Some really helpful advice as always.
On the side note of whether Amazon is worth the risk. Amazon has been buying market share for online sales but it’s not clear where it actually generates profit as it’s reporting is so opaque. It seems that it’s making money in its cloud division but using that to buy sales elsewhere.
A well diversified equities heavy and low cost passive index fund will outperform the active market every time long term.
Thats not true (also define "long term")
Fan of passive low cost investments (Vanguard especially) but there are managed funds that have outperformed them. Difficult to find one as the majority are poor but a small number do.
As a non uk resident you may pay voluntarily uk ni to accrue uk qualifying years. It's been discussed on here a few times but I think it's a good investment. Once the years are paid its a done deal, ie, you cannot access till retirement and the govt may change the rules.
Really no-one knows over the long term what will perform, so get a mixed bag of investments and spread the risk.
Certainly this year has taught me the value of defined benefits, I know some people who cashed them in. Again no-one knows what's going to happen.
Thats not true (also define “long term”)
Fan of passive low cost investments (Vanguard especially) but there are managed funds that have outperformed them. Difficult to find one as the majority are poor but a small number do.
You've fallen for the con I'm afraid. You're right in one way, a small number of active funds outperform the market each year. After fees it's about 20%.
So let's say these magic fund managers outperforms the market. Well done them. Unfortunately, the next year the 20% thing success happens again leaving 4% of funds up. The next year? Not looking good but a small amount are up. The magic active funds you hear about are the handful out of thousands, yes thousands, that have rolled six on the dice a few times. It's luck.
This is the reason Warren Buffet took on the hedge funds, in the bet I linked to, over a 10 year period. He wiped the floor with them and he knew it would happen.
Index funds are a no brainer winner long term term but advertising works and so active funds live on. Newspapers report them with glee because they pay for advertising and all feed the same monster.
So, what do I call long term?
20+ years.
The reason I invest in an index tracker?.
I know I'm stupid. I don't have any training in equities analysis, I don't have have insider information, and I know there are financial experts out there smarter than me. I accept this. And so... I don't pay the fee's for financial advice (through a fund manager or advisor) as it pays for their porsche not my retirement. After you take this middle man out you are simple, efficient and effective.
Cheers for the info Hugo, good to read the Buffet article. I have actually already read a bit on MMM and would say that I live a fairly MMM lifestyle. Except for the savings part, but that's mainly because I've never actually owned or made much money to save yet as we started our own business two years ago. Otherwise I don't spend money on unnecessary things, eat cheaply, have a cheap car, use offers and sign-ups for discounts etc and just generally try to be pretty frugal.
This year and next should see us actually starting to make money though and have an income, hence the decision to start saving!
I also use the Moneysavingexpert site a lot, almost my bible (if any of you don't then I would definitely give it a go). After reading up on various savings options on there I had already opened an account with Fidelity (via Cavendish so fees are .25%) and invested in a couple of their top 50 suggestions with £100 before starting this thread. I chose that one as it had the lowest fee but most options to invest in whereas Vanguard you could only invest in their funds.
By the sounds of it, it might be better to use Vanguard and just invest in a couple of different their index funds for different sectors/parts of the world? As you've mentioned I don't really see myself investing in specific companies as it is probably more suited to short term/day trading and you've got to be more involved. I was thinking to invest for the next 10-20 yrs or until we think about building our own house somewhere.
Poolman - could you link me to some info about that or explain what you mean? What I've read is that you need to live and contribute to NI in the UK for at least 10 yrs to access your state pension so I might well be willing do that just to be sure of at least some kind of pension.
I'd expect you can buy the Vanguard funds on the Fidelity platform, the fees will be slightly higher than direct but they may be other benefits to using Fidelity. I use Interactive Investor and have about half in Vanguard funds.
If you're not sure where you'll be living, but considering contributing to a UK state pension, think about both ends of that deal. If I remember correctly, if you're entitled to a UK state pension you can take it even if you don't live in the UK but there's a penalty, I think it's that you lose the index linking.
By the sounds of it, it might be better to use Vanguard and just invest in a couple of different their index funds for different sectors/parts of the world?
Yes, absolutely, but luckily Vanguard do a range of funds that do that for you so you can hold just one fund. The Target Retirement funds are based on your retirement date and and alter the shares/versus bonds allocation to be more aggressive early and more conservative later. The Lifestrategy funds have a set asset allocation depending on which one you get, eg Lifestrategy 80 one has 80% shares 20% bonds. Hope that makes sense!
10 years is a funny length of time, especially if you're going to be using it to fund a house. You could be at the top or bottom of an economic cycle and I wouldn't want to be relying on an exact amount. That said, even if the stock market stayed the same for 10 years you'd still be way ahead of a bank account on dividends payments reinvested!
I can only say what I'd do in the circumstances. If it were for me I would go for one of the target retirement fundsl set for 10-20 years ahead.
The target 2030 is currently 68% equities and 32% bonds.
The target 2040 is currently 80/20.
As the approach the "retirement" date they eventually both reach 50/50 for lower volatility (and it must be said, returns).
Just have one fund so no moving parts. Vanguard will rebalance for you. Super low fee so all the gains are yours.
I'm not a financial advisor, but then as Mr Buffet says "no advisor gets rich suggesting index funds".
just piggybacking this thread rather than start another......
one of my lads has moved in with his girlfriend (rented house), theyve got a 6 month old baby now, so im trying to get him to think about investing in a LISA, either for a first time buy or retirement.
i sort of understand the 'pay in £4000, the government pay £1000' side of it, and you can choose to either take advantage of that for your first home or leave it til retirement (stop paying at 50, take it out at 60).
The Moneybox LISA is recommended on MSE as a cash LISA. knowing his views on risk tho, i think he'd prefer to invest in S&S, which i believe you can also do with a LISA.
how would that work? would it still be a case of investing say £4000 into the LISA, government tops it up to £5000, then you buy S&S? and if the shares rise then all that gain would be theirs?
and how would that work tho if he was daft and drew it out for something else and forfeited the government percentage? would they just force the sale of x000's worth of shares?
could end up a hypothetical question anyway as who listens to their boring old dad, i never did 😀
thanks
I’m not an expert on LISA’s but would say two things:
Any money in Equities / Stocks you should be prepared not to access for 5 years min (some would say 10) - to ride out the downturns. So in my opinion I’ve always winced when people say they are using equities to save for a house - yes returns should / will be better than cash over the long term - but you need to manage your risk appropriately to prevent your house deposit dropping 30% etc.
I’m not sure the market is as developed for S&S LISA’s as it is for ISA’s and Pensions etc. It’s something I’ve never looked into but my limited understanding is that there are far less options for investment platforms.
Any money in Equities / Stocks you should be prepared not to access for 5 years min (some would say 10) – to ride out the downturns. So in my opinion I’ve always winced when people say they are using equities to save for a house – yes returns should / will be better than cash over the long term – but you need to manage your risk appropriately to prevent your house deposit dropping 30% etc.
i think youre saying then that a S&S LISA would be a good investment for retirement then, but not a house purchase, that right? so if he went for a LISA, decide one way or the other whether its for a house or retirement and choose either the S&S or cash LISA depending on his decision?
if he decided retirement, would a LISA be a better choice than a personal pension/SIPP?
I’m not sure the market is as developed for S&S LISA’s as it is for ISA’s and Pensions etc. It’s something I’ve never looked into but my limited understanding is that there are far less options for investment platforms.
as a financial doofus, i dont really understand that, sorry. he already has a small S&S ISA which i talked him into, but why are there not the same options for investment with a LISA? arent they the same thing but with different 'rules' (the same companies are still out there to invest in?), so essentially he could still invest in the same spread of markets within a LISA as his ISA?
thanks, and apologies for maybe confusing you. ive just read it back and i realise i havent really articulated myself very well. thinking about it i think you maybe mean that with pensions/SIPPs/ISAs, vanguard, fidelity, HL etc will all provide these, and the accompanying vast array of choices. but they maybe dont provide LISA's, and the companies that do wont provide the same spread of markets. have i got that right?
would it still be a case of investing say £4000 into the LISA, government tops it up to £5000, then you buy S&S? and if the shares rise then all that gain would be theirs?
That's how it works, yeah. You put in £4k, government puts in £1k. You invest the £5k as you please.
how would that work tho if he was daft and drew it out for something else and forfeited the government percentage? would they just force the sale of x000’s worth of shares?
It doesn't work that way, you sell shares for £1000, and withdraw it. Government takes £250, you're left with £750. i.e. They take their cut from the amount you withdraw.
i think youre saying then that a S&S LISA would be a good investment for retirement then, but not a house purchase, that right? so if he went for a LISA, decide one way or the other whether its for a house or retirement and choose either the S&S or cash LISA depending on his decision?
if he decided retirement, would a LISA be a better choice than a personal pension/SIPP?
I think what I’m saying is the key to successful investing is a long term mindset. Markets can and do fluctuate (sometimes a lot!) over the short term. So if your son has a very fixed or near term need for the funds, equities may not be suitable. Having said that, since 2008 equities have been a good place to be, so it’s sometimes difficult to remember the pain of big equity drawdowns! (But have provided good gains!)
The difference between using a LISA or pension for retirement will depend largely on your sons marginal tax rate (higher rate tax payer etc) as to which is more lucrative. As a lower rate tax payer I don’t think there’s a lot of difference between a LISA / SIPP (annual contribution limits far lower on a LISA)
1st rule of retirement saving - is he maximising his employers contribution?
My comment re: market availability was aimed at the platform itself, not the investments themselves. Sorry if that wasn’t clear. Vanguard, I-web etc don’t offer LISA’s.
The Financial Times do a personal finance podcast which covered LISA’s a few months back - might be worth searching for.
HTH.
I have a s and s Lisa with hl. You have to put your 4k in, then they tip up the extra 2 or 3 days later, which is a bit annoying as you have to go back in and reinvest it (the original order can only be for the 4k, not the 5).
I agree with the earlier caution on shares for short term, but with interest rates where they are its still the way I would personally invest. Just make sure they're in a diverse enough set of funds/trackers to minimise the impact of single share changes..
INRAT
If you have an employer provide pension scheme then put in as much as you need to to maximise their contribution.
Check the investments in that pension often you can choose funds etc. I did this with my current one and made over 20% pa over the default.
If you can wait until you are 55 for the money invest in a SIPP (assuming it is worth it in charges) lots of platforms check which one is cost effective for the amount you are investing and amount of trades etc (I use III) then invest and you will get 20% tax back. if you are a high earner you can claim another 20% from HMRC and its easy to do.
In terms of investments you pays your money etc and IANAFA but Fundsmith have been a very good and consistent fund for me and I started when it opened in 2010. I have several other funds (very few individual shares) and some have shone bright but Fundsmith has reliably grown and I have been very happy with it. I also like the idea of "buying good companies then doing nothing" Also the usual advice, its time in the market not timing the market. By all means work your cash but generally leave it alone and dont try to buy and sell etc it never works!
YOLO into the coinbase IPO tomorrow.
If anyone wants a foolproof investment strategy, I can simply post the shares and funds that I bought and all you have to do is buy something - anything - else.
No idea on S@S but when I worked in Alesund about 10+ years ago I met a teacher who'd retired to Norway on British pension and it was topped up from UK I think to meet Norwegian standards which are obviously a lot better. Worth a look to see if it can be done, that would be a great investment. He may of course just been telling me fibs.
As a lower rate tax payer I don’t think there’s a lot of difference between a LISA / SIPP (annual contribution limits far lower on a LISA)
1st rule of retirement saving – is he maximising his employers contribution?
he doesnt have one, hes a self-employed painter/decorator, subbing for someone, so has to sort all that out himself.
could you also explain the 'annual contribution limits far lower on a LISA' comment please? is there a minimum contribution per year that needs to be made into LISA/SIPPs?
thank you.
Lol at finbar. Am quite tempted by coinbase ipo. I think investing in an exchange might make sense as they take a slice irrespective of people buying or selling.
could you also explain the ‘annual contribution limits far lower on a LISA’ comment please? is there a minimum contribution per year that needs to be made into LISA/SIPPs?
the opposite I think. You can chuck up to £40k/year (pre-tax) into a pension and only £4k/year (post-tax) into a lisa.
L-ISA you can put £4,000 a tax-year in, and if you max it to that 4k, the gov will top it up to £5k.
I'm with the Nottingham building society. Was v easy to open up. It's 0.8% interest, and they report monthly to GOV for the topup. So if I put £1k in, about a month later £250 gets added
I'm using it as a house deposit, probably to be utilised in ~2023
It’s 0.8% interest, and they report monthly to GOV for the topup. So if I put £1k in, about a month later £250 gets added
so in effect, as the 0.8% is (probably) lower than inflation, you would actually be worse off if it wasnt for the government addition, yep?
As a few of you have alluded to, S&S for long term only then, so would it be reasonable to give him the advice to save for a house deposit with a cash LISA (moneybox maybe?), and if he wants to save for retirement then a SIPP (more choices of investment than a S&S LISA)?
thanks
