19 and have £500pm to invest, what to do?
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Here's my crazy idea.
£200 per month to HTB ISA. Current best buy is Barclays at 2.53%.
£200 per month to either a First Direct, M&S, Santander or Nationwide regular saver - all of the aforementioned pay 5%. On maturity each year the balance (£2465ish) dumped into a Lifetime ISA.
£100 per month to your choice of a Stocks and Shares ISA buying a single cheap, diversifed fund OR an Innovative Finance ISA - my personal pick would be with Ablrate. Beware, you could lose everything, etc etc.
For simplicity let's say you're due to turn 20 any moment now. In 10 year, when you're 30, the above strategy would produce:
£60,000 total deposited giving
£27,334 in the HTB ISA (growth of £3,334)
£30,812+ in the LISA (growth of £6,162 plus whatever interest the account pays)
Plus whatever the £12,000 in S&S/IFISA generates. Nightmare scenario: negative £12,000. Favourable scenario (assume 10% P2P); that's over £8,000 growth.
The logic here is to give you the option of keeping some cash instantly accessible (LISA money has a penalty if you withdraw early), with decent growth, all completely within ISA wrappers.
Please do plenty of homework before committing to shares and particularly P2P.: )0 -
That fee would only apply if the Op logged each month as a separate trade. If the Op used The Share Centre's regular investing option, he would pay 0.5% commission (£1 pm on a £500 pm investment).ValiantSon wrote: »The Share Centre is more expensive than Vanguard Investor. In fact, it is one of the more expensive platforms, unless you have a large investment. For someone starting out with nothing, and investing £500 per month it would work out at £90 for the first year, while using Vanguard Investor would work out at roughly £5 (allowing for a little growth), so The Share Centre is approximately 1,700% more! That's a hell of a premium for customer service/a nice website, and Vanguard's customer service (and website) is also excellent.
You don't need to wait a 'full economic cycle'. If you are unlucky enough to invest immediately before a crash, you only need to wait for recovery - not for the whole economic cycle to complete and reach the next crash.Really? Over a five year period there is a pretty high risk of cashing out at a loss. This is only half of an economic cycle, and less than one-fifth will have been invested for the full time.
Looking at the FTSE 100 max graph on google, it appears that there has never in history been a 5 year period over which one would have made a capital loss if remaining invested in a FTSE 100 tracker (even ignoring dividends) - I can't see that a recovery has ever taken more than about 5 years in the history of that market.
If the Op wants to buy a house, their greatest concern will be raising enough for a deposit.If the OP is intending to use the money for a house deposit, then they really are better off with savings, and the LISA is, again, a no-brainer (but in its cash form).
That is a moving target. House prices are likely to increase faster than the interest paid on cash savings. If the Op keeps his money in cash, instead of the "risk" of making a loss on his investment he will take the 100% certainty of taking a real loss on the value of his £500pm.
When people give very conservative advice in relation to achieving a savings goal which is a moving target that increases with inflation - such as buying a house or retiring - they miss the wood (the shortfall risk of not being able to afford a house or retirement) for focussing on the trees (the investment risk of markets going the wrong way).
Taking a modest amount of investment risk over a period of a few years seems a no-brainer to me.0 -
steampowered wrote: »That fee would only apply if the Op logged each month as a separate trade. If the Op used The Share Centre's regular investing option, he would pay 0.5% commission (£1 pm on a £500 pm investment).
So still more than Vanguard Investor, then!steampowered wrote: »You don't need to wait a 'full economic cycle'. If you are unlucky enough to invest immediately before a crash, you only need to wait for recovery - not for the whole economic cycle to complete and reach the next crash.
Looking at the FTSE 100 max graph on google, it appears that there has never in history been a 5 year period over which one would have made a capital loss if remaining invested in a FTSE 100 tracker (even ignoring dividends) - I can't see that a recovery has ever taken more than about 5 years in the history of that market.
You don't have to wait any length of time, but I am talking about what is sensible.
The FTSE 100 is just one index, and not a particularly good one for investors to base their decisions on. I hope that you aren't basing all of your decisions on the FTSE 100, and that you aren't only invested in a FTSE 100 tracker!steampowered wrote: »If the Op wants to buy a house, their greatest concern will be raising enough for a deposit.
That is a moving target. House prices are likely to increase faster than the interest paid on cash savings. If the Op keeps his money in cash, instead of the "risk" of making a loss on his investment he will take the 100% certainty of taking a real loss on the value of his £500pm.
Thanks for explaining the housing market to me; I'm not that experienced having only bought four houses and sold three in the last 18 years.;)
As I've already said, a LISA will add £1,000 each year to their savings (assuming they max it) plus the interest earned. You'd need some pretty high risk investments to get that kind of return on the stockmarket!steampowered wrote: »When people give very conservative advice in relation to achieving a savings goal which is a moving target that increases with inflation - such as buying a house or retiring - they miss the wood (the shortfall risk of not being able to afford a house or retirement) for focussing on the trees (the investment risk of markets going the wrong way).
Taking a modest amount of investment risk over a period of a few years seems a no-brainer to me.
When people give ill-informed advice about investments it makes me quite angry, because they are influencing others to make high risk decisions without being fully aware of the risks.
You aren't an IFA - and it shows - so you are not authorised to give investment advice.0 -
steampowered wrote: »Looking at the FTSE 100 max graph on google, it appears that there has never in history been a 5 year period over which one would have made a capital loss if remaining invested in a FTSE 100 tracker (even ignoring dividends)
24 Dec 1999 - 6806.50
28 Jan 2005 - 4854.19
Considering RPI moved from 167.3 to 188.3 in that time, that's about one third wiped off the value."Real knowledge is to know the extent of one's ignorance" - Confucius0 -
ValiantSon wrote: »You aren't an IFA - and it shows - so you are not authorised to give investment advice.
I don't claim to be an IFA. People don't need an IFA qualification to understand the advantages and disadvantages of keeping funds in cash versus investing them in stocks & shares. It ain't rocket science.
I agree with using a LISA. But remember that a LISA can be held in stocks and shares - it doesn't have to be held in cash.As I've already said, a LISA will add £1,000 each year to their savings (assuming they max it) plus the interest earned. You'd need some pretty high risk investments to get that kind of return on the stockmarket!
Likewise, it makes me angry when people give overly conservative investment suggesting that people should take zero risk with their capital. That makes no sense when someone is saving over a number of years towards a deposit - which is a moving target liable to increase over time.When people give ill-informed advice about investments it makes me quite angry, because they are influencing others to make high risk decisions without being fully aware of the risks.
It is not just investment risk that is relevant. The Op also needs to consider shortfall risk (i.e. the difficulty of gathering a deposit together, given that house prices are likely to continuing rising at least in line with inflation) and inflation risk (i.e. the fact inflation will eat away at the real value of £500pm held in cash over time).
The Op is an adult and is able to make his own decision as to how he would like to balance these competing considerations.0 -
steampowered wrote: »I don't claim to be an IFA.
People don't need an IFA qualification to understand the advantages and disadvantages of keeping funds in cash versus investing them in stocks & shares. It isn't rocket science.
I agree with using a LISA - but this is irrelevant to the question of whether the Op should be saving in cash or investing. A LISA can be held in stocks and shares.
Likewise, it makes me angry when people give overly conservative investment advice that results in people who want to be able to afford a property, an asset class that is likely to increase in price with inflation, having a lower chance of getting there.
You wouldn't advise a prospective pensioner to switch their entire pension fund to cash up to 11 years before retirement (bearing in mind that the Op is 19 and the average age of a first time buyer is 30, or 32 in London).
The Op is an adult and is able to make his own decision as to the level of investment risk he is willing to take on, and as to how he wants to balance that risk against the shortfall risk and inflation risk associated with keeping his savings in cash.
While I agree that being too risk averse is a bad thing, I think you're basing your comments on recent history, i.e.,
(a) fairly robust stock market growth over the last 10 years
(b) steadily increasing house prices
(c) poor performance of money market relative to the latter
While the money market is still likely to be poor over for the foreseeable future, it's rather bullish to assume (a) and (b) will hold true as well.
Personally, I take the view that anything I need in 5 years shouldn't be vested in stocks. Maybe OP can ride out a crash (particular as they'll be drip feeding), but there's no point backing yesterday's winners."Real knowledge is to know the extent of one's ignorance" - Confucius0 -
steampowered wrote: »I don't claim to be an IFA. People don't need an IFA qualification to understand the advantages and disadvantages of keeping funds in cash versus investing them in stocks & shares. It ain't rocket science.
You specifically referred to giving advice on investments. This is something that you are not qualified to do, nor are you regulated in doing so. That was the point I was making.steampowered wrote: »I agree with using a LISA. But remember that a LISA can be held in stocks and shares - it doesn't have to be held in cash.
Yes, I know that LISAs can be S&S, but I have explained why that is a poor choice in the OP's circumstances.steampowered wrote: »Likewise, it makes me angry when people give overly conservative investment suggesting that people should take zero risk with their capital. That makes no sense when someone is saving over a number of years towards a deposit - which is a moving target liable to increase over time.
The suggestions for consideration I have made (not advice - I don't give advice because I am neither qualified to do so, nor regulated) are not, "overly conservative". They are appropriate to the OP's circumstances and aims for their money. Suggesting investments in their circumstances is, in my view, irresponsible. You will note, that I am not averse to investments, and in my first post in this thread (where I believed the OP was asking specifically about investing, as opposed to savinf) I offered some suggestions about how to do so.
Taking risk with money that is intended to raise the deposit on a house is irresponsible.
You keep going on about deposits being a moving target, but then you brush over the very real risk of capital loss that exists with investments. Capital would ot be lost in a savings account, and if it took one or two more years to reach the target then so be it.steampowered wrote: »It is not just investment risk that is relevant. The Op also needs to consider shortfall risk (i.e. the difficulty of gathering a deposit together, given that house prices are likely to continuing rising at least in line with inflation) and inflation risk (i.e. the fact inflation will eat away at the real value of £500pm held in cash over time).
Yes, you've said this previously. I understand, but the risk is considerably lower than the risk of losing value with investments (as I keep explaining). Your own figures for how investments have performed in the past are demonstrably wrong, and yet you persist.steampowered wrote: »The Op is an adult and is able to make his own decision as to how he would like to balance these competing considerations.
The OP is a very young adult who has no experience of investing, and, indeed, has only been able to take on debt for less than two year. Your "advice" lacks rigour and potentially leaves them at a disadvantage. You need to be much more circumspect.
See the comments in this thread for another 19yo looking at an investment timeframe of 5-6 years, to see the caution raised by others for the same kind of issue (albeit where there is a lump sum): https://forums.moneysavingexpert.com/showthread.php?t=5867050. I am not alone in my view!
You seem to be very gung-ho in your attitude, and that is absolutely fine for you, as long as you understand the risks, but it really isn't okay to be pushing a completely inexperienced potential investor down that route with the particular aims and timeframes that they have elucidated; you haven't even asked them about their attituded to risk, but are proposing a high risk strategy. This all comes back to the point I made about your lack of qualification to give financial advice.0 -
I!!!8217;m going to look into opening a S&S ISA, is it better to be in a one with its own funds (eg. Vanguard) or somewhere like IG??0
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I!!!8217;m going to look into opening a S&S ISA, is it better to be in a one with its own funds (eg. Vanguard) or somewhere like IG??
Neither. Decide on which fund(s) you want to invest in, and how you want to invest, e.g. regularly or annual lump sum, and then identify the cheapest platform to do this on.
http://monevator.com/compare-uk-cheapest-online-brokers/
I'd avoid IG as their offering is limited to individual company shares or ETFs - you can't invest in OEICs, for example. Their fees are also a bit on the high side.0
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