First investment advice

Have you got an emergency fund of at least 6 months spending? Houses tend to consume money.
Five years is the minimum to consider for investments, 10 years plus would be better.

kasworld wrote: »

Hi all!

I have just recently purchased a house for which I used up all my savings on the deposit, so I am in the process of starting off fresh again with my savings and investing in my future and would like to see what you guys think my best options might be.

Having done some research of my own, I was looking in to a Stocks and Shares ISA and was thinking of opening an account with Cavendish Online and putting money into an investment fund such as the Vanguard Life Strategy 80. To start of with I was looking to invest an amount of £2000 and then top it up initially with a monthly amount of £100.

A bit about myself, I am 33 years old, I currently contribute towards a final salary pension at work and I am in the higher tax bracket. As the money will be for the future I am in no hurry for a return so I am happy to leave it invested for the next 5 years at least.

Does this seem like a good idea or am I better of exploring a different investment?

Look forward to your thoughts.

Thanks.

All sounded good until you mentioned you mentioned the next 5 years. In 5 years you will have invested £8k. With a continuing strong bull market, the value could have possibly doubled to £16k in 5 years. However more likely there will be an equity crash and it could end up being worth less than the £8k you invested in 5 years time.

If I was in your position at 33 years old, I would be looking to invest monthly hopefully until I was at least 55, then there is a very good chance you will have a significant sum to supplement your final salary pension, and enable you to retire early if you choose.

Yes, this is a very good idea. Getting into a habit of saving a reasonable amount is one of the best things you can do.

The question you need to ask yourself is whether you are better off investing through an ISA or through a pension. There are pros/cons to both.

You need to make sure you are happy with the risk associated with any investment you choose and you understand the implications of your decision. If not, advice from an IFA may be money well spent. You also need to think about what you want from the money. If you may need it before retirement age an ISA offers more flexibility. Additional pension contributions will save you more tax now and possibly child benefit payments, but if you're likely to exceed the LTA additional pension contributions may not be the right thing for you. Often both an ISA and pension will be the right path, but how you divide funding of each will be individual to your situation.

A book often recommended on these forums is Smarter Investing by Tim Hale. Reasonably easy read and as a novice investor I found it a good overview of what you should be looking for if you're going down the passive investing route, which sounds you are if you're looking at VLS80. That said you need to know yourself eg what are you likely to do emotionally when things drop (which they will) and do you have the self control to rebalance or will that tempt you to over tweek things? After reading the book I knew a lot more, but still went for a funds of funds (VLS60 in my case) as I'm too likely to meddle if I have to rebalance something regularly.

Cavendish are slightly more expensive that vanguard for those sums if you do go with a vanguard fund, although you may want to move to a fixed fee platform in a few years as money accrues such as Halifax.