To ask for your tips on investing money?(10 Posts)
I’ve got no idea where to start at all.
Could anyone help please?
I’m in my mid-twenties, and have recently started full-time work.
At the moment, I’ve got some money in Premium Bonds, an ISA and a savings account paying 5% per year.
Should I invest money anywhere else?
Thanks Rollercoaster and Cheery.
I’m enrolled on a work pension scheme through my job at the moment, so my company contributes a certain amount to my pension every month and I do as well.
I work in London and am living in a shared rented flat as I can’t afford to buy property at the moment.
Any ideas on how I can save effectively towards a deposit for a flat/house? How should I invest my savings?
Also any advice on which areas of London I should look into for buying, please? I know this depends on my budget. I know many people are against the idea of buying flats but I’d like to live as close to central London as possible, rather than commuting in from outside London, so I think my only option is buying a flat.
Firstly, premium bonds are terrible. The mean payout is 1.25%, and most people earn less in order to fund the lucky few who win big. Dump them at once. www.telegraph.co.uk/investing/bonds/martin-lewis-this-is-why-you-should-dump-premium-bonds/
And the ISA - assuming you mean a cash ISA, your money is totally safe, but what you'll earn is pathetic - with current interest rates, if you left £10K in a cash ISA for 10 years, you'd only get £11K and change out at the end. And worse still, the effect of inflation means it'll only be worth about £9K in today's money - if you have money in an account paying less than the rate of inflation, you're effectively losing money, not earning it. At the other end of the spectrum, equities or similarly risky investments will probably double your money in 10 years or thereabouts, which is obviously a massive difference - but there's a risk you get back less than you put in.
What you have to decide is (a) the timeframe in which you're going to need this money and (b) what you need it for, in order to decide an appropriate level of risk. Stocks and shares always win in the long run, but they go up and down a lot along the way. So if you're expecting to leave the money alone for some time, and it would be disappointing but not disastrous if you got back less than you put in, you should absolutely put it in a high-return investment, as you'll probably wind up with far more than the alternatives. However, if you know you'll need the money in a year or two, the risk of a poorly-timed dip is significant. And if you absolutely need it to be worth X amount at the end, you obviously can't take the risk.
FWIW, I use moneyfarm.com for a bunch of my investment money, cos it's really simple - you basically just select the risk level you want and they'll pick a diversified range of investments that match that risk level.
If you know you definitely want to save for a deposit, consider a LISA. You can only save £4K a year in one, but the government will add 25% to what you've saved when you use it to buy a property. See www.moneysavingexpert.com/savings/lifetime-ISAs for more info.
Does your company operate any kind of employee share scheme? I buy the maximum amount of shares each month on ours and it's by far the best performing investment I have and they are potentially very tax efficient (can be risky too though).
It depends on how much risk you are prepared to take and how soon you will need the money for spending. If you have a long-ish time-frame, ie you can leave the money alone for at least 5 years, preferably 10 years, then I would suggest a stocks and shares ISA.
There's lots of useful information on Hargreaves Landown's website.
Thanks so much, everyone. Does anyone have any more tips please?
It's best to diversify and not put all your eggs in one basket, so don't put everything into just one company's shares. Avoid having everything in just one sector too (ie not all in retail companies or all in financial companies).
Investment funds can be a good place to start, as the fund manager chooses the investments for you, within the remit of the fund.
Or, if you're not sure which funds to choose, there are products called "funds of funds" which are basically a basket of funds put together by another manager.
Bear in mind that the more your money is "managed" the higher the ongoing charges will be.
Again, I would recommend Hargreaves Lansdown. They now offer various "ready made portfolios", tailored to differing levels of risk, to help investors get started.
If you're still in any doubt as to what to do, then contact an accredited financial advisor for personal advice. You can find one here.
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