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Adult and child ISA help - struggling with online advice

6 replies

optimusing · 21/03/2021 18:49

Hi,

Would appreciate advice. Am generally sensible with money. although am probably would describe myself as low risk with respect to savings which is probably holding me back - i.e with interest rates so low, this could be a good time to invest in a stocks and shares ISA for me and DC but am nervous about it.

Current issues is that have 2 cash ISAs myself that are earning no interest. Mine and DCs ISAs both with known building societies.

Just went to money saving expert and see that the highest interest cash ISAs are with online financial providers that I've never heard of. Probably my age as find this anxiety inducing.

If anyone could offer advice and how to navigate choosing a new ISA, would be very grateful.

OP posts:
Bard6817 · 22/03/2021 19:33

Hi - I didn't understand this myself, sadly missed out of decades of potential gains..

Ok - so what ive come to learn is that the best ISA's is you don't mind a bit of risk, and plan to invest money for about 5 years, is a stocks and shares ISA... I personal use Interactive investor, but there is Hargreaves Lansdown and Vanguard. They all charge for giving you access, and the cheapest is Vanguard at 0.15%pa of your funds invested. Interactive Investor is £9.99 a month if I recall correctly...

So - my first advice is given that you are hinting at your age and thus probably a little later in life, but willing to accept some risk, then Vanguard will be a good starting point for you...

Once you have selected a provider, then you have to (a) put in upto max of £20k per annum, but I think you can put in as low as £100 a month... then (b) define an investment strategy... But you can take your time with (b) as once the money is there, you can take a bit more time...

To get you started, have a look at index linked funds, these add a bit more charge another 0.2% usually, but generally, these charges are lowest on the market. (Its Vanguards biggest selling point.). Have a look at the index funds (I'd suggest US or Global) and basically use the money you've put in the ISA account, to buy that fund, and I think there's options to do that automatically...

Other platforms will charge you transaction fees for doing that, but Vanguard funds in a vanguard ISA, you don't pay transaction fees.

You should find then, that you make some return on your investments...

Alternatively, if you have £40k sitting around, and you don't need access to it, get £20k into the same Vanguard ISA asap, and in April you can put in the other £20k... I would suggest a different selection of funds to choose in the case of large deposits, perhaps pick 2 or 4 funds that don't have much overlap, and go with that.

To reiterate the main point though, if you do invest in an ISA, no matter which kind, really you are locking your money away for 5 years+, and although you can access it, you will risk selling funds at a loss.. In reality, that is the same disclaimer you see everywhere, and people do make real losses, but in reality you will probably make small profit quickly and after 2 to 3 years see the benefit... If you do get hit with a pandemic, a recession, a market crash, you will see profits eroded and probably be at a loss... HOLD YOUR NERVE.... and don't sell..

The key to making money in the markets, is diversification, a bit of luck, not having all you eggs in one basket (although small amounts < £5000 and in funds I'd argue that doesn't apply) and not selling....

I would also begin the lengthy process of learning about investing... Vanguard doesn't give you access to everything out there, but later on you can transfer your holdings to one that does... Then you will be able to invest in precious metals, individual companies, bonds, play currencies off against each other... But that's not relevant to now for you...

To sum it up, the most simple thing I can say, is get a Vanguard ISA, start putting in £100 a month into a US or Global, Index Based Equity Fund...

The most I've ever lost was 15% of my investment in a crazy Russian fund I took a massive gamble on in the 90's... And whilst the headlines say you can lose money, its real hard to do that if you stick within the suggestion I've made above for you...

Good luck

optimusing · 22/03/2021 22:33

Bard6817 - thank you so much for your kind and detailed reply. The one thing I wasn't sure on was how much time you have to put into it? I have some time this weekend to look into what you described in more detail.

I'm middle aged. My only investment to date has been a rental flat as always felt completely overwhelmed by shares. However, the low interest rates are pushing me out of my comfort zone and into making an effort to try to understand this and although I'm starting late with me, if I manage to get to grips with it, it won't my late for DC.

OP posts:
Bard6817 · 22/03/2021 23:08

Good question... Ive been investing for a long time so a lot of what I know has accumulated without me really thinking about it...

Once you've opened the account (making sure you use very good password) and transfer a small amount (the minimum) - just to make sure everything works smoothly, and that the app on your phone works, etc. Then you are ready to start thinking about investments...

Vanguard has about 70 funds... There's a bit of variety, but in the main, once you get a feel for them, you'll understand about most of them from their title, once you've read the details behind one or two. So set aside a few hours one evening for fund selection....

And that's about it... To get started....
It is actually best if you don't check it daily, but rather once a quarter if you can handle not looking at it and see what changes there are every day...

The Index funds are great for a variety of reasons...

  1. They follow the index - so if things are going the right way, which is in the interest of governments, then, you benefit.. When something bad happens, you'll hear about it on the news (funny how you will end up knowing more about world events) and you can check the following day to see the impact on your investment...
  1. The fund managers are in effect, incentivised to help your money grow.. Its not like a bank with a set interest rate, etc, it is quite literally in the interests of the funds, for you to take £100 and make it £1000, because whatever their percentage, it grows...

However, the problem I found.... And this is for you longer term... Is like anything.. Just how much do you want to be involved and dig...

I have friends who don't check their accounts, they just look once a year, smile and say, this is awesome... til its not, then they ask me what's happened and I usually say "" and then say "its ok, don't do anything, it will come back.."

Ive also got friends that now know more than me... They started small, dug deeper then found an area they had some success in, and wholly focus on it and ended up not working at all... One friend, about 15 years ago, did something like this, ended up loving precious metals, now seems to his own valley in Mexico...

Anyway... It can just be like a bank account is the summary.. Send the £100 in every month, let it automatically buy you the same fund, and in 5 years, you'll probably spend a bit, but keep it going...

If you do get into it, you'll find there are much more complex funds, and I usually work on the basis of doubling my investment every five years... Wont get that in a bank... However, years like last year do happen... I keep up with current affairs, saw Covid coming, a lot of people had a 30% drop in March, but most have now recovered... I was in cash for the drop, so wasn't affected... But I also then went into tech and healthcare specific funds... Doubled my entire portfolio in a year... Now im back in 70% cash, because im not sure where to go next... China will get some investment, but not quite right now... But that's just me and I have arrived at this particular style of investing, because of the portfolio I have..

When starting out, keep it simple... Simple funds, low fees... And treat that first year, as learning and watching and seeing what gets you interested... Vanguard is ideal for you... Just had another friend who had to take full IFA advice as they were transferring pensions around, and that advice was Vanguard...

Once you're up and running and want to learn more... Theres a chap on YouTube, runs a free channel called Pension Expert... Superb and unbiased, with no hidden agenda... which is very rare in investing..

Let me know what you decide and feel free to email me if you have any more questions... In ten years time and you're approaching your first million, remember me as Brian, that Scottish guy on the internet without whom, it would never have happened lol...

optimusing · 24/03/2021 22:26

Hi thanks so much for your generosity. It's definitely going to take me a little time to get to grips with but I think £100 per month to get me started is completely doable. You have sold me on Vanguard
so hope weather's not nice this weekend so can do lots of swotting!

You have made it sound far less scary than I thought it was. Hugely appreciate your advice - I will start small and see what happens.Not planning on making millions just keen to beat the appalling interest rates! With the DC, am thinking about a stocks and shares ISA also.

Many many thanks!

OP posts:
crystalize · 29/03/2021 07:35

@optimusing I'm in a similar situation with regards to 2 cash ISA's and child ISA earning next to nothing and wanted some advice.

I have heard of Vanguard and just wanted to say thanks @Bard6817 for your response. I too am going to open an account. I noticed there's loads of funds there. Would you recommend putting funds in a more than one? Or to choose say 3 to 4?

Bard6817 · 29/03/2021 23:17

To all, ever so welcome. I was lucky when i was 18 an annoying old man at work, made me join the pension scheme and ultimately taught me in 1 month, more financial education than 10 years of school and 4 of university. I got lucky. This is just me paying it forward...

Re: Vanguard choices.... Depends on value being invested, but £100 a month into a single fund either US or Global focussed would be the best safe start. After a few years, start a seperate fund with payments from tht point onwards. If you are £1000 a month, yes different funds every month.

Good luck.

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