internet. In fact, I could be all three at the same time.

    If anything I say makes sense, then do it. If not, don't. Don't blame me or my stars if you do something stupid because I suggested it. I'm responsible for my own stupidity only. You are responsible for yours.

    Why, I don't even have five stars anymore! Aren't you glad you aren't responsible for my stupidity?
  • dunstonhdunstonh Forumite
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    dont rule out life bonds. With no initial charge, increased initial allocations and may be more tax efficient than an ISA depending on circumstances. Many life bonds are showing lower reduction in yields than an ISA over 10 year periods. Also, depending on your age, it cannot be forced encashed to pay for nursing home fees, unlike an ISA. It can be used in IHT planning as well. And HRT payers can potentially avoid high rate tax on these if they expect to be basic rate taxpayers in the future

    Its all about matching it with your circumstances.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • SystemSystem Forumite, Community Admin
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    Thank you so much DiggingOut and all others who responded to my post.

    I've decided to put 3K away in an abbey postal Cash ISA and the remainig 2K into a shares ISA - not sure which/ what etc yet - any recommendations will be much appreciated.

    Thanx.
  • SystemSystem Forumite, Community Admin
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    ohmygod. I've just been reading ' ISAs, Toisas, Peps and Tessas' chat forum and well I'm a little confused now. Earlier i wrote (the post before this) that i wanted to invest 3K in a Cash ISA and the remaining 2K into a shares ISA - now I'm uncertain whether it is possible to do this in the same tax year - is it? Please help.
  • DarrylDarryl Forumite
    218 Posts
    Nids

    It is possible to do this in the same tax year. Max 3K in a cash ISA, and max 3K in a shares ISA. Both don't have to be with the same provider, so shop around for the best deals.

    Darryl.
    ... Fool's Gold ...
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