UKC

If you had a modest amount of savings, how would you go about investing it, and what pitfalls should you look out for?

Define modest.

I will take if off your hands, and will keep it safe for you, at 0.1% lower than the base rate - just give me a weeks notice of when you want to withdraw any money.

I wont charge you for this service, it will be free.

You need a lot more info such as how much? How long are you investing for? Is it earmarked for something specific? Might you need it at short notice or can you lock it away long term?  Can you afford to lose some or all of it? What's your attitude to risk? etc etc

That's a starting point, for a subject which I know nothing about.  How would I research this subject?

Would I go to an intendant financial advisor, or would I good unbiased-ish advice from my bank?

Cheers

The short answer is get Googling or go down to your library and read up on it. Then you will at least know what questions to ask. With so many variables it is impossible to give anyone meaningful advice without knowing an awful lot about their needs.  It is worth putting in the time to research it properly. Look at the amount you have to invest and ask yourself how long would it take you to earn that kind of money or better still, how long would it take you to accumulate that kind of figure AFTER all your other outgoings.  The chances are that you are talking months or years. If that's the case it is just plain dumb not to spend quite a bit of time researching what to do with it.

There's an old line: the easiest way to make a small fortune from investing is to start with a big one

The problem with risk is there's no proper definitions - one financial advisor's medium risk investment is another's high risk one. Because of the lack of definition and consistency it makes comparisons virtually impossible .

A few starting points (not comprehensive) for you to google/ask financial advisor (the bank won't be any good)

- Maximum possible should go through an ISA (currently circa 20k/year) You can put the cash in and leave it as cash if you want, which will get it into the tax free system.

- Depending on how much you actually have, a mixture of equities (probably a cheaper index tracker), bonds and keeping a % as cash would be advisable.

- Parameters you need to know the answers to. What is your time frame for the length of the investment? How quickly might you need the money if you need it? What is an acceptable drawdown/loss on the original amount to you i.e. how much are you prepared to lose outright, but also how much are you prepared to see it go down whilst taking the long term view

Hope that helps a bit.

oh, one other thing. My investment managers won't take any money that you think you might need in the next 3 years, and they advise you not to invest anything where you think you might need the money in the next 10. 

The theory being that if your investments have a downturn (lose value) 10 years should be a long enough time horizon to ensure they are back in profit.

For shorter time frames, high interest savings accounts and similar are the best bet - that is not investing though.

IFAs cost loads. Possibly worth it for £100k+

Banks. Don't trust them an inc

Some good advice online, also some good books

If I had that kind of cash, I think I would have known how to invest, to generate that sort of cash to play with.

BITCONNEEEEEEEEECCCCTTTTTTTTTTTTT

I was going to play 5-10 years ago but bottled it.

Any links or pointers? The internet is a minefield, as Galileo once said.

I found "Wealth Management" by Jason Butler useful when I inherited some money. Some of this is quite good

https://www.moneysavingexpert.com/investments/

Thanks.

I have that kind of cash, in a pension fund I have paid in to for 45 years. I didn’t know where to invest it, but my Financial Advisor does.

I found the Financial Times Guide to Investing by Glen Arnold a useful (and not too heavy) book.

Listen to this Podcast https://www.npr.org/sections/money/2016/03/04/469247400/episode-688-brillia... . 

Everything on black. Wish for the best....

Scratchcards.

Scratch cards

There's a load of guff talked about investing money, and mostly it's because people want something for nothing, and there's plenty of snake oil salesmen out there willing to take it off them. In one of Woody Allen's films his character is asked what he does for a living: 'I'm an investment advisor, I help people invest their money until there isn't any left.'

With interest rates as they are, you're talking miniscule returns with any halfway safe investment; once you get to stocks and shares you are in a game where the odds are stacked against you. Think BP, Enron, Lloyds Bank... Anything can happen to a company and sooner or later it will.

For relatively small sums (<£50K) I'm a fan of premium bonds; the more you have the closer you get to a return of 1 -2 %, tax free, and there's always that off chance... 

Other than that I think it is one of Warren Buffet's maxims that he only invests in businesses that he understands. That seems like good advice to me.

That's not actually true.  Sure, if you put all your money in only one company then that would be foolish and risky, but you can put the money in low-cost tracker funds, or you can put it in investment trusts or unit trusts that invest in a range of companies.

If you do that, the odds are very much stacked in your favour.  Over the long term you nearly always win (the long-term return on the stock market is about 8% a year, which beats anything else).    

Over the long term you could only lose if you happened to buy at the top of the market and then were a forced seller in a big crash  (which you can avoid by putting money in gradually, in a scheme for a set amount a month, and/or by not being a forced seller just after a crash).

Priceless. There is absolutely zero to dislike about the above post. Nothing. It is sensible, helpful advice.

Mods - can we deactivate the like/dislike feature please as it is clearly broken 

Not me who disliked but ISA before pension could queried. Better tax benefits, particularly for higher rate.

Just over 10 years ago I invested a modest amount (40k) as a deposit on a buy to let residential property. I sold it last year and was extremely pleased with the 'interest' earned over the 10 years. However, it's not necessarily plain sailing - we had good tenants and a bad one (had to go through court to get evicted). There is also the practical side of letting (maintenance, testing, paperwork). We had also done our research beforehand on the local letting market and property type etc. So in a nutshell, it's not for everyone, there is quite a bit of work/worry involved compared to simple financial investment, but if you are up for it, the rewards can be good in comparison. Food for thought?

N

Also what kind of ISA?  Implicitly I understood cash ISA.  The only reason to use one is to get cash into the allowance now in the hopes something changes in the future...  Better use of the cash now would more than balance that logic.  With limits of £20k in per year, anyone short of a serious investor isn’t going to have a shortage of ISA allowance, and a serious investor will be doing other things instead.

I’ve been using RateSetter (p2p) for 20% of my cash savings for the last 6 years or so.  There returns are 5x other accounts so I roughly double my overall cash returns for risking one fifth of the cash.   They’ve just launched an ISA under the new third class of ISAs.  Keeping track of the additional interest earnt this way, in practice only 2/3rds of my capital is “at risk” as I’ve recovered 1/3rd through increased return over FSCS protected accounts.  

I echo Coel’s comment on index tracking ISAs - or even non ISAs if you’ve bust your limit.

Some good advice there, and in this thread generally.

Also is the OP looking for income or capital growth? Or a bit of each?

To the OP it's well worth buying and reading the Financial Times for a while before embarking on investing so that you can start to get a "feel" for the various markets, and products out there.

What is your attitude to ethical investing? Eg Are you willing in invest in arms manufacturers who sell to foreign Governments? In tobacco companies? In companies outsourcing their manufacturing to countries using child labour, sweat shops etc?  To some investors this isn't a problem, to others it's a major consideration. 

Honestly no ideas yet.

Happy to invest in drugs, guns and other recreational stuff that is all legal.  Is there really a profit to be made in ethical stuff?

You are likely to make more money by including non ethical investments than purely ethical ones, so it's matter for each individual's conscience. No one can tell you what to do.

It's a question that a good financial adviser is likely raise with you when assessing your investment profile. So think about it and be ready for it. A good financial adviser should not moralise though, it's your choice.

A very good point.

I got 19% on 85k last year. You just need the right advice.

Given the FTSE rose 14.5% (and US shares much more) with about 3% dividend, that sounds like replicating the market to me, rather than the result of advice.

Couple of questions I think you should ask yourself regarding stock market related investment.

What is your tolerance to risk and volatility? How much will you worry? Are you psychologically prepared to lose some of the capital? A lot of the capital? None of the capital? What timescale are you prepared to invest for?

I used to think buying individual shares was a casino but got drawn and initially lost a lot of money but you learn about investment and yourself but it takes time and is a rollercoaster.

A more passive approach as suggested above is to get a cheap tracker in an isa and buy into the long term trend of above inflation busting gains that stock market has provided.

If you have enough to place a deposit for a rental property then you get an enhanced return if your your net rental yield exceeds interest rate through the magic of leverage but income and capital gain is taxable unlike in an isa.

If the money you have is really rainy day money for  unexpected costly events then best left in a savings account 

The mere fact you are posting this question on a forum, should make you question whether any investment other than a standard savings account is for you.

Any share / fund based investment is going to take some research and time. 

I'd be dubious about any get rich quick schemes bitcoin springs to mind  currently trading at $7000....

That line is total BS.

Here is my version: the easiest way to make a small fortune is to rob a bank.

You should be giving advice if you made that much.  

Why don't you think about website investing? You may buy a domain with 5$ and then find someone who need it...then you may sell the domain with 100$ or more. You also may build up a website, and then work with affiliate program.  read this:

https://onlineearning4u.com/make-money-buying-selling-domain-names/

https://proweb365.com/why-custom-website-design-is-a-wise-business-investme...

Everyone has to start somewhere, so there's nothing wrong in asking some basic questions. 

Not really true.  If you were to, say, feed money into a FTSE tracker fund, at a rate of say 50 quid a month, and hold it inside an ISA, then there's not much research one need do (just check out the annual charge on the tracker and check the charges for the ISA wrapper). 

Not really investing though at £50 a month into a tracker-- it is to be honest small change or saving for a rainy day.. You may as well go and do something else with that.

Why?

This site is a wealth of knowledge and if anybody is talking bullsh1t, then they get shot down quite quickly by those that do know what they are talking about.  I personally think that this site is an excellent first point of call.  With the advice given, I am further armed with knowledge to help me research the subject further.

If I had spare money I'd start by offsetting it against my mortgage, (so I can get it back if needed) and paying off all other debts and save enough not to have to borrow for a new car when needed. 

After that I might gamble a bit on some premium bonds, you might win or not, but you get your original amount of money back. Most people get a few small wins every now and again.  

I had £1000 in them for a few years, I won £50 around once or twice a year and once won £500 which was nice. I don't know how much is typical.  

After that I'd look at shares and funds but I've no idea about the details.  

I do know that some shares give you nice perks other than money, so that's worth considering, for example some pub chains give you a book of vouchers for cheap food if you are a shareholder.  

I have a lifetime's experience of investing in the stock market and yet I still can't tell you what it's likely to do tomorrow or which share is a solid bet. More to the point, I have an army of highly trained advisors at my investment bank and they can't seem to give me profitable advice at the moment either. Last year was easy. All markets rose. There were no falls, let alone corrections (big falls). This year we have had a correction already and there will be more.

Pay off a bit of your mortgage or put it in the bank. If you must invest wait for the next correction. Easily identified by the point that share falls hit the national news and when that calms down, buy into a FTSE ETF (Vanguard or iShares FTSE) and come back in 10 years. Lock it in an ISA for lower (no) tax.

It's fair to say that I get very few personal messages, and probable from less than five people throughout a year.

On the back of this OP I have recieved a few PM from this parish offering further helpful advice and I'd just like to thank then. You know who you are

To everybody, in general, I really do appreciate all the help and advice offered and I'm grateful that the subject has not degenerated or been hijacked.

Kiss of death now, I realise.

Cheers everybody

Agreed on the latter two, since you'd likely be paying 5 to 7 percent on any borrowings.

On the first, that's worth thinking about.  I'm currently paying 1.8% on a mortgage.  I could just pay it off with money I have in the stock market, but I'm not because the long-term rate of return on the stock market is about 8%, so nearly inevitably (so long as I'm not a forced seller just after a crash), I'll gain by investing the money and continuing to pay the mortgage (in the long term one would gain even if one sold after a crash, since 8% compounds to way more than 1.8%).

The current average return on Premium bonds is 1.4%.  That doesn't attract me (and the odds on a big win are way too low to take into account).

Just to add a few more thoughts.

If you are truly talking about investing (as in not cash savings), it should of course be money you don't need for a fair amount of time, minimum 5 years, ideally much longer.

Assuming that, then my recommendation would be to use tax sheltered savings accounts - a private pension (aka SIPP) and/or a stocks & shares ISA. Invest the money in cheap global passive index trackers, then forget about it except to top it up as often as you are able. Check how it's doing and once a year or so 'rebalance' it so it still matches your desired asset allocation (the split up of where the money is invested, this can be dispensed with by investing in a product such as the Vanguard Lifestrategy funds which do the rebalancing for you at a slight increase in fund fee, but still meet the above criteria).

Good resources for learning more and getting shrewd advice are:

http://monevator.com/ -plenty of articles on starting out investing, some of the intricacies and a useful table to help you find the cheapest broker to hold your ISA/pension with)

https://www.reddit.com/r/UKPersonalFinance/ great UK focused community for all things personal finance, further advice and resources.

Smarter Investing by Tim Hale - a book that explore the above approach to investing and demonstrates why its the logical system.

Above all, take the time to learn and you can do it yourself. IFAs, banks and active fund managers are all trying to help themselves to a bit of your cash for something that is pretty straight forward to do without them. Fees significantly degrade performance over any reasonable time frame (see first point).

Happy investing!

Good points and a nice illustration of attitudes to risk.  By putting the money against the mortgage instead of on the stock exchange I'm putting peace of mind above financial gains which may be a silly thing to do.  Probably a good place to keep the emergency 3 months salary type of money as it is safe and instant access.  

As for the premium bonds, the rate has dropped a lot, it was much better when I had mine.  Better that than the lottery or scratch cards though if you like a flutter.  

I'll be sure to bear all this in mind once I pay everything off.  Unless I decide to say stuff it and go travelling of course.  

The premium bond money went on a sea kayaking trip to a Greek Island. Financial return zero, but money well spent in terms of happiness, confidence, memories.  Shrouds don't have pockets.  

Not at all, that's entirely sensible if that's your priorities. 

To make investing in the stock market sensible you need to have both the right psychology to ride out dips, and the personal circumstances to allow you to ride out dips.