Finance/Investment tips?

ToneControl

I'd say put the extra in your pension only if you ae paying 40% tax, do it by salary sacrifice, you will get around between 7% and 14% (of the amount you put in) extra paid for by your employer's NI savings, and don't put in any more per year than would bring you down to lower than the 40% tax threshold. Reasoning is: on 20% tax, you get the tax rebate, but then you pay tax again when you take it out, the benefit of the tax rebate is probably more than offset by the inflexibility of pensions.

Then again there are other factors, e.g.

• ISAs would count as savings if you were applying for benefits or care, pension savings would not
• getting net salary down very low can help with maintenance loans if you have kids at Uni
• Pension funds can pass tax free to your kids if you die, ISA pots would not

ToneControl

Hargreaves Lansdown do a very good saver account - you can move money into different banks' offers within the HL policy (rather than having to open new bank accounts for each special offer), and the amounts you can invest are way more flexible

stickyfiddle

CMW335 said:

stickyfiddle said:

Buying property right now would be extremely brave. 

Wis for Raymondo

It's worked out great from me

That's why I said "now" because while it may have been a great strategy for the last 20 years up until 6 months ago, things are markedly different right now and only going to get worse. 

ToneControl

RaymondLin said:

Not specific investment tips but the current school of thought are

1 - do it regularly and often
2 - dollar cost average
3 - never time the market
4 - don't put all your eggs in 1 basket
5 - don't invest in stocks of companies you don't understand
6 - Index funds out performs trying to pick best stocks in the long run

In the short term, high interest accounts, plenty now give over 2% with immediate access, Chase, Santander etc.

I'd say 
3 - never time the market
- unless you know what you are buying. plenty of people do this successfully 

6 - Index funds out performs trying to pick best stocks in the long run
-on average perhaps, but not for everyone.
Do you mean index funds usually outperform managed funds?

RaymondLin

ToneControl said:

RaymondLin said:

Not specific investment tips but the current school of thought are

1 - do it regularly and often
2 - dollar cost average
3 - never time the market
4 - don't put all your eggs in 1 basket
5 - don't invest in stocks of companies you don't understand
6 - Index funds out performs trying to pick best stocks in the long run

In the short term, high interest accounts, plenty now give over 2% with immediate access, Chase, Santander etc.

I'd say 
3 - never time the market
- unless you know what you are buying. plenty of people do this successfully 

6 - Index funds out performs trying to pick best stocks in the long run
-on average perhaps, but not for everyone.
Do you mean index funds usually outperform managed funds?

3 and 6 are essentially the same thing.

Even if you think what you are doing, as Warren Buffet has proven, index funds out performs trying to pick stocks to buy and sell.  You probably know the $1 mil bet that i am referring to.

Considering that OP has no idea....would you encourage him to pick stocks himself? That just doesn't make sense.  For every person who day trade to be a millionaire, there are many more who loses everything.  The shorter and the more specific way you trade, the more risk you are exposing yourself to.

As for using a fund manager.  WB has proved that also isn't the best idea.

I mean use a fund manager if you want, everything about investment has it's risk but for someone who doesn't know, the best thing for a layman to do is just use an index fund.  You could also apply the 60/40 rule (stocks/bond). If you want but putting every penny on Tesla is hell risky, vs say buying index fund on the NASDAQ. 

NCo

the_jaffa said:

Thanks for the tips.

I know nothing at all about investing etc so don't understand Raymond's first reply other than the obvious bits.

Herr Metals advise is nice and simple which appeals.

I'll look into and research what's been mentioned though, so thank you.

Your first step is to quickly get your financial knowledge/education to at least a very basic level which helps you understand the advice given.

It is your money and your responsibility, and investing your money has risks associated with it.

ToneControl

RaymondLin said:

ToneControl said:

RaymondLin said:

Not specific investment tips but the current school of thought are

1 - do it regularly and often
2 - dollar cost average
3 - never time the market
4 - don't put all your eggs in 1 basket
5 - don't invest in stocks of companies you don't understand
6 - Index funds out performs trying to pick best stocks in the long run

In the short term, high interest accounts, plenty now give over 2% with immediate access, Chase, Santander etc.

I'd say 
3 - never time the market
- unless you know what you are buying. plenty of people do this successfully 

6 - Index funds out performs trying to pick best stocks in the long run
-on average perhaps, but not for everyone.
Do you mean index funds usually outperform managed funds?

3 and 6 are essentially the same thing.

Even if you think what you are doing, as Warren Buffet has proven, index funds out performs trying to pick stocks to buy and sell.  You probably know the $1 mil bet that i am referring to.

Considering that OP has no idea....would you encourage him to pick stocks himself? That just doesn't make sense.  For every person who day trade to be a millionaire, there are many more who loses everything.  The shorter and the more specific way you trade, the more risk you are exposing yourself to.

As for using a fund manager.  WB has proved that also isn't the best idea.

I mean use a fund manager if you want, everything about investment has it's risk but for someone who doesn't know, the best thing for a layman to do is just use an index fund.  You could also apply the 60/40 rule (stocks/bond). If you want but putting every penny on Tesla is hell risky, vs say buying index fund on the NASDAQ. 

I don't think 3 + 6 are the same thing

You could have bought a US index tracker in April 2020, in the belief that the market had bottomed out. That would be "timing the market", but would not be "trying to pick the best stocks"

Certainly I would not advise OP to being with stocks, but I do challenge the idea that investing equal chunks over a long period is always the best thing to do. We've had discussions about this before, and there are plenty of times when it would be a bad idea. Also for the matter - staying invested (i.e. not in cash) all the time is also not always a great idea

RaymondLin

So you do know, then why are you asking? lol

I know what timing the market is, but the point is Point 1.  And I disagree about staying invested.  The general consenses is stick with it, that is the long term goal.  i.e. Donald Trump would be a much much richer man had he put all his money from his inheritance into the S&P500 vs trying his hand at all kinds of failed businesses.

If your tactic is short term then just go to Vegas.

Stay invested, diversify, dollar cost average, and keep at it.
 

goldtop

Timely post - I've got too much sitting doing SFA in Metro Bank, and I should move it. Will look at the Hargeaves Lansdown thing...

ArchtopDave

From my perspective, I would check your pensions first, and this includes checking that your State Pension contributions have been adequate (it's concerning that a sizeable percentage of people reach pensionable age, and haven't paid sufficient contributions to be eligible for a full State Pension).

Secondly, have you got "rainy day savings" somewhere already?? It's usually reckoned that you should have easy access to an account(s), where you have the equivalent of 6 to 9 months pay. This is where a Savings Account, or possibly Premium Bonds, are needed. Be very aware that the interest on savings accounts, whilst higher now, is still way below the inflation rate (10.1% at present), so sadly you and I have to accept that the downside of easy access is that any such money is dwindling in value.

If you can, other things being equal, plan to put some of the money away in the long term, then investing it in a modest number of funds - say you use £20,000, then you could put it into 4 or 5 funds. Depending on your income and tax position, then whether you use an ISA now, or not, is something for you to work out.
 At the present time, stock markets around the world are significantly lower than they were at the start of the year. It is possible that they may go even lower, but you never know where the bottom of the market is until after the event. I've actually been adding to some of my own holdings earlier this week on the basis that I've had dividend income mount up this year, and I'd rather reinvest the money to up my dividend return and hopefully long term capital return; as a long term investor, I'm not worried about suffering a bit of  capital loss in the short term should the markets fall a bit further.

swiller

I learned TA (technical analysis) as a hobby, put a fair bit of time into it over the years. Largely in crypto environment.
Mitch Ray on you tube is brilliant and has tutorial videos. 
The emotional side of investing is also v important and well worth swotting up on that.
Fascinating subject and reduces risk significantly with those two combined.

RandallFlagg

ToneControl said:

RaymondLin said:

ToneControl said:

RaymondLin said:

Not specific investment tips but the current school of thought are

1 - do it regularly and often
2 - dollar cost average
3 - never time the market
4 - don't put all your eggs in 1 basket
5 - don't invest in stocks of companies you don't understand
6 - Index funds out performs trying to pick best stocks in the long run

In the short term, high interest accounts, plenty now give over 2% with immediate access, Chase, Santander etc.

I'd say 
3 - never time the market
- unless you know what you are buying. plenty of people do this successfully 

6 - Index funds out performs trying to pick best stocks in the long run
-on average perhaps, but not for everyone.
Do you mean index funds usually outperform managed funds?

3 and 6 are essentially the same thing.

Even if you think what you are doing, as Warren Buffet has proven, index funds out performs trying to pick stocks to buy and sell.  You probably know the $1 mil bet that i am referring to.

Considering that OP has no idea....would you encourage him to pick stocks himself? That just doesn't make sense.  For every person who day trade to be a millionaire, there are many more who loses everything.  The shorter and the more specific way you trade, the more risk you are exposing yourself to.

As for using a fund manager.  WB has proved that also isn't the best idea.

I mean use a fund manager if you want, everything about investment has it's risk but for someone who doesn't know, the best thing for a layman to do is just use an index fund.  You could also apply the 60/40 rule (stocks/bond). If you want but putting every penny on Tesla is hell risky, vs say buying index fund on the NASDAQ. 

I don't think 3 + 6 are the same thing

You could have bought a US index tracker in April 2020, in the belief that the market had bottomed out. That would be "timing the market", but would not be "trying to pick the best stocks"

Certainly I would not advise OP to being with stocks, but I do challenge the idea that investing equal chunks over a long period is always the best thing to do. We've had discussions about this before, and there are plenty of times when it would be a bad idea. Also for the matter - staying invested (i.e. not in cash) all the time is also not always a great idea

Research into this suggests dollar cost averaging and staying invested works extremely well from peak through crash vs market timing and holding cash even if you start investing at the worst possible time. Only perfect market timing beats it, but barely.

https://seekingalpha.com/article/4471728-getting-in-at-the-worst-time

Conclusion:

"Based on history, it pays (quite literally) to begin investing ASAP, and to keep investing in the market as often as possible... even in the worst case scenario where the market crashes right after you start to invest. History shows that by investing early, you do ~10.3% better on average than you'd do if you saved your money and only started to invest from the lowest month of the past three bear markets. On the other hand, flawless market timing (Scenario 3 in my example) only earns ~3.1% more money than the investor who starts investing right before the crash. Although investors may be wary because markets are at all-time highs, history has shown that investing early and often is generally the best approach - even if you start right in front of a bear market."

Do you have some empirical evidence to show that market timing and dipping in and out the market to cash can outperform remaining invested?

Also, fees are a big consideration, some mutual funds have fees many factors higher than low cost index funds, which will eat into gains enormously over the long run. Trading and marking timing can also incur fees the impact of which the long term effect may not be apparent.

RandallFlagg

Interesting video on Financial Literacy, data shows that Financial Literacy leads to greater long term wealth than Academic Literacy. I agree with the findings and see plenty of evidence at work as very intelligent people roll up in their latest PCP financed shiny new cars.

Investing some time into self learning on financial matters, budgeting, pensions, tax, borrowing cost analysis etc pays dividends

https://youtu.be/6RzO26Sxsug

RandallFlagg

RaymondLin said:

So you do know, then why are you asking? lol

I know what timing the market is, but the point is Point 1.  And I disagree about staying invested.  The general consenses is stick with it, that is the long term goal.  i.e. Donald Trump would be a much much richer man had he put all his money from his inheritance into the S&P500 vs trying his hand at all kinds of failed businesses.

If your tactic is short term then just go to Vegas.

Stay invested, diversify, dollar cost average, and keep at it.
 

** agree this @RaymondLin ;

d8m

Another easy one that I've just bee shown:

https://www.hsbc.co.uk/savings/products/online-bonus-saver/

Interest capped at 3% up to 10K on months with no withdrawals, nice to run alongside the Barclays rainy day saver.

ArchtopDave

RandallFlagg said:

Interesting video on Financial Literacy, data shows that Financial Literacy leads to greater long term wealth than Academic Literacy. I agree with the findings and see plenty of evidence at work as very intelligent people roll up in their latest PCP financed shiny new cars.

Investing some time into self learning on financial matters, budgeting, pensions, tax, borrowing cost analysis etc pays dividends

https://youtu.be/6RzO26Sxsug

I came across this test for financial literacy on the Yahoo Finance website site about a year ago. I was surprised that it really only needed a modest amount of straightforward maths knowledge in order to get all 5 questions right ( I was actually expecting it to be testing knowledge of finance/financial markets).
 It reminds of a a similar test I came across on the BBC website several years ago which was a test of basic arithmetic, which apparently 60% of people couldn't manage to work out correctly. It's worrying that people can complete their schooling, and fail to be taught and understand simple maths, which is vital to managing your own life.

DefaultM

That's funny I opened one of those last night. I don't understand though, it says bonus interest is paid monthly, but then you look at the chart further down and it says if you put in £1000 you'll have £1030 after a year. How, if the interest is paid monthly? Why isn't it compounding? Or have they just not been arsed to add the pennies from the compounding?

ArchtopDave

d8m said:

Another easy one that I've just bee shown:

https://www.hsbc.co.uk/savings/products/online-bonus-saver/

Interest capped at 3% up to 10K on months with no withdrawals, nice to run alongside the Barclays rainy day saver.

Unfortunately, as I pointed out in my first post above, whilst some savings income is better than no income, that savings accounts like this do not protect the value of your cash against inflation ..... currently you'd need a return of 10.1% in order to maintain the value of your money versus inflation.

ArchtopDave

DefaultM said:

That's funny I opened one of those last night. I don't understand though, it says bonus interest is paid monthly, but then you look at the chart further down and it says if you put in £1000 you'll have £1030 after a year. How, if the interest is paid monthly? Why isn't it compounding? Or have they just not been arsed to add the pennies from the compounding?

The 3% is the AER ...... you should have read "Definitions" under "Additional Information", where it explains that the 3% AER is what you get when the interest is compounded.

RaymondLin

ArchtopDave said:

d8m said:

Another easy one that I've just bee shown:

https://www.hsbc.co.uk/savings/products/online-bonus-saver/

Interest capped at 3% up to 10K on months with no withdrawals, nice to run alongside the Barclays rainy day saver.

Unfortunately, as I pointed out in my first post above, whilst some savings income is better than no income, that savings accounts like this do not protect the value of your cash against inflation ..... currently you'd need a return of 10.1% in order to maintain the value of your money versus inflation.

There are no sure way to beat inflation out there that is risk free.  Not even the housing market right now with its outlook.  Put it simply, anyone with any lump of money is trying to minimise the impact of any inflation, park it in a place where it holds its value best.

You can throw it all into Index Funds, ISA, Savings account, or take a chance with Premium Bonds, or buy a Rolex, bottle of Whisky, vintage guitar or even a piece of art or crypto.  Hell, anything can appreciate value if you are willing to take a risk.  I have a book that i paid £40 for that is worth £800 now because it's out of print!

Personally, while I still check my Vanguard account once every couple of weeks, I don't time the market, i just buy some as often as I can.  I won't be buying this month, not because i am trying to time the market, but because i bought a flight and paying off any credit card bill trumps and investments.  Overall, i am not trying to beat the 10% inflation, rather thinking about that, it's more believing that historical evidence about consistent investing is the way to go and go with it.