£200pm investment, 20 years. Whats the best investment?

[Paul O]

Hi all,

Just after a bit of investment help as I'm a bit lost in the woods. Interest rates are pretty crap for savings rates at the moment, so thinking of an investment. However, I set up an ISA Investor on recommendation of a high street bank as a regular investment which over three years returned a disasterous 0.3%, so I think I might have been badly advised there and as such don't want to make the same mistake.

This particular £200pm (starting from £0) is for a specific reason, possibly a 10 or 20 year hike. So thinking to maximise the retun, again through the ISA channel to keep the tax man away long term - but what should I be investing in please to get a decent return and how frequently should I review this (and who should I review it with?!).

Any help much appreciated. It is specifically a £200pm investment with a tangible growth that I can see year on year that I'm looking for (i.e. not "buy a house").

Thanks!!

Paul.

[BoRED S2upid]

Read the various threads on S&S ISA's and the various different ways to invest. HL or another of the fund supermarkets have plenty of stuff to read you can invest as little as £50 per month into most funds a trained monkey could do better than 0.3%!

[BL Fanboy]

Pension?

£200 a month might cost you £160 or only £120 a month.

Not very accessible if you are or will be under 55 when you want it back out.

[ryuali]

"£200pm investment, 20 years. Whats the best investment?"

If everyone knew this we would all be millionaires. The fact is there is no one investment that is best.
Your best is to 'Spread the risk'
What this means is spreading your investments into 5 areas;
1. Equities - Shares/ stocks etc
2. Property
3. Cash savings
4. Commodities - Gold, silver etc
5. Pension

Also bear in mind to have 3 months at least of buffer if you lose your job, emergency funds.

I would also add to read and get to understand finance. See moneysavingexpert

Hope that helps.

[OtherBusiness]

For a decent spread of shares (FTSE100) if you don't want to try and find a fund, this strategy works well - http://www.moneyobserver.com/portfolio-ideas/dogs-...

[Ginge R]

The problem with the FTSE (100) is that, currently, it isn't diversified with a decent spread of shares.

I did some research a week or two back modelling some scenarios in the event of Labour winning the election. Currently, UK equity funds invest in a total of 342 companies and of that amount, 40% is made up of 20 companies (in the 100).. propped up largely by Financials, Healthcare, Defensives and Energy.

If you want to invest directly, look at the earnings per share of Astra Zenica and BAT (for instance) versus their share price, it's crazy. They're running at values of close to 70 times earnings per share - and if Labour gets in and caps what energy companies can make, if China (when?) and the rest of the emerging markets wake up to the fact that smoking actually kills.. hold onto your hat.

The trick to making money in the long term, such as the 20 years that the OP is referring to, is not to lose money in the short term. It's almost as if investments within a portfolio of that remit need to be handled at outset, like a pension in the early stages of drawdown. Low volatility, low alpha.

[gregf40]

Ginge R said:

If you want to invest directly, look at the earnings per share of BAT (for instance) versus their share price, it's crazy.

BAT's PE is 21?

[Ginge R]

That'll teach me to tap away from a hotel foyer on a tiny screen. I should have typed <<70 times its share price per earnings for Astra Zenica.>>

http://www.bloomberg.com/news/articles/2015-03-20/...

Check the BAT graphs.. they're mad.

Thanks for the correction.

[gregf40]

Ginge R said:

That'll teach me to tap away from a hotel foyer on a tiny screen. I should have typed <<70 times its share price per earnings for Astra Zenica.>>

http://www.bloomberg.com/news/articles/2015-03-20/...

Check the BAT graphs.. they're mad.

Thanks for the correction.

You had me worried for a second!

[walm]

Ginge R said:

That'll teach me to tap away from a hotel foyer on a tiny screen. I should have typed <<70 times its share price per earnings for Astra Zenica.>>

http://www.bloomberg.com/news/articles/2015-03-20/...

Check the BAT graphs.. they're mad.

Thanks for the correction.

Sorry but you are still wrong.
Since it is a Bloomberg article it is relying on Bloomberg numbers which are often wrong.
In this case, the PE is close to 15x - nowhere near 70x.
Their core EPS was $4.28 last year and they guided to slight growth.
Their stock is on c.$68 so with 5% growth it's 15x.

The reported EPS is much lower because it includes non-cash intangible amortisation and one-off restructuring costs both of which you should exclude to get to the underlying earnings power of the company.

Arguably relying on the face value "adjusted" EPS given by the company is wildly optimistic but using a reported number is just nonsense.

DYOR.

[CarlosFandango11]

Ginge R said:

The problem with the FTSE (100) is that, currently, it isn't diversified with a decent spread of shares.

The FTSE100 is diversified.

Yes, more diversification is possible, but100 different assets is far more than is needed for a reasonable level of diversification.

Edited by CarlosFandango11 on Friday 1st May 17:31

[Paul O]

Thanks for the replies so far guys. I'm sorted for pensions and don't want it locked away in there.

Think ISA is way to go, is there a type of fund i should be looking at? Any recommendations, and how often should I be reviewing it?

Thanks!

[CRB14]

Have a look at the Woodford fund. I have the accumulator fund and so far it has performed extremely well. He has also released a new fund but I've not looked into that one.

[BoRED S2upid]

CRB14 said:

Have a look at the Woodford fund. I have the accumulator fund and so far it has performed extremely well. He has also released a new fund but I've not looked into that one.

Same here not a bad first year if I recall. I check it's progress every few months.

[Paul O]

Thanks guys. Crikey, this just gets more complicated. So I thought "Right, woodford fund, find it, buy it, job done". A forgotten password later and I ended up on Money Saving Expert, which starts to describe different banks charge different amounts, and there are all kinds of "best for..." options.

Totally lost now! So I have to pay the bank for the account, then pay the fund manager too, but I need to make sure I get the right bank with decent charges and continually change the fund to ensure I get the best rates??

Fekking hell, I've no idea what to do now. Help!!

If it helps, I currently have a Nationwide ISA investor, with zero in it, following the bad advice a few years ago. So once I've found my password, I can presumably log in, select a fund and job jobbed... or is it?

[Sargeant Orange]

If it helps at all, I just opened a vanguard lifestrategy fund via Cavendish. Took all of 2 minutes. It's as much "open & forget" as you can get so is ideal for me

[grahamm]

Www.fundsmith.co.uk

I am not a financial adviser but they have low charges and have done well over the last 4 plus years. Looking at the website they seem to make a lot of sense and would take your monthly investment into an ISA without paying an intermidiary

[trowelhead]

Paul O said:

Totally lost now! So I have to pay the bank for the account, then pay the fund manager too, but I need to make sure I get the right bank with decent charges and continually change the fund to ensure I get the best rates??

You'll have to select an isa platform (that may or may not be your bank) they will charge you a fee for holding your account. It will usually cost you a % fee based on the amount you put in (0.3-5% ish) but some platforms charge on a one off fee basis for funds bought and sold for example.

Then you need to choose your fund. You'll usually pay a management fee to the fund this will be anywhere from 0.07 - 2% ish depending if you go for a cheap tracker fund or an actively managed fund that charges high fees.

Beware as the fees have a significant impact on your real return over time:
https://www.vanguard.co.uk/uk/portal/about-vanguar...

And if you are looking for something simple to set and forget you'll get all the info you need here:
http://monevator.com/category/investing/passive-in...

Edited by trowelhead on Friday 1st May 21:56

[Simpo Two]

Sometimes it is good to hand over things to an expert. I can't fix my Jaguar so I take it to a garage I trust. I can't get my head round investments (they are after all designed to deceive) - so I take it to an IFA I trust and say 'Make it so'. It gets it off my desk.

[trowelhead]

Simpo Two said:

Sometimes it is good to hand over things to an expert. I can't fix my Jaguar so I take it to a garage I trust. I can't get my head round investments (they are after all designed to deceive) - so I take it to an IFA I trust and say 'Make it so'. It gets it off my desk.

But if your IFA charges c. 1% of assets held, and you can construct a portfolio for less than 0.5% (with a little time spent reading - or paying an IFA a one time fee) then you stand to save :

With IFA at 1% fees p/a - £10k portfolio, average returns of 8% pa - total charges of £15214 over 25 years
Self Managed at 0.5% fees p/a - £10k portfolio, average returns of 8% pa - total charges of £8028 over 25 years

Scale that up to a £100k or £200k portfolio and you can see why low fees are very important in keeping your returns.

(plus - don't IFAs charge c. 1% of assets held per year and then still charge fund fees ontop?)