On turning 30 I've decided to become an adult and start my first ever savings account. I've never had any kind of savings and have also recently started my own small business abroad so don't have a pension either. I'm not that money driven, live quite cheaply, don't really have the desire for any fancy car or latest gadgets and also don't really imagine ever owning a big fancy house so never felt the need to be saving.
Although actually I would quite like to design and build my own 'tiny house' or something at some point but I'm more the type of person that might find some unconventional way to do it cheaply, what that is is another discussion I guess. But I suppose at some point that will require some money anyway, so at the very least I should save for that! Otherwise, I thought it might be sensible to start saving some cash moneys for when I'm old and decrepit and can't work.
Research would suggest that savings rates are pretty crap at the moment, even before Covid-19, to the point that you're returns are actually less current inflation rates. I decided to set up an investment/stocks and shares ISA with Fidelity (via Cavendish Online) as that seemed to have the lowest fees of .25%/yr. You have to do all your own money managing however, but then it seemed unnecessary to pay for a managed stocks and shares ISA account as that is essentially what a fund is anyway, no? You invest in a fund which is a managed set of investments.
Now I'm at the point that I should start choosing some funds and this is where I don't really know where to start. We're talking about small amounts of money for now, like less than £1k, but I'll set up a regular savings debit and I'll invest it fairly long term and don't mind going for some higher risk funds.
Can anyone give any advice one the above?
- Is there anywhere else I should be saving money that would be better?
- Is there any websites to suggest for where to find fund advice/suggestions to invest in? Or websites about how to invest? i.e. what I should research and how I should choose specific funds.
- Does anyone have any specific fund suggestions to take a look at?
Probably sound like a total noob as I only started looking at this 2 weeks ago! But my point is to help me not be a noob and hopefully receive some advice or advice on where to get advice 🙂
Thanks!
OK I am no expert but at one point I thought I would invest in a few shares, strike the big time and retire. Oh how niave I was 🙂
My savings plan is now this. I have a set amount in a Stocks and Shares Isa with Hargreaves Lansdown. This is invested in a passive tracker of the top 100 global companies. Can't mind the exact Index tracker name but basically your money is invested in them. As they grow so does your pot. But what goes up can also come down. But for a bit of learning check out passive investing and Index tracker funds.
I also have a some more invested in 3 sets of shares which have decent dividends which are then reinvested in these companies. This is a long term approach.
I'll either do ok or be living under a bridge at some point.
Fundsmith and Vanguard are a couple of funds to look at. Not particularly exciting but have made steady gains. You can buy both directly or through a investment company so worth looking at the fees. As a self employed person a S&S ISA is a good middle ground between cash and pension. Ideally you need a bit of all three but it's a good place to start.
i got some good advice from members of the forum here, then later read this 'RESET' book from amazon which includes a bit of an idiot guide into investing, which platforms to use, how to do it, explains pitfalls and fees, gives a few options. sounds like the sort of info youre after and its only about £3 for kindle.
funnily enough the funds and platforms it recommends were almost the same as the advice i got from here anyway.
I also started a S&S isa recently. Ended up with Vanguard as their fees are the lowest (0.14% irrc), but you can only choose their funds. Hargreaves Lansdown for example has access to a wider range of investments but the fees are quite a lot higher.
FWIW I have spread my pot amongst the Vanguard Lifestrategy 60%, 80% and 100% equity options for now - idea being the higher equity/lower bond based ones are slightly higher risk/reward,a nd vice versa. All are well down at the moment of course but I'm not too worried as they're meant to be a long term view.
I would go for Vanguard funds. The fees are significantly lower. If you look at the effect of a difference of 1% in fees, compounded over how ever many years you might hold the fund for, it becomes significant. There is a choice of funds, so you can choose a tracker (invested in all the shares in, for example, ftse 100, and various different geographical markets. If you want to reduce risk, as your total grows you can include a fund based on bonds rather than shares. Bond prices generally go up when share prices go down (I'm not going to explain it here!)
Split the money 4 or 5 ways between low cost trackers eg
30% US Equities
25% UK Equities
25% European Equities
10% Japan Equities
And 10% slightly higher risk eg
10% China Equities / High tech fund eg Scottish Mortgage Trust
I'm not quite clear if you have savings (if no savings account) but if not, might first be prudent to sort out an emergency fund - 3-8 months' cash. Then if everything goes titsup at once you're not screwed (imagine if you had put all your money in the stock market last November and needed to get your hands on it now!).
While you're building that up, have a few "shadow" portfolios (i.e. pretend to buy XYZ and see how well you would have done) - that can be educational in the best and worst ways.
Then when you get investing you'll have had a little more of a runup.
Books:
Alvin Hall's "Your money or your life" and Tim Gayle's "Smarter Investing" helped me get my head round things a bit (risk/reward, asset mix). The latter has sample portfolios which is handy.
Website - moneyvator
Citywide forums & moneysavingexpert have some interesting threads - see what other people are doing and why.
OK I am no expert but at one point I thought I would invest in a few shares, strike the big time and retire. Oh how niave I was
I'm still in stage 1 of this approach. Doing ok so far, but conscious of how easily you can lose it all again. I put some money from my pointless cash ISA into a Shares ISA at the end of March and topped it up a bit in April. Bought 5 or so key FTSE 100s at various points and played higher lower for the last month. I've made around 20% profit in the first month (yes, I know it's not profit till you close all your positions but you know what I mean)
I screwed up a few things well and good... sold £3k of BP at its low point last week when they announced the lates oil issue. I assumed they would drop further, but they didn't. They marched on up to today's ridiculous high. Bought Jet2 and BA then dumped them on the up, then bought again. Thought I did well selling Jet2 at 630 yesterday, made a neat little profit of £200 or so. But then the ****ers went up to 680 or so today . Quite amusing.
I'm hoping to catch [near enough to ] the next drop to get back into BP especially. I'm sure I'll get burned, but the fact is it's bloody addictive.
I should probably stick it in a fund like the posters above said.....
Probably will stick the remains in there after I get stung 🙂
I should probably stick it in a fund like the posters above said…..
It's a lot easier. Obviously weird times but fundsmith is up more than your 20% over the last month for zero effort. Big drop just before though for balance so it's only really recovering rather than real gains but if you are just counting that month it looks good.
You are mad to invest in anything (other than a bit of cash for a rainy day) if you haven’t paid the maximum you can into a pension this year. To put £1 into you pension it only costs £0.80 as you get tax relief on it. Once you have made the maximum contributions you can THEN think of stocks and shares ISA.
You are mad to invest in anything (other than a bit of cash for a rainy day) if you haven’t paid the maximum you can into a pension this year. To put £1 into you pension it only costs £0.80 as you get tax relief on it. Once you have made the maximum contributions you can THEN think of stocks and shares ISA.`
It's really not that simple. Surely this pandemic has shown that a bit of rainy day money that you can potentially access might be useful. This goes double for the self employed. Don't also forget that while the S&S ISA is bought with taxed income the pension is taxed on the way out. Not usually to same amount but it reduces the benefit. Personally I'd say you want some cash savings, some S&S ISA and some pension. How you split that depends on your age and personal circumstances.
VWRL
Exactly what neilv said. Pension first for saving if possible as it is effectively free money (income tax savings)
The downside is it is locked up until 55
1 clear debt
2 savings for any unexpected issues
3 saving for anything you may want to spend before 55
4 rest in a pension.
You can invest in a pension in many different ways
Sort out your pension first. it's effectively free
Free money I mean to say about pension
Savings for a rainy day, I'm presuming you want in a stable investment so probably stick with cash, bonds possibly safer funds.
Fwiw I invested in a few funds (supposed similar levels of risk) a few years ago with HL. Some did average, one did spectacularly well, one did nothing. The key message: spread your risk.
I've just invested in a few index trackers (UK and international) to take advantage of the market hopefully having been somewhere near the bottom.
and if you've done 1-4 and in receipt of pension?
And also as a ps, don't feel limited by what your employer will match your invest to, into a pension on your behalf via payroll. They may not match is you want to make higher contributions, but it is still worth it for the tax savings. You can also make a one-off contribution from your own account rather than payroll for similar savings (though missing out on ni benefit)
Dunno what I'd do if in receipt of a pension. I'm not there yet. It depends on how much income tax you are paying I suppose. I guess theoretically you could both pay into and withdraw from a pensio at the same time (or buy an annuity or something) but I don't know the detail.
There are pretty strict restrictions on contributing to a pension whilst also in receipt of one. If you are in receipt of a pension the question that I would ask is do you need to save or invest at all?
1 clear debt
2 savings for any unexpected issues
3 saving for anything you may want to spend before 55
4 rest in a pension.Sort out your pension first. it’s effectively free
Why is it number four on your list then 🙂
I think your list is spot on, though (not counting mortgage as debt). By all means put it in a pension but do the others 3 first
Personally,i don't like personal pensions.Yes,the Government adds to it but potentially gains more back in tax if the fund grows.If the poster is looking for a largish lump sum down the line then a pension won't do that.
Follow the old saying , "its not timing the market its time in the market ".
You need to decide just how much risk you are prepared to accept and how active you want to be.
Do you want to be regularly checking the performance and switching funds,or just leave it and hope the fund managers do their job in the long term.
I have had better results from the specialist invest companies than ones that do pet,house,car insurance,etc.Banks have been particularly poor with a limited range of investments spewed out of the computer depending on your criteria.
Some years ago i was talking to a man who had his own investment company for the seriously wealthy.A client asked him how he could make him a million and his reply was " give me 2 million to start with ".
May be worth looking at more ethical alternatives (if you're concerned about such things) - Legal and General's 'World Future..' funds or Fundsmith Sustainable Equities for example? Or go for iShare's FTSE100 tracker ISFD (Irish, so avoids stamp duty).
A client asked him how he could make him a million and his reply was ” give me 2 million to start with
50% return then - nice.
Some years ago i was talking to a man who had his own investment company for the seriously wealthy.A client asked him how he could make him a million and his reply was ” give me 2 million to start with “.
I think he needs to work on his sales pitch.
Will, how relevant is all of this advice for someone based in Norway (the OP) ? Does it make difference? I'm over the border in Sweden and currently have no debt, but just stick money in a savings account every month, no real idea what to do with it. it's a rainy day fund, some of which i will be spending at the OP's business at some point in the near future!
I suppose the only real difference will be the tax. Is there an ISA equivalent? How do pensions work there? The actual principles will be the same. The investments will be in funds or shares for global companies, and unless the tax is really different you should get a much better return than cash. You could invest your rainy day fund in the OP's business, then get a healthy discount 🙂
The downside is it is locked up until 55
Only of you're old, the access age is rising with the pension age, so will be going up to 57 soon, I just scrape in under the old 55 in the current plans.
Pensions aren't risk free, all the rules on access to them / taxation can be changed at zero notice by the government, so whilst they are quite generous now, if a post CV-19 cash strapped government is looking to save some money, you could quite easily see the tax rules changing e.g. we've had dividends go from tax free to taxed, lifetime allowance added in, the 55 thing is increasing and once your money is in them, you can't take it out if they change the rules...
I suppose the only real difference will be the tax. Is there an ISA equivalent? How do pensions work there?
The principal is you should only be taxed once.
So with pension you pay in from your gross income (before tax) and pay tax once when you take money out (although currently you can take up to 25%/£250k tax free). NB It's not quite that simple as dividends are taxed within a pension, so you get double taxed on them as they tax you again when you take the money out.
With ISAs you pay from your net income (ie after tax), but you take out tax free, so any growth is untaxed.
How are dividends taxed within a pension?
Op: have a look at a Lisa. More locked in, but if you want to get the money back for buying a house or retirement you get a 25% bonus, making it about as tax efficient as a pension for most folks.
What is the max contribution to your pension per age group?
Thanks for all the info.
Yes I live in Norway, hence why a British pension doesn't make sense just now.. I don't think.
I don't yet understand pensions here very well, only just getting to grips with setting up the business, doing our accounting and how to pay ourselves (we have a ltd company). Once we're actually making some money I'll be setting up a pension here properly.
I have some money in the UK and thought I would put that into a S&S ISA instead of transferring it here, plus we might move back to the UK one day...
Basically this all started because I don't have a pension but thought I should maybe have one. But then being sort of between 2 countries I don't really know where to start with pensions so the S and S ISA seemed like a good compromise for now. Plus the stock market seems to be about as low as it can be at the moment so seems like a good time to invest in it.
What am I supposed to do if I don't know how long i'll live in Norway for? Or which country I'll be in when I'm old?
What is the max contribution to your pension per age group?
For anyone posting here there is almost certainly not an age-related cap on what you can pay in. There is an Earnings-related cap and a lifetime contribution cap. Most people can (together with their employer) pay up to £40k per year. If you earn more than a certain amount, that comes down.
At some annual income levels, this results in 62% tax saving on pension contributions! At others, it acts as a massive marginal tax penalty.
You can only open an ISA if you are a UK resident.
I still have a bank account and address in the UK and spend several months of the year there.
Pictet Robotics has been good to me.
I'd (and have) invest in two things:
1) Global equity tracker with low fees - trying to beat the market is a mugs game
2) Amazon - my only exception to 1) - it's a global unregulated monopoly.
Don't consider Amazon unless you're in for the (very) long term; see recent comments by Bezos.
Personally, I woudn't invest in them unless and until they become 'good corporate citizens' - tax and their treatment of employees are major concerns for me.
For anyone posting here there is almost certainly not an age-related cap on what you can pay in. There is an Earnings-related cap and a lifetime contribution cap. Most people can (together with their employer) pay up to £40k per year. If you earn more than a certain amount, that comes down.
just to add, the total fund is limited to just over £1m, which sounds like a lot, but it works out at as little as £17k/year if you retired at 55 and wanted to track RPI
How close an eye do you have to keep on Funds? Are they managed well for the first few years and then de-prioritised as new funds come to market or do you pick one and leave it for 10yrs?
What am I supposed to do if I don’t know how long i’ll live in Norway for? Or which country I’ll be in when I’m old?
Doing something, even if it causes some difficulties later, will almost certainly be better than doing nothing. Now is a great time to invest in the stock market provided of course you have the available funds and can afford to lock it away for a few years.
In terms of investments there is no significant difference between a S&S ISA and a Pension. You can invest in basically the same things so the returns aren't any different. It's only the tax rules that are different. ISAs are taxed on the way in, Pensions are taxed on the way out. Other than that they are basically the same.
Don’t consider Amazon unless you’re in for the (very) long term; see recent comments by Bezos.
We'll see.... all he's said is he'll spend one quarters profits on internal investment / covid costs - something they've done consistently for years anyway. Every market they've entered they decimated - and in several are an unregulated monopoly (online sales, cloud compute). Which is a licence to print money.
If you're looking at this long term/early retirement then absolutely and totally a Vanguard Target Retirement fund taken up through them.
Read about Warren Buffet's million dollar bet vs active fund managers here
A well diversified equities heavy and low cost passive index fund will outperform the active market every time long term.
Great decision to invest by the way.
Mr Money Mustache's website is a good place to start.
Loads of great books such as The Simple Path to Wealth or Millionaire Expat to explain things. Fortunately, being in the UK, ISAs allow you to invest tax free like an expat. I've got mine stuffed in Luxembourg as I live internationally.
Unfortunately, there's some terrible advice in this thread. Don't go for individual companies, don't go for active funds, etc.
Probably a bit like reading advice on mountain bike purchasing on the Bogleheads forum!
Non-stealth edit.
Should have said, some great advice as well! Definitely some to avoid, however...
Good luck!
AWS by no means has a monopoly on cloud compute. Gcloud and azure are right there in terms of cost and features
Definition of a monopoly is more than 25% market share. Aws has 33%, next nearest is 18%.
@Ewan - they also need to be able to dictate the pricing within the market to have a monopoly. It's more of a oligopoly at the moment with GCP and Azure.
