20-40K - where to start investing?

[nshooter35]

Hi

I'd really appreciate any advice people have for a first time invester. I will have 20-40k to invest in the near future. I'd appreciate any suggestions people have on:

1) Where to invest? - I have considered investing some of the money into a buy to let property and the rest in to something like a stocks / shares ISA.
2) Where to learn about investing - e.g. any books / websites etc?
3) Is it worth consulting a financial advisor?

For background I already have a mortgage on a property. I am looking for longer term gains but would also be keen to learn about buying / selling shares. Having now saved enough for a deposit and go onto the property market I am looking at other ways to invest money. Any advice would be appreciated as this is new to me.

Thanks!

[kentlad]

Max yours and your partners ISA's. Probably won't have much change depending on circumstances? How about your pension? Maybe max the tax free payments in for a few years? Think the allowances is now £40k per annum.

[davepoth]

Keep the equivalent of three months' salary as readily accessible cash as a buffer.

Consider what will happen if the interest rate on your mortgage rises by 5% (I know it seems crazy now, but crazy things happen) and make sure you can cover that.

If you want to invest in stocks and shares, do it with an ISA (you and your partner's), but make sure you understand what you're buying, and if you aren't 100% certain walk away.

[p1doc]

overpay mortgage depending on early payment penalties then max ISA

[Welshbeef]

I'd say the first thing you should ask yourself is

1. what do you want to achieve?/what is your goal?

It might be mortgage free by 40
It might be able to retire at 55
It might be to fund retirement to the same living standard as you have now
It might be to build funds for extending he house
It might be a buffer for an extended family
It might be because you want "fk you money" - as it utter freedom you could walk from your job tomorrow without a care I. The world
It might be for your wedding - or your kids
Might be deposit for your kids house / uni fees
Might be because you want to take your kids to private school etc

Once you have the answer to that whatever it is then you know what your trying to achieve then you need to think of right "so what" that's key the so what might mean by next week in the next twenty years etc so timeframe comes into play.

Then you can work out he compound return that is needed to yield that £ value. How much PCM from now until do you need to save. Is it viable? Do you need s bit of luck or a high amount of luck. Etc etc.


I've done this lots of times and one thing I can tell you is the answer does change - certainly from before children to after and then once we had two it changed again. Certainly changed once I found the love of my life etc.

My answer is to be happy everything else is a bonus - money doesn't really matter too much, it certainly helps you do more things and get nicer stuff and live in nicer areas.

[ncjlee]

p1doc said:

overpay mortgage depending on early payment penalties then max ISA

This is probably the easiest advice to follow and you could do a lot worse. Overpaying mortgage if you have a 3% rate is equivalent to a 5% rate of return outside a tax free ISA or pension, which is hard to achieve without moving up the investment risk curve. BTL seems to be a capital gains play rather than income these days given skinny rental yields and the taxes, especially if your anticipated hold period is short and you own other property. Premium bonds also have a pretty low expected yield, although clearly no risk of principal loss.

[ncjlee]

And forgot to say - I'd always try and minimise fees for relatively standard situations - so passive index tracking is the way to go! Just need to pick the right indices, a bit of diversification won't hurt.

[bogie]

If you have a pension, particularly with employer contribution and if you are a 40% tax payer then its a no brainer to use that. Make sure the funds chosen are as low cost as possible.

You can put up to £40k tax free per year in there, pay off the mortgage and save years of interest, plenty to keep you going there before you think about teaching yourself to trade stocks. You could soon lose your £40k in a few years of "learning" ...best off not lose it in the first place.

[nshooter35]

davepoth said:

Keep the equivalent of three months' salary as readily accessible cash as a buffer.

Consider what will happen if the interest rate on your mortgage rises by 5% (I know it seems crazy now, but crazy things happen) and make sure you can cover that.

If you want to invest in stocks and shares, do it with an ISA (you and your partner's), but make sure you understand what you're buying, and if you aren't 100% certain walk away.

Thanks for all the advice

We both have NHS pensions.

davepoth - so would this be via a stocks and shares ISA?

Regarding current goals - it is part longer term savings / but also considering investing some to make a quicker return in the short term ( at a higher risk it seems).

[Welshbeef]

Remember any investment in pensions is locked away and cannot be taken back out until the minimum retirement age.

[bogie]

Welshbeef said:

Remember any investment in pensions is locked away and cannot be taken back out until the minimum retirement age.

Yeah, you get more biased the closer you get to 55 and getting your hands on it. I guess I thought different at 20 years old....in fact I wasnt thinking of pensions at all then...wish I was, would have saved me £££ in my thirties and forties playing catch up

[Welshbeef]

bogie said:

Welshbeef said:

Remember any investment in pensions is locked away and cannot be taken back out until the minimum retirement age.

Yeah, you get more biased the closer you get to 55 and getting your hands on it. I guess I thought different at 20 years old....in fact I wasnt thinking of pensions at all then...wish I was, would have saved me £££ in my thirties and forties playing catch up

My old man drummed pension into me so on my 18th birthday I got into pensions and have done ever since - I know for sure that most of my closest friends didn't even look at it until into their 30's by which time Id got final salaries which gave a pension of over £6k back then banked and all I had to pay in was 3%. I had other defined contributions and career average on top of that but what a difference.

The Mrs started following Uni.

Happy we did it and will ensure our kids do the same - lots of influencing them (or even pay if for them ... To start with)

[Jockman]

Welshbeef said:

bogie said:

Welshbeef said:

Remember any investment in pensions is locked away and cannot be taken back out until the minimum retirement age.

Yeah, you get more biased the closer you get to 55 and getting your hands on it. I guess I thought different at 20 years old....in fact I wasnt thinking of pensions at all then...wish I was, would have saved me £££ in my thirties and forties playing catch up

My old man drummed pension into me so on my 18th birthday I got into pensions and have done ever since - I know for sure that most of my closest friends didn't even look at it until into their 30's by which time Id got final salaries which gave a pension of over £6k back then banked and all I had to pay in was 3%. I had other defined contributions and career average on top of that but what a difference.

The Mrs started following Uni.

Happy we did it and will ensure our kids do the same - lots of influencing them (or even pay if for them ... To start with)

I opened the grandkids' pensions when they were 3 weeks old

[BryanC]

LBC Radio had an hour on this topic thus morning now that NW /HSBC are talking about charging for business accounts.
People rang in.... obviously pensions, but other ideas :
- Classic cars ( TR4a and E types were mentioned as good investments - and this is Pistonheads ! )
My ears pricked up with one guy investing in Shipping Containers in China - he never sees them, just the dividend cheque, and another guy was buying up lock up garages and renting out, mainly used for storage and undercutting the usual storage warehouse companies.
Made me think.....