The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: msangi on June 18, 2014, 04:23:12 PM
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Hi, I live in the UK and I save about £1000 every months but I am yet to find a good strategy to invest them.
I am doing a budget and that £1000/month are pure savings and I don't really plan to use them in the short term as I am already covered by an emergency fund and by a rainy day fund for other unplanned expenses.
Since I am still not too confident in my investing skills I'd like to start simple, keeping part of them in cash/shortish terms investments and part in an investment fund (I was thinking at one of the Vanguard Lifestrategy funds). I'd like to have some cash/short term investments either because I would feel safer in case of some very bad emergency situation and because at the moment I am renting and I can imagine that in the short/medium term I'll be needing to put a deposit on an apartment.
My main doubt is about how I should allocate that extra £1000/month so that I get a balanced but yet meaningful investment. Ideally I don't want to put too much on the fund but I am afraid there is a threshold under which it is not worth to use a found at all.
Can you please give me some advice?
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If you have concerns about short term events such as needing security deposits or other housing related expenses what you should do is establish your emergency fund first. This will be a cushion to support you in the event of something happening. Things to consider would be loss of income (job loss), unexpected medical expense, unexpected transportation expense..etc. Consider that many of these things may happen at the same time. Choose an amount that will let you sleep at night.
Then you can get down with investing and not worry about "Oh shit" money.
With investing you should pick an Asset Allocation that will keep you from doing something stupid in the event of a market drop. After that focus on low cost/fee index funds as the foundation of your investments. Educate yourself and if you so choose expand your investments beyond index funds. Get an Investment Policy Statement (http://www.bogleheads.org/wiki/Investment_Policy_Statement), and read this series. (http://jlcollinsnh.com/stock-series/)
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Thanks for your reply. The emergency fund I have can easily allow me to live for more than six months. I'm already planning to keeping extending it and it is outside from the amount of money I think I could invest every month. I could probably rethink about it and try to think at a realistic amount of money I'll need and start saving them separately.
I was already thinking at starting with a low cost/fee index fund with a balanced asset allocation. But I'm sure that after reading more about what an Investment Policy Statement is and the articles of the series you linked I'll have much clearer ideas.