Stocks and Shares ISA Investment Advice?

[Willber]

I've just sold my motorbike and have put some of the cash (2.5k) into a Hargreaves Lansdown account. I am thinking of investing using their ready made portfolios and was thinking of spreading it across the three risk categories for capital growth rather than income as I am thinking long term 5 years minimum. I would put 1k into the conservative fund, 1k into the balanced and 500 quid into high risk. I will be topping up with £250 each month which I can choose where to invest.

Does this sound like a reasonable plan to at least see some return on my money rather than it sitting in a cash ISA earning pretty much nothing? I have a small slush fund already and will be adding to it monthly also. I will have a 50% cash savings and 50% stocks and shares investment split.

Just looking for some general advice really and I appreciate this is a bit like trying to look into a crystal ball!

Thanks

[Ginge R]

Have you considered working out your average capacity for loss, and investing it all in that? Sure, have a nominal play fund if you really want, but one thoughtfully considered common approach for something like this might serve you better.

[Willber]

Thanks for your reply. I did a questionnaire on the Met Life website and it told me I have a high risk profile for investment but that my capacity for loss is medium. Therefore using that as a guide I could be best served putting everything into the medium/balanced profile fund portfolio?

I have a small emergency fund as mentioned which I will add 250 to each month but all my other existing savings would go into the ISA along with another 250 per month.

I have a mortgaged house at 68% LTV and 2.55% interest rate if that helps put a spin on things.

[Ginge R]

Difficult to say. I'd certainly suggest paying down pricy debt and bolstering that emergency fund. We live in volatile times so if you do still want to invest, consider drip feeding it in over time. As to expectations, I'd dampen down anything over 4% at the moment, and remember, HL is a sexy proposition but can you get cheaper for your money? If you want to stay with them, they also offer passive funds which mean less cost being retained by HL, and more (in principle and all things being equal) being retained by you.

[Ozzie Osmond]

Willber said:

I will have a 50% cash savings and 50% stocks and shares investment split.

This is where life is tricky at present.

Returns on "cash savings" today are typically below the rate of RPI inflation. What this means is that the real value of "cash savings" will actually shrink - not grow. Put simply, cash is bad news.

In your situation my feeling is that a realistic approach might be,

• Keep yourself a cash slush fund for emergencies. As big a fund as you think you need and as small as you think you can get away with.
• Invest all the rest in a single mainsteam fund of mixed equities (shares) and bonds (government and corporate loans).
• Keep costs to a minimum - because over time they can have a significant effect. Make sure you are not charged to buy the fund at the beginning. Also I think that at your level of investment Fidelity (another huge and respected retail platform) would apply a lower ongoing annual charge than Hargreaves Lansdown.

Regrettably there is no route to good returns which does not involve some degree of risk.

[Willber]

Thanks to both of you for your helpful advice. I will take it on board and do some more research and decide where to go from there!