19 and have £500pm to invest, what to do?

Kylet63b · 11 July 2018 at 12:18AM

I want to explore different types of investing options, would it be sensible to open an account with vanguard? I was looking online and could see there is option such as p2p investing, is this something anyone has done on here?

MallyGirl · 11 July 2018 at 7:25AM

P2P is higher risk. If the stock market crashes it will eventually recover if you don't panic and wait it out. If a P2P borrower defaults then that money is almost certainly gone - some providers have some sort of provision fund to help with this but it is not guaranteed.

I'd walk before you try to run

MallyGirl · 11 July 2018 at 7:29AM

If you decide that a Vanguard fund is the way to go then it would be cheaper to operate this through a Vanguard ISA but that limits you to only investing in Vanguard products. There are thousands of products out there.

Do investigate a S&S LISA as the 25% government bonus is good news if you are definitely going to buy a house

macman · 11 July 2018 at 10:29AM

OP< what is your attitude to risk? S&S ISA's or P2P lending carry the risk that you will lose your entire investment. Cash ISA's and LISA's are protected and offer a fixed rate, plus the tax-free bonus. If you are hoping to buy a house in the next 1-5 years, a LISA really is a no-brainer.
Any stock market investments offering the possibility of double-digit returns will be high-risk.

steampowered · 11 July 2018 at 2:58PM

Kylet63b wrote: »

I want to explore different types of investing options, would it be sensible to open an account with vanguard? I was looking online and could see there is option such as p2p investing, is this something anyone has done on here?

You don't have to open your account through vanguard. You could open an account through almost any online broker, and buy vanguard funds through those accounts.

I would recommend The Share Centre (https://www.share.com) as their interface is very easy to use.

Terry_Towelling wrote: »

If OP is happy to risk a potential deposit on investments then so be it. I guess they could carry on living at home (parents willing) should the market slump at the wrong time and they need to ride out the rough patch.

We also need to take into account that the Op may need to live at home for a long period while he saves up a deposit. The average age of a first time buyer in the UK is 30 because people can't afford a deposit. "Shortfall risk" is just as much of a risk as stock market "investment risk" when it comes to buying a house.

At the Op's current saving rate of £500 pm it will take him 5 years to reach the average first time buyer deposit of c. £30k, so he has plenty of time to ride out any stock market slumps. It is very unlikely the Op would be behind over a 5 year period assuming the Op chooses to reinvest his dividends.

macman wrote: »

OP< what is your attitude to risk? S&S ISA's or P2P lending carry the risk that you will lose your entire investment.

There is no risk of losing your entire investment with a S&S ISA - assuming the Op chooses to invest in a balanced fund rather than selecting just one or two individual shares.

The worst experience people who make balanced investments in stock markets could have would be losing about half of it, which is what would have happened had they invested at the very top of the peak in 2008 immediately before the last major stock market crash. Even then, by waiting just 4 years, the capital losses would have been recovered plus the benefit of dividends paid in the meantime.

P2P does indeed carry the risk of losing everything. Which is why I think P2P is a bad idea - greater risk than stock markets and lower potential returns.

kinger101 · 11 July 2018 at 5:28PM

swindiff wrote: »

Well mine get a boost by 47% and I earn nowhere near that much lol

Tax relief is 20% and national insurance is 12%. So for every £100 that goes into my pension it costs me £68.

£68 + 47% is £100 (rounded to the nearest pound)

You've completely ignored the fact that pensions are taxable income.

ValiantSon · 11 July 2018 at 6:02PM

steampowered wrote: »

You don't have to open your account through vanguard. You could open an account through almost any online broker, and buy vanguard funds through those accounts.

I would recommend The Share Centre (https://www.share.com) as their interface is very easy to use.

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.

If the OP were investing a large sum in multiple funds then using a different platform would make sense, but on a planned £500 per month regular investment, then only one multi-asset fund makes sense (yes choosing a raft of different index trackers may be slightly cheaper, but not advisable for the inexperienced investor). If Vanguard are that chosen fund house then Vanguard Investor is the perfect platform, charging the lowest possible 0.15% platform fee with no other charges at all, not even a transfer fee if they choose to move platforms at a later date to take advantage of other funds. It really is a no-brainer.

steampowered wrote: »

We also need to take into account that the Op may need to live at home for a long period while he saves up a deposit. The average age of a first time buyer in the UK is 30 because people can't afford a deposit. "Shortfall risk" is just as much of a risk as stock market "investment risk" when it comes to buying a house.

At the Op's current saving rate of £500 pm it will take him 5 years to reach the average first time buyer deposit of c. £30k, so he has plenty of time to ride out any stock market slumps. It is very unlikely the Op would be behind over a 5 year period assuming the Op chooses to reinvest his dividends.

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.

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).

steampowered wrote: »

There is no risk of losing your entire investment with a S&S ISA - assuming the Op chooses to invest in a balanced fund rather than selecting just one or two individual shares.

The worst experience people who make balanced investments in stock markets could have would be losing about half of it, which is what would have happened had they invested at the very top of the peak in 2008 immediately before the last major stock market crash. Even then, by waiting just 4 years, the capital losses would have been recovered plus the benefit of dividends paid in the meantime.

True enough, but on a five year timescale it still isn't a good bet. It's also worth noting that each crash and recovery is unique, so what happened during and subsequent to 2008 may well not be replicated when the next crash comes.

Kylet63b · 11 July 2018 at 6:20PM

Has anyone used evestor or Cavendish? i see these on the isa page of this website. Thanks for the advice on p2p sounds like it would be better to steer clear of that for now.

kinger101 · 11 July 2018 at 6:45PM

Stocks are probably not appropriate if you need the cash in the next five years. Skipton do a cash LISA. Only 0.75%, but it's 25.75% in the first year as you get 25% from the government.

enthusiasticsaver · 11 July 2018 at 6:51PM

When I started investing I used Cavendish as they were among the cheapest for small investors. I think Charles Stanley were comparable. Go on to comparemyplatform to decide which one suits you best. Cavendish used Fidelity Funds Network which was ok but not the most usable system out there. I am now with Halifax Share Dealing and I like them better but they are a fixed fee so might not be best for you if you are starting off small.

As others have said you should decide whether you want to save or invest. If you may need the money in the next few years saving in a high interest current account or regular savers may be better or HTB or LISA. Long term investing is done best through a pension for the tax relief.

If you decide you want to invest at least some of the £500 per month the usual way for people to start investing is in funds. There are passive ones which follow indexes as trackers and these are the cheapest. Active funds charge management fees and there is ongoing debate as to whether they are better than passive ones but they are certainly more expensive and usually less diversified so can be riskier. Deciding on your appetite to risk and your ability to do without the money should the market fall and you need to ride out a market cycle for a year or two until it recovers is important. Your age would normally dictate that you have many years ahead of you to recoup losses but if you will panic and sell if your investment drops by 25% over a few weeks may mean investing is not for you or if it is stick to well diversified multi asset funds which are not quite as volatile as they contain bonds as well as equities.

Read up lots on monevator, trustnet or even investing for dummies. You need to understand where your money is before you go ahead and be clear in your own mind what your investing objectives are.

19 and have £500pm to invest, what to do?

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