Opening an investment ISA?

[NotYourPrincess]

DH and I need to start some serious saving if we are ever going to be able to afford our own home. He's talking about high performing investment ISAs, but I wondered what other options there might be.

We'll be putting away £500 every month for the next 5 years - What should we do with it?

[IndigoBell]

Trouble with an investment ISA is that in 5 years when you want the money you don't know how much will be in there........

Safer options are Cash ISAs or just plain savings accounts.....

You can get at least 4% on regular savings accounts.......

[IndigoBell]

Although because tax is taken off savings accounts interest, and not for Cash ISAs you're probably better off with Cash ISAs........

[wearenotinkansas]

I'm no expert - but in my view high performing might mean high risk. From what I've read the average return for shares/equities over the long term (and by that I mean 20 years) is about 11% - provided it's accumulated - ie any dividends get reinvested and interest compounded on those. If it's an ISA it should be tax free. This is a better rate than you'd get with any savings account at the moment but there is always a greater risk with equities.

Probably worth speaking to an IFA about a suitable fund - but watch out for their charges. These can make a significant difference to your return, especially if they keep getting paid while you hold the investment. I nearly got fleeced by one last year, where the fund costs and their charges were over 2% per annum - which makes a major difference to your return over the long run.

Alternatively, if you're confident you could choose an investment ISA yourself. Charges will be lower. I've recently invested in a FTSE tracker and there is no entry charge and annual management charge is quite low (think its about 0.5%). I also like Fundsmith which is new - and which most of the investment industry seems to hate! But obviously depends what you are looking for.

In any case, its worth reading around before you decide if and where you want to invest, especially if you decide not to use an IFA.

[wearenotinkansas]

p.s. - meant to say, I'd be cautious about investing a lot of money now anyway until the Greek situation has been resolved. But if its going in over time ie. regular monthly payments, probably not such a problem.

[NotYourPrincess]

Mmm I see what you both mean - obviously, what DH is talking about is higher risk, but I didn't think about the period of one that we want to be saving for a 'short term', when in reality it probably is.

I'm ashamed to say that I'm nit entirely au fait with what's going in in Greece. It certainly doesn't appear to be something that will be resolved overnight, so investment over the next 5 years may be riskier that I'd first considered. I really hadn't thought that it may have an impact on our money. God, times are complicated.

Thanks so much for the advice, it has really helped.

[NotYourPrincess]

werenotinkansas - sorry, just read your post thoroughly (moved house today, am knackered and a bit spaced out) - VERY interesting re: IFAs. We haven't used one before, and it was a possible option, so I'll watch out for that.

You seem very sussed, I will be taking your advice and doing lots of reading before we do anything with out money. Thanks again.

[wearenotinkansas]

Congratulations on moving!

Not that sussed, but for the first time I have money to invest and have been pretty unimpressed with the so called "experts"!

Good luck.

ps. I found Investing for Dummies pretty helpful...

[Lizcat]

I have dramatically increased my investment /money savyness by reading the money section of a broadsheet every weekend for the last 5 years. So I would highly recommend this to increasing your knowledge - I have gone from one small cash ISA and standard pension to split european and high gowth ISA, an group SIPP and a SIPP WRAP.

[wearenotinkansas]

Lizcat - how did you select your split european and high growth ISA, if you don't mind me asking?

[Lizcat]

I have a 50:50 split on them with the Invesco Perpetual fund whilst this fund is not quite doing so well currently Neil Woodford the head fund manager has one of the best track records out there. I also have my DDs CTF in an Invesco Perpetual Fund and it is again one of the best child trust funds and I am very happy with it's performance.

[wearenotinkansas]

Thanks - that's interesting. Have also been thinking of moving DD's CTF as hers is not that great - although will feel a bit guilty as its currently in an ethical fund.