Investing…how do you do it?

[overeater]

Can someone please explain to me how index funds work and which ones could I think about investing in? I have 0 idea what to do. I have around 30k in savings and I would really like to invest this so any advice would be appreciated.
thank you ☺️

Do a free course so you understand the basics of what an index fund is, what a platform is.
https://financialinterest.com/index-funds-for-beginners/

Read some books to help with the concept of investing globally. Such as:
The Simple Path To Weath, JL Collins.

Thank you 🙏🏽 this will be a start! :-)

Youtube channels and podcasts can also help.

https://m.youtube.com/watch?v=UsV0QyAirWU&pp=ygUJI2dvdGZ1bmRz

ISA and Pension are different tax wrappers. You can put up to £20k into ISA each tax year. What you can pay into pension (and get tax relief) is limited by £60k or your gross salary if lower. What you can pay into pension gets complicated if you have a defined benefit work pension scheme.

Consider what the money is for, when it is likely to be used. Pension locks money away until retirement, ISA is accessible. An investment should be 5 years timescale plus. If you are saving for something you will pay for in under 5 years time, then do not invest… that is savings, so use interest paying cash accounts.

Rebel Finance School

If you don’t have an isa, start there. Put in 20k this year and the rest next year.

how long are you investing for? Is this our first and only investment? If so, I’d start with a basic tracker like Nutmeg or Hargreaves Landsdown. Put the money in, look at it once a year, add more when you can and that’s it.

I don’t intend to touch this money for the next 10 years. I just want to put it away as it’s a big chunk and I know if I start dipping into it , it will disappear very quickly!!

For more context…I am 47 and have no investments. I have a pension with the nhs that I pay into and I own my flat and hopefully willl be mortgage free in about 5 years. I have no children. I have around £300 disposable income every month (after my expenses) that I would like to start investing rather than leaving in my bank account.

Please don't tie it all up if you don't have a savings pot.

Think about what could go wrong; car repairs , new boiler, job loss etc that an income surplus of £300 per month won't cover.

Put a proportion of your £30000 in an account that you can access for emergencies but has a half reasonable interest rate. Some current accounts pay the best interest.

Shares go up or down and so you need access to some cash as you won't want to sell investments when they have fallen in value just to pay for a new boiler.

If it were me, I would then put the isa amount in a share isa and invest in 4 or 5 blue chip shares and watch your dividends mount up and use the dividends to reinvest in more shares.

Platforms like Halifax share dealing make it really easy to do so and there are no management fees.

You need a stocks and shares isa so that income and gains are tax free. The key point for you will be fees - shop around for a product that has low fees. Most banks/ big financial institutions will offer managed funds in isa wrappers.

Good advice here:

https://www.moneysavingexpert.com/savings/stocks-shares-isas/

I’d keep £20k savings aside for emergencies (or ideally 6 months worth of income). Put that in the highest account you can find. The highest one that worked for me recently was a Plum ISA paying 5.65% interest (3 withdrawals a year), but search Money Saving Expert for the latest.

Then put the rest into an investment pot and top it up monthly if you can. You can use easy platforms like Wealthify, Trading 212 or others PPs have mentioned.

A good idea is to make sure that you have a wide range of holdings. If you invest in one company, it has a disastrous few years and its shares tank, then you lose most of your investment. If you invest in a large number of different companies, then the risk is spread so one company tanking doesn’t have as big an impact on your finances. Funds allow you to hold a very small stake in a large number of investments that usually balance risk. You could invest in a mix of funds with different risk profiles, eg bonds, gilts, UK FTSE 100, small companies, developing markets, real estate etc.

With funds you basically chose between managed (where one individual chooses the investments) and tracker (where the returns track an index, such as the FTSE 100). Over the long term, for ordinary investors, it doesn’t seem to make much difference which you pick other than fees: they’re higher for actively managed funds.

I'm invested in a mix of funds to spread my bets. It’s fairly unusual for individual investors to hold shares directly, most people invest through funds.

These are really helpful tips. I’ve been terrified to start investing as there is so much contradictory information out there. Very keen to get started though

Go check out the Reddit personal finance board. They have a good flow chart for financial savings / investing priorities.

Check the fees carefully for all products / providers you intend to use, fees really cut into gains over time. Stay well away from St James Place or anywhere with big fancy offices, you are ultimately paying for that!

£20k for emergencies is overkill. The OP works for NHS so is in secure employment and will have generous sick leave. Not investing such a large sum will lead to lower returns. I'd only keep £5k max in a cash ISA for emergencies.

£20k for emergencies is overkill. The OP works for NHS so is in secure employment and will have generous sick leave.

depends on OP’s attitude to risk, redundancy package, family situation etc. I don’t agree NHS is necessarily secure - some posters - nurses - were talking on MN about being made redundant this week, and there’s talk of some maternity units closing due to falling birth rates. Always a good idea to have personal savings anyway and not need to rely on government/employer for personal sense of security IMO. You just never know what’s round the corner. If single, might want more of a buffer as no partner’s income to cushion a blow.

@FloraBotticelliyes i agree. The nhs is very rocky right now. However, the money I want to invest is seperate to the money I have for rainy days / months but being single does leave me in a vulnerable position so lots to consider

The Lemon Fool is a great place for investment discussion. www.lemonfool.co.uk/viewforum.php?f=88&sid=ddaa9727a341f839894dc4d5da647e6e

Hey, keep it simple open a vanguard account, invest each month into their all world index fund and just sit on that :)

I have mine in Hargreaves Lansdown. Use the app.

Its in a mix of UK ftse tracker, us index tracker and a small bit in European. I bought lots of us during Covid and made 45% increase as it was cheap when markets are uncertain. I’ve bought again recently with trump being such a psycho.

so yeah buy when it’s down and don’t sell when the markets are down whatever you do!!!

@ryukattcan I ask how much is a sensible amount to invest? Should I do a few hundred each month or put my £30k in altogether?

As a beginner I would suggest you decide on a regular amount to put in every month and set that up so it does it automatically. So that may be £200 every month into a fund within your Stocks & Shares ISA. Get comfortable about how it works, login once a month to see how the value goes up and down. Get used to sticking to a plan, not reacting to market noise (press reports, tv news, etc).

@nannynickim going to sound really stupid here but when you say “a fund within your stocks and shares isa” I don’t understand what that means. Do I just put money into a stocks and shares isa or do I have to select a certain type of “fund” also?
thank you ☺️

You have to select what to invest in. Choose a global tracker. Or google Vanguard Life Strategy which is designed for people who don't want to think too much.

Hope nobody minds me jumping in. I already have a bog standard Wealthify stocks and shares ISA that I put a bit in every month, and pay them to manage for me because like OP, I do not know what I'm doing.

Is this better, worse or basically the same as the Vanguard Life Strategy fund?

@yatuway that sounds like a managed fund (where you pay someone to manage the fund and hopefully outperform the markets). Vanguard LS is a mix of passive (not actively managed) funds that track major benchmark indexes and bonds. Passive funds are cheaper and there is some debate over whether passive v managed is best. If you get an amazing fund manager maybe not. I invest in passive funds. Either way, investing in diversified assets with a global spread is the way to go. With VLS you just choose a single LS fund. For my kids ISAs I've stuck it in VLS 80, which is 80% equities, 20% bonds.