What should a complete investment novice do?

C_J · 17 May 2017 at 11:29AM

Dear wise people

I'm a long time lurker on this thread, but am still baffled (and slightly terrified!) by much of the terminology - I have zero experience with investments, and would welcome some easy-to-understand advice from you.

I have two current account regular saver accounts which mature at the end of June, which will give me around £7,000. I would like to invest this in a S&S ISA, as a way of dipping my toes into the stock market and assumed that the safest and easiest way to do this would be to open an HSBC World Selection ISA as they are my main bank.

However not many of you seem to talk about having a S&S ISA through a high street bank as they are too expensive or don't perform as well. Would I be being ridiculously naive to go down this route? Is there a better option for me? I know £7K is a tiny amount, but I'm pleased to have managed to save this over the past 12 months and would like to put it somewhere where it can continue to work for me.

I've already filled up the high (ha!) interest accounts from the likes of Tesco, Club Lloyds, Nationwide, TSB and get the Halifax and Coop Rewards so there's no space for the money there.

What would you suggest, please?

droopsnoot · 17 May 2017 at 11:36AM

I don't know HSBC, but I opened my S&S ISA many years ago at the Nationwide. The problem I have run into is that the selection of funds available there is very limited, so virtually none of the funds that people talk about on here or elsewhere are available.

As well as the costs, this is something worth considering. £7 may be a "tiny amount" compared to some, but there's an argument that the costs would therefore be of more significance to you, rather than less.

keyboardworrier · 17 May 2017 at 11:38AM

My advice would be to go for the cheapest platform and appropriate fund possible, there's no point paying extra just to stick with a brand you're familiar with IMO

xylophone · 17 May 2017 at 11:41AM

http://www.moneywise.co.uk/investment-platforms

might be worth a read.

http://monevator.com/category/investing/passive-investing-investing/

Eco_Miser · 17 May 2017 at 11:58AM

http://monevator.com/compare-uk-cheapest-online-brokers/ also lets you compare brokers.

Incidentally, the moneywise link xylophone gave has wrong information about Iweb in its comparison table at £45 per year with 4 transactions (it's actually £20 after the first year, and nothing after the first year excluding transactions)

C_J · 17 May 2017 at 12:06PM

Thank you, I'll have a read through all that tonight.

How do the fees work, then? Do they deduct their percentage or flat fees from my investment at the start, or from any increase I've earned (each month? at the end of the year?). If I set up a standing order for a set amount to be invested each month, will I be charged a transaction fee for every deposit?

enthusiasticsaver · 17 May 2017 at 12:07PM

I would not use a high street bank. Generally they are pretty expensive and under perform and have a very limited choice of funds.

Diy investors have to choose an appropriate platform to invest from and then decide which type of assets to invest in. Which one you go for depends on how much you are investing and whether you prefer percentage based one to flat fee. I use Halifax Sharedealing.

A few golden rules of investing I follow but I am no expert as I only started 3 years ago.

We never invest anything we think we may need in the next 5-10 years.

We keep a large cash buffer so we are not forced to take money out of our portfolios if we need to buy a new car, holiday etc.

We diversify across geographical areas, sectors and types of assets. The more diversified your portfolio the less risk of you losing anything.

We invest in the Vanguard Lifestrategy funds which are popular on here and one of the most popular funds sold in the UK. You can choose different levels of risk according to the ratio of fixed investments to equities and they are funds of funds so very well diversified. Low charges too and most platforms sell them.

The more you read about them the more confident you will get. You can either put your £7k in as a lump sum or drip feed money in monthly.

Eco_Miser · 17 May 2017 at 12:21PM

enthusiasticsaver wrote: »

I would not use a high street bank.
I use Halifax Sharedealing.

Which is an online broking arm of a high street bank - Lloyds Banking Group.

It's a good choice, although I prefer Iweb - another trading name of the same company, with different fees.

But don't go in branch and expect to get the same inexpensive service.

bostonerimus · 17 May 2017 at 12:31PM

Here's what I do

1) Spend less than you make (ie Mr Mcawber had it right) and do a detailed budget to track spending
2) Save 6 months spending to an emergency cash account
3) Max out your workplace pension, LISA, SIPP etc
4) Buy low cost diversified investment funds like Vanguard LifeStrategy or an asset allocation with index funds and rebalance
5) Avoid individual shares and actively managed funds, they are expensive and often risky.
6) Avoid high interest debt, pay off the credit card in full each month
7) Try to save 20% of your gross salary, hard I know but start with something and work your way up
8) Maximize ISA then go onto regular investing accounts...still only using low cost index funds
9) Be cynical about advice and educate yourself, read the bogleheads.org wiki
10) Don't fret about performance.

StellaN · 17 May 2017 at 1:00PM

HSBC do have some decent funds though both passive and active.

As well as the HSBC World Section they also have the HSBC Global Strategy funds (3 risk levels) and these are low cost multi asset funds similar to VLS and L&G funds but lower in UK allocation.

What should a complete investment novice do?

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