Middle income beginner investor help for dummies

[beginnerinv]

I could really do with some advice.

Partner and I have a mortgage of £450k at a 2.9% rate- about 4.5 years fixed left.
We are also saving up for our wedding this summer.

Partner wants to put our savings in a easy access saver and pay off as much of the mortgage as we can in 4.5 years when our fix ends.

I want to put some money in a Vanguard fund such as the S&P 500, but partner thinks we need the money in a easy access saver or a short fixed term so that we have a pot of money to pay off a large chunk of the mortgage when the fixed term ends.

What should we do?
For reference, we have no children and we earn £80k net with expenses of about £40k.

Put it in the vanguard account. I would recommend the S+P 500 fund you have mentioned but it wouldn't hurt to spread your risk. Use a stocks and shares ISA first for tax efficiency. Whilst not instant access, you can draw your money down within 1-2 business days from experience.

It will do nothing in the bank but lose value.

Thanks. What other funds would you suggest please? In 5 years time when we want to overpay the mortgage having the money in stocks may not be wise if they are not doing well at that point.

I'm not qualified to offer advice so I will not recommend funds for you, please do some research, have a look on their website, each fund has an information sheet with a risk score from 1-7.

Typically low risk = low reward, if you'd prefer that safety net then perhaps investing isn't for you and you'd be better off saving in a bank. But you only need look at the average performance of the S and P 500 throughout history to see that on average it has returned approx 9% annually throughout the last 20 years, 6.5% factoring for Inflation.

You could ride out any fluctuations in the market and just remortgage to a deal that allows early redemption with no penalty. Then when the time is right pay it off with your investment.

Vanguard are low cost which is good.

Youre right to consider their s&p fund. Also have a look at their global equity accumulation fund. Fundsmith equity is also another big name to consider - have done very well for their clients for about 20 years, averages about 15% pa. (it was high about 19% but they have had a poor 18 months). S&P estimates going forward is about 6.5% pa and global is 8.5%. Crystal ball gazing i know, but it’s based on history with knowledge of the present.

So, Id get as much into a stocks and shares Isa as you can.

History suggests that you will make more than the interet saving from clearing the morgage early - so on a pure financial decision - investing is wiser. And within a s&s isa, it will be tax free profit.

However, investing isn’t for everyone. Some people can’t handle seeing periods where their pot goes down in value. It does add stress and worry. The best idea is to invest and not look, so they say, but i check every day lol.

Isa’s are also offering interst these days too, i think about 2% is the minimum. Isa’s are also quick access - 3 days usually. I’ve heard but not seen you can get 4% savings accoubts now too. When the mortgage rates come down - that will go down too. It’s just a matter of it or when.

You can get 3% interest on easy access savings, and 4.45% if you fix. This money is guaranteed and is higher than your mortgage interest, so that's a great way of saving to pay off the mortgage. Your money is protected and you are guaranteed to get those saving rates for now.

www.moneysavingexpert.com/savings/savings-accounts-best-interest/

You can lose money as well as make it on the stock market. You often start down 1% or more with trading costs and stamp duty just buying shares/funds every month, and S&S ISAs tend to have a monthly/quarterly charge. So, if your investments don't get an annual return of maybe 6% (after costs, that could be closer to 4.5%), you won't be much better off than sticking it in a fixed-term savings account. Given the risk you are taking in the stock market, you'd want higher returns ... I don't think it's worth it. And if you lose money, how are you going to explain it to DH?

When interest rates were close to zero, shares were the only game in town. In your position, and with a partner who is not so keen, either cash savings or cash and a little bit of investment is probably a better choice.

5 years isn’t a long time for investing. Ideally you’d want 10 years plus. Long term id want some balance between investments and overpaying mortgage. However, you seem to have a short-term goal though of paying off as much as possible from your mortgage in 5 years. In those circs I’d find a high rate savings account for the money unless you’re willing to put some towards overpayment and some towards longer-term investing.