£10,000 to invest, low risk. Any ideas?

[ProperLush]

We are thinking about investing about 10k in something that is 'safe' (from losing capital, really), earning some interest but not 'needed' for 5 odd years. It's for our DS's ongoing education, really (oldest in Y8 at the mo.)

Any idea?

isa's fuck the stock market

You could put it in my bank account.

isas all the way. Don't piss around with that money, things are too shakey.

It would be protected if a bank failed as it's under the limit.
Cash ISA all the way for tax purposes. You'll need one for you and DH as it's over the annual limit £5340.
Inflation is a silent 'loss'. Stock markets are low (ish) but very volatile I wouldn't suggest this sounds like your thing.

If you want zero risk, look either at Fixed Term Cash ISAs or at Fixed Term Bonds over 5 years. You could only put about half the £10000 in a Cash ISA this year and would have to wait until April 2012 to invest the other half but all interest is tax-free and 5-year cash ISAs are paying over 4% at the moment. A quick comparison of 5-year bonds shows that they are paying around 4.7% which equates to 3.76% after tax. However, if your DS does not use up his personal tax allowance then that tax can be claimed back.

CogitoErgoSometimes your a banker?

remember that "safe from loss" will also mean "safe from growth"

I'd recommend you keep it simple, and don't invest in anything you don't understand (like for example a complex structured product "guaranteed" by Lehman bros)

Banks in foreign parts are more tricky to get your money out of when things go wrong. Remember Iceland and Jersey (which is not part of the UK, or the EU). Neither is India.

Not a banker. Just interested in money matters.

Have you thought about renewable energies?
Despite the reduction in the Feed-In-Tariff as of Dec 12th (for Solar), you can still make a nice little profit, providing your home suits whatever technology you decide to go with.

That's a good idea.

I read in Chronic Investor today that there will shortly be a lot of cut-price PV Solar Panels coming on the market, the stock of the companies that are going bust due to the cutting of the FIT subsidy.

The panel price has dropped a considerable amount over the last 12 months, coupled with the increase in efficiency does help soak up a good chunk of the 50% cut that the government are implementing, and obviously depending where in the UK you are and roof slope, the payback period can still be 8-9 years (FiTs plus cost saving from reduced electricity bills).

The OP doesn't want to lose their capital. Forking out £10k on solar panels means the capital can only be released if they sell their home. Don't think that's quite what they had in mind

Have a look at Ecotricity. They are asking for money to invest in renewable energy production for a 4 year fixed term deal and giving 6% return (or 6.5% if you get your electricity or gas from them).

Ecotricity EEEEk!

Investors Chronicle wrote
^"Now I would hesitate to say that anyone who buys this bond is being excessively sentimental, but the table suggests this is within the bounds of possibility. And these vital statistics are not the only wrinkle. As has been pointed out by Harden & Partners, an investment adviser with a special focus on green investment, last year Ecotricity spent £700,000 buying its local football club, which went on to contribute a £550,000 loss. Forest Green FC is surely a worthy enterprise, and may well be developed into an admirable platform for the green credentials espoused by Ecotricity's founder and boss, Dale Vince. But if you were raising £10m of loan capital for an electricity company with interest cover of 1.6x, your subscribers would probably want to aware of its football division. However, there is no reference to it in the bond prospectus.

Nor is there any mention of an interest-free loan of £500,000 to directors. In other words, to one or both of Dale Vince or Kate Vince, who are the only two directors of Ecotricity Group. For some reason I just cannot shake off, that too seems to me to be an important detail of which all investors ? no matter how keen about green energy ? should be appraised."^

the table he mentions shows, among other things:

Net assets £55m
Net debt £60m

If you can afford to lose it, fine. Otherwise, cash ISA.

he also mentions that you can't get your money out of Ecotricity

"...In the first place, you can't sell a minibond. They're not listed on any stock exchange and indeed their terms expressly forbid you from transferring them to anybody other than your executor. In the second place, their prospectuses are not vetted by the Financial Services Authority..."

Ooo - maybe not such a good idea then .

How do ISAs compare to Premium Bonds/National Savings? I have money in PBs because I want to be able to access it quickly when we find a property we want to buy, rather than have it tied up, but a 5 year investment presumably makes more sense to have as an ISA, is that right?

This sounds mad but i read somewhere that one of the safest things to invest in is whisky (NOTE i am not trained financially or anything so look into it independently)So you can buy a cask from a distillery for about a grand, obviously not yet matured, but when it does, you can bottle it and pay duty, or sell it back to the distillery. But it will always, always increase in value.

More interesting than an ISA anyway.

"How do ISAs compare to Premium Bonds/National Savings?"

National Savings are very safe and many of their products are tax-free, but the interest rates are not always the best in the market. Premium Bonds are rather hit and miss. They are set to pay out an average return (currently 1.5%) but what this means in practice is that some lucky bonds pay out a lot but lots of bonds get no prizes at all. With inflation in the 4-5% region, a premium bond that wins the average 1.5% or nothing at all is worth less every year in real terms.

Cash ISAs vary from provider to provider but there are several on the market that are offering a reasonable return - around 3% - together with instant access for no penalty. The interest is tax-free and the main restriction is that there is a limit on how much you can save each year ... currently £5340.

Generally speaking, the longer you're prepared to put your money away and not touch it, the better the rates you are offered. Applies to bonds, savings accounts and ISAs. A 3 year or 5 year product generally pays better than instant access. However, as base rates are expected to rise at some point you have to judge if tying the money up for 5 years at 4% is still going to look like a good deal in 3 years time if interest rates have risen more generally. You might decide, for example, to put the money away for just 1 year and then, when it matures, see if anything has changed and make a fresh decision. Stay flexible.