Putting money in the stock market for 30 years?

[Warner31]

Hi everyone,

Recently I have been seeing a lot of financial videos and a lot of financial people saying to grow your money via the stock market (index funds, ETFs etc) and how the stock market averages just under 10 percent return a year so if you invest in the long run and put additional amounts every year your money will grow a lot by 30 years.

I am in my late 20s so I do wish I knew things such as investing in index funds, ETF before but I guess it is better late than ever. I am willing to put a initial deposit of say £5-£10k and put additional contributions every year when I can (£1,000 to £2,000) or what I can afford

Which platform do you recommend using? I have heard of Hargreaves Lansdown, AJ Bell and Vanguard. What is the process in opening an account and what are the tax implications for future growth and dividends if I open via a cash ISA (which I do not have yet).

Thank you.

[nannynick]

I would start with something simple like Vanguard Investor. They have less than 100 funds to choose from, not many thousands. They are also very low cost.

Vanguard Investor is a percentage based platform, so they are good when you do not have much money invested. When you have £100k invested there are likely to be lower cost providers.

With Vanguard Investor you can start by putting in a lump sum, then you can setup a monthly investment amount via direct debit or you can just add whenever you like using your debit card.

HL has a percentage based platform available, but their fee is 0.45% whereas Vanguard Investor is 0.15%. With HL you are paying more to get access to a lot more investment funds and to a great App. HL will do a lump sum investment and will do monthly (£25 per month per fund minimum I think).

I started with HL and was with them for about 2 years. Then Vanguard came to Europe and I moved from HL to Vanguard as by that time I had decided to use a Vanguard fund (which HL provides access to) as my core investment and due to the lower platform fee, it made cost lower. So whatever you choose you can change it later.

[JustOneMoreNameChange]

There's also interactive investor which is very low cost, but you need to know what you're doing.

Definitely get an ISA first and make sure you use your allowance before you invest anywhere else. You can also use a self invested pension (SIPP), and you will get the tax back on anything you pay in. But that is locked up until you retire.

[MayMorris]

I’d agree with others…use an ISA. Go through an investment “supermarket” to self invest such as ones mentioned above. I have vanguard and Charles Stanley.
I look for low fees. And I invest in funds ( groups of shares that are managed by an investment manager). The cheapest funds are passive tracker funds. They track against the FTSE index or similar and are not going to get spectacular returns but are relatively low risk. Other funds can be higher risk, that may mean bigger returns ( or losses!) and can be more actively managed- they tend to be more expensive.
Look for a “balanced “ portfolio of funds…identify if you want some income or just growth at this stage, look at costs. All the fund supermarket ps like vanguard and CS let you pick various funds, split the money you want to invest between funds you put into your “basket” easily, and give you quick links to see the information on each fund relating to historic performance, charges,estimated earning etc.
It is simple, but takes a bit of background reading to get your head around it.
Most people say don’t buy all at once, spread your spend over a year ( tax year) to benefit form rise and fall in what prices.

I can comm not on 30 year investment timelines. I hold some ex company stocks and have been managing them for 30 years odd now. As it is a single company you see far more volatility in price. I have seen years go by when the value of my shares were low, then years when value was high. It’s all about timing, and if you can wait and sit it out and not panic when markets fall, then reputable companies price will pick back up over time. It is a waiting game, but you’ve got to be prepared to tie up that money for a long time if needed

With a fund, a collection of shares or bonds etc you’ll not see that level of volatility if you choose lower risk funds…you’ll see it in higher risk funds that are investing in emerging markets, start ups etc.

I always think that you need to tie up for a minimum of 10 years but more importantly be able to be flexible as to when you need to sell, as if it is for a specific year/date you may end up having to sell when market values are low…you want to avoid that if possible and delay the sale.

[MossyBottom]

Is an ISA really necessary if you don't have savings income above £1000 pa?
DS1 uses Vanguard as mentioned above. He's 26 and not a high earner but has always taken an interest in investment. He certainly takes the long term view.

[MayMorris]

To add about opening and tax implications

You go onto your chosen fund supermarket site ( if you opt to self invest)…they’ll be links directly to ISAs. You create your account. For ISA you’ll fill in tax info like your national insurance number and sign a declaration. Then start selecting funds to your basket. Then you opt to pay a one off payment or monthly payment and for how much. It then allows you to assign how much of that sum to each of the funds in your basket.. For one-off you then pay in an investment sum via your bank card. You’ll see money go in straight away, but it takes a few days for them to clear it and buy your funds.
Some have nice apps, but others are more basic web sites.

2 taxes apply..income ( on dividend income you take each year) and capital gains ( when you sell shares). There are annual allowances for both, but up your better going through ISA wrapper which will protect you from both taxes unless you want to use your ISA allowance for something else. You can split your annual ISA allowance between cash and investments now anyway.

[Mia85]

@MossyBottom

Is an ISA really necessary if you don't have savings income above £1000 pa?
DS1 uses Vanguard as mentioned above. He's 26 and not a high earner but has always taken an interest in investment. He certainly takes the long term view.

The OP is looking at investing in a stocks and shares ISA not a cash ISA. The personal savings allowance isn't relevant to that. Instead, as MayMorris explains, the relevant taxes are on dividend income and capital gains when the OP disposes of them. If the shares/funds are in an ISA these won't be payable.

[MayMorris]

@MossyBottom

Is an ISA really necessary if you don't have savings income above £1000 pa?
DS1 uses Vanguard as mentioned above. He's 26 and not a high earner but has always taken an interest in investment. He certainly takes the long term view.

Your right…but it is a £2000 allowance on investment- even better!
BUT, an ISA will protect you from capital gains…so if you’re holding a long time value gain could exceed the £12.2 current allowance for capital gain. You can avoid this if you just sell some shares each year up to that gains allowance, but it could cause an issue if you need to cash in everything at once.
If you aren’t using your ISA allowance for anything else, then it makes no sense not to use an ISA…it doesn’t cost anything more

[Mia85]

NB and at the start the OP probably would be within allowances for capital gains and dividends but over time this may well not be the case. Caclulating the capital gains over a long period with frequent investment can be complicated. Much more straightforward in an ISA.