Investment for beginners
Discussion
Morning all,
Very new to understanding finance and trying to wrap my head around things for a better financial future.
I've not yet been in my first 'proper' job for a year but don't plan on returning to education or taking any long breaks anytime soon so I'm looking for the best thing to do with my money.
Currently 26, salaried job (NHS), own my first home (mortgaged), own a car, own a bike and have very few regular outgoings personally (1x personal loan, no pension).
I've been trying my best to rid myself of personal debt, which isn't a substantial amount and comes as a consequence of being a student. I imagine I'll clear this within 3 years maximum. Whilst doing so I have been saving as well.
So questions; where's the best place to put my money? I have a regular savings account (0.2% annual) and an S&S ISA (which so far has been very up and down, currently at a loss). Alternatively I have an interest in second-hand watches and have thought to use this as an opportunity to invest/profit (ridiculous idea?).
I'm relatively risk averse and not massively fussed by shiny toys, more interested in feeling 'comfortable'.
Any help/advice appreciated.
Very new to understanding finance and trying to wrap my head around things for a better financial future.
I've not yet been in my first 'proper' job for a year but don't plan on returning to education or taking any long breaks anytime soon so I'm looking for the best thing to do with my money.
Currently 26, salaried job (NHS), own my first home (mortgaged), own a car, own a bike and have very few regular outgoings personally (1x personal loan, no pension).
I've been trying my best to rid myself of personal debt, which isn't a substantial amount and comes as a consequence of being a student. I imagine I'll clear this within 3 years maximum. Whilst doing so I have been saving as well.
So questions; where's the best place to put my money? I have a regular savings account (0.2% annual) and an S&S ISA (which so far has been very up and down, currently at a loss). Alternatively I have an interest in second-hand watches and have thought to use this as an opportunity to invest/profit (ridiculous idea?).
I'm relatively risk averse and not massively fussed by shiny toys, more interested in feeling 'comfortable'.
Any help/advice appreciated.
At your age (slightly younger than me) i would open up a pension and a stocks and shares ISA. I did this through a local financial advisor but you could do it yourself if you don't mind managing things. There are various stocks and shares ISA portfolios you could invest in online such as H&L.
I really like the stocks and shares ISA. You can pay up to £20k in a year and any gains that are made are tax free. Obviously there could be loses too but you have time (your young age) on your side. This is something that you could be paying into for the next few decades which will inevitably rise in value. I myself am just ploughing any spare money into my pension and the stocks and shares ISA. Boring but hopefully it will set me up for a fairly relaxed retirement in years to come...
I really like the stocks and shares ISA. You can pay up to £20k in a year and any gains that are made are tax free. Obviously there could be loses too but you have time (your young age) on your side. This is something that you could be paying into for the next few decades which will inevitably rise in value. I myself am just ploughing any spare money into my pension and the stocks and shares ISA. Boring but hopefully it will set me up for a fairly relaxed retirement in years to come...
You have a great attitude that will serve you well in life
You need to strike a balance between paying down debt (the highest interest rate first) and putting as much as possible into a balanced S&S ISA portfolio.
When you have any earnings in the higher rate tax band consider mirroring this portfolio in a SIPP/Pension to get the higher rate tax relief.
Hargreaves Lansdown and Fidelity are good starting point (Fidelity is lower cost) if you are happy to manage your own investments. Vanguard is a popular and low cost investment option here.
Don't worry about the short term fluctuation you have experienced, these are part and parcel of long term stock market investing.
Good luck!
You need to strike a balance between paying down debt (the highest interest rate first) and putting as much as possible into a balanced S&S ISA portfolio.
When you have any earnings in the higher rate tax band consider mirroring this portfolio in a SIPP/Pension to get the higher rate tax relief.
Hargreaves Lansdown and Fidelity are good starting point (Fidelity is lower cost) if you are happy to manage your own investments. Vanguard is a popular and low cost investment option here.
Don't worry about the short term fluctuation you have experienced, these are part and parcel of long term stock market investing.
Good luck!
What is the NHS pension scheme for someone of your age? It's probably a far better investment than anything you could achieve on the stock market, assuming that you don't need the money until you retire.
There's no point having a 0.2% regular saver account when you can get > 1% on instant access accounts.
There's no point having a 0.2% regular saver account when you can get > 1% on instant access accounts.
At your age, you could be investing for many decades to come. This means that stocks and shares cease to be a risk - they have pretty much always beaten any other form of investment over long periods of time. You do have to endure short-term volatility and the occasional "crash", but even big crashes don't matter over the long term.
You don't need a financial adviser. They'll just take a percentage of your money for telling you stuff that you could teach yourself. There are plenty of good resources to learn from on the internet.
For a beginner, the best way to start investing in stocks and shares is with index tracker funds. These spread your investment over a range of shares, with the aim of matching the performance of an index. These funds are simple, and cheap - they don't snaffle much of your money (typically 0.1 to 0.2% per year).
And of course you want to keep your s&s investments in an ISA for the tax benefits.
A common beginner's mistake is to put far too much into your home country's stock market because it feels "safe". But it's far better to diversify your investment across the whole world's stock markets, either by picking a range of index trackers that cover the US, Europe, Asia etc, or by simply using a "global" index tracker that does it all for you. Putting all your money into the UK stock market would be risky, especially at the moment - do you know how Brexit is going to pan out? Nope, me neither.
As for your cash savings, you can do far better than 0.2%. There are online savings accounts offering around 1.4%, and they're easy to open. Of course you're still losing out to inflation, but you'll be losing less than you are with 0.2%.
As someone else has said, I too would bet that the NHS pension is better than anything else you can get. So put as much as you can afford into that.
Lastly, and this is a tricky one... don't forget to leave yourself enough cash to enjoy life in the present. On the one hand, you're only young once - but on the other hand there will come a point where you can't wait to retire. It's a balancing act.
You don't need a financial adviser. They'll just take a percentage of your money for telling you stuff that you could teach yourself. There are plenty of good resources to learn from on the internet.
For a beginner, the best way to start investing in stocks and shares is with index tracker funds. These spread your investment over a range of shares, with the aim of matching the performance of an index. These funds are simple, and cheap - they don't snaffle much of your money (typically 0.1 to 0.2% per year).
And of course you want to keep your s&s investments in an ISA for the tax benefits.
A common beginner's mistake is to put far too much into your home country's stock market because it feels "safe". But it's far better to diversify your investment across the whole world's stock markets, either by picking a range of index trackers that cover the US, Europe, Asia etc, or by simply using a "global" index tracker that does it all for you. Putting all your money into the UK stock market would be risky, especially at the moment - do you know how Brexit is going to pan out? Nope, me neither.
As for your cash savings, you can do far better than 0.2%. There are online savings accounts offering around 1.4%, and they're easy to open. Of course you're still losing out to inflation, but you'll be losing less than you are with 0.2%.
As someone else has said, I too would bet that the NHS pension is better than anything else you can get. So put as much as you can afford into that.
Lastly, and this is a tricky one... don't forget to leave yourself enough cash to enjoy life in the present. On the one hand, you're only young once - but on the other hand there will come a point where you can't wait to retire. It's a balancing act.
TartanPaint said:
Read "The Millionaire Teacher" and you should be mostly set on what to do and why.
I'm passing that advice on from those who advised me on this forum to do the same, and I can say from first hand experience they were right! It will teach you exactly what you want to know.
Ive just ordered that off Amazon as i fancy a read this xmas... cheers I'm passing that advice on from those who advised me on this forum to do the same, and I can say from first hand experience they were right! It will teach you exactly what you want to know.
Dr Mike Oxgreen said:
At your age, you could be investing for many decades to come. This means that stocks and shares cease to be a risk - they have pretty much always beaten any other form of investment over long periods of time. You do have to endure short-term volatility and the occasional "crash", but even big crashes don't matter over the long term.
You don't need a financial adviser. They'll just take a percentage of your money for telling you stuff that you could teach yourself. There are plenty of good resources to learn from on the internet.
For a beginner, the best way to start investing in stocks and shares is with index tracker funds. These spread your investment over a range of shares, with the aim of matching the performance of an index. These funds are simple, and cheap - they don't snaffle much of your money (typically 0.1 to 0.2% per year).
And of course you want to keep your s&s investments in an ISA for the tax benefits.
A common beginner's mistake is to put far too much into your home country's stock market because it feels "safe". But it's far better to diversify your investment across the whole world's stock markets, either by picking a range of index trackers that cover the US, Europe, Asia etc, or by simply using a "global" index tracker that does it all for you. Putting all your money into the UK stock market would be risky, especially at the moment - do you know how Brexit is going to pan out? Nope, me neither.
As for your cash savings, you can do far better than 0.2%. There are online savings accounts offering around 1.4%, and they're easy to open. Of course you're still losing out to inflation, but you'll be losing less than you are with 0.2%.
As someone else has said, I too would bet that the NHS pension is better than anything else you can get. So put as much as you can afford into that.
Lastly, and this is a tricky one... don't forget to leave yourself enough cash to enjoy life in the present. On the one hand, you're only young once - but on the other hand there will come a point where you can't wait to retire. It's a balancing act.
^^^This is brilliant advice!You don't need a financial adviser. They'll just take a percentage of your money for telling you stuff that you could teach yourself. There are plenty of good resources to learn from on the internet.
For a beginner, the best way to start investing in stocks and shares is with index tracker funds. These spread your investment over a range of shares, with the aim of matching the performance of an index. These funds are simple, and cheap - they don't snaffle much of your money (typically 0.1 to 0.2% per year).
And of course you want to keep your s&s investments in an ISA for the tax benefits.
A common beginner's mistake is to put far too much into your home country's stock market because it feels "safe". But it's far better to diversify your investment across the whole world's stock markets, either by picking a range of index trackers that cover the US, Europe, Asia etc, or by simply using a "global" index tracker that does it all for you. Putting all your money into the UK stock market would be risky, especially at the moment - do you know how Brexit is going to pan out? Nope, me neither.
As for your cash savings, you can do far better than 0.2%. There are online savings accounts offering around 1.4%, and they're easy to open. Of course you're still losing out to inflation, but you'll be losing less than you are with 0.2%.
As someone else has said, I too would bet that the NHS pension is better than anything else you can get. So put as much as you can afford into that.
Lastly, and this is a tricky one... don't forget to leave yourself enough cash to enjoy life in the present. On the one hand, you're only young once - but on the other hand there will come a point where you can't wait to retire. It's a balancing act.
JulianPH said:
Dr Mike Oxgreen said:
At your age, you could be investing for many decades to come. This means that stocks and shares cease to be a risk - they have pretty much always beaten any other form of investment over long periods of time. You do have to endure short-term volatility and the occasional "crash", but even big crashes don't matter over the long term.
^^^This is brilliant advice!A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
AdamFX said:
Very much this!
A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
And the fact I didn't realise this when I was 23 is why I hate you A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
AdamFX said:
Very much this!
A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
Tell me more.. A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
iMitchy said:
AdamFX said:
Very much this!
A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
Tell me more.. A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
Pension:
5% personal contribution, 9% employer contribution
Assuming a 40-year salary average of £70k for example...
£3,500 + £6,300 = £9,800 into pension annually, self-invested in a SIPP.
£9,800 compounded @ 10% over 40 years = ~£4.5million
The big plus-point to pension is that it's out of gross income rather than net, so much more affordable short-term and even bigger value long-term. The down-side is obviously you won't see it until you can draw upon it.
Private investment:
£500p/m over 40 years @ 10% return via heavily diversified global funds = ~£2.8million
I choose to be a bit riskier with this money so I've got about 12% returns, although you have to resist the temptation to spend all the profits on shiny things
Total of the above two ~£7.2 million over 40 years, with what I saw as a realistic long-term approach for many
I didn't include property equity as I saw this as more of a bonus and not something I'd ever actually cash-in.
Edited by AdamFX on Wednesday 19th December 17:50
Edited by AdamFX on Wednesday 19th December 17:51
First of all, thank you all for your replies and help. I'll be picking up the Millionaire Teacher asap.
I'll be looking into opening a tracker as mentioned. H&L is a name that has popped up enough times so I'll look there.
How do people feel about peer-to-peer loan companies such a zopa, ratesetter etc? Another place to diversify savings maybe.
Again, thank you all for your help.
robfox said:
What is the NHS pension scheme for someone of your age?
AFAIK it's banded and non-adjustable. Currently I would contribute 9.3%, bumping up to 12.3% in a year or 2. This works out as about a 6th of my monthly take home. I'm sure worth it but I'm not sure if I'm ready to lock it away...I'll be looking into opening a tracker as mentioned. H&L is a name that has popped up enough times so I'll look there.
How do people feel about peer-to-peer loan companies such a zopa, ratesetter etc? Another place to diversify savings maybe.
Again, thank you all for your help.
b
hstewie said:
hstewie said:AdamFX said:
Very much this!
A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
And the fact I didn't realise this when I was 23 is why I hate you A couple of years after leaving university & entering the working world, I wanted out as quickly as possible & began doing some sums. It was only then I realised that investing £500p/m in funds @ a doable 10% return came out at something silly like £2.8m over 40 years (all non-inflation adj. of course). That's before you factor in pensions or equity from home ownership, etc.
Perhaps an overly-simple example, but it really hit home to 23 year old me who had otherwise thrown money up the wall left right & center.
I'm also not so sure about the comment "Assuming a 40-year salary average of £70k for example" - I know this is PH, & everyone is clearly hugely wealthy & powerfully built, but for a good chunk of my career (at least the first half of it, & I believe am reasonably well paid in IT), I was earning way below £70k. Started on £9k back in '85 !
I do agree quite firmly with the good Doctor above....& a good general rule of thumb for pension payments is around half your age in % - so at 24, pay in around 12% (including any company contribution). If you can squeeze in a bit more early in your career, I doubt that future-you would regret it!
I believe https://i.imgur.com/BfHzwr9.png is a fairly useful flowchart for figuring out what to do with money!
The other point (mentioned elsewhere) is to be sure to enjoy life - as the late great Douglas Adams once wrote...."Life is wasted on the living"....
Lukas239 said:
Morning all,
Very new to understanding finance and trying to wrap my head around things for a better financial future.
I've not yet been in my first 'proper' job for a year but don't plan on returning to education or taking any long breaks anytime soon so I'm looking for the best thing to do with my money.
Currently 26, salaried job (NHS), own my first home (mortgaged), own a car, own a bike and have very few regular outgoings personally (1x personal loan, no pension).
I've been trying my best to rid myself of personal debt, which isn't a substantial amount and comes as a consequence of being a student. I imagine I'll clear this within 3 years maximum. Whilst doing so I have been saving as well.
So questions; where's the best place to put my money? I have a regular savings account (0.2% annual) and an S&S ISA (which so far has been very up and down, currently at a loss). Alternatively I have an interest in second-hand watches and have thought to use this as an opportunity to invest/profit (ridiculous idea?).
I'm relatively risk averse and not massively fussed by shiny toys, more interested in feeling 'comfortable'.
Any help/advice appreciated.
Where are you based Lukas? Feel free to drop me a PMVery new to understanding finance and trying to wrap my head around things for a better financial future.
I've not yet been in my first 'proper' job for a year but don't plan on returning to education or taking any long breaks anytime soon so I'm looking for the best thing to do with my money.
Currently 26, salaried job (NHS), own my first home (mortgaged), own a car, own a bike and have very few regular outgoings personally (1x personal loan, no pension).
I've been trying my best to rid myself of personal debt, which isn't a substantial amount and comes as a consequence of being a student. I imagine I'll clear this within 3 years maximum. Whilst doing so I have been saving as well.
So questions; where's the best place to put my money? I have a regular savings account (0.2% annual) and an S&S ISA (which so far has been very up and down, currently at a loss). Alternatively I have an interest in second-hand watches and have thought to use this as an opportunity to invest/profit (ridiculous idea?).
I'm relatively risk averse and not massively fussed by shiny toys, more interested in feeling 'comfortable'.
Any help/advice appreciated.
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