Author Topic: Starting investing (UK)  (Read 2824 times)

Tyn

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Starting investing (UK)
« on: July 22, 2015, 09:57:11 AM »
I've been lurking on the forums for a while and I've finally come to a point where I'd like to invest some money for retirement. I'm hoping to get some advice on my plan and if there's anything major that I haven't considered.

Background:
I'm 32 and have ~700 left each month after expenses (~1000pm). I would like to own my own home, but not planning on that for another 7 years or so (currently working/living in London and not looking to buy here). I'm not aiming for a super early retirement, just being able to a) actually retire and b) own my own home. I think putting 500pm towards the house should get me a reasonable amount towards a deposit and I would like to put the rest aside for retirement somewhere with a chance for better returns than the 2-3% I get on my savings accounts. Part of my paycheck goes to a matched company pension scheme, but any additional payments would be handled by a separate provider at a 0.75% fee with rather limited fund options so I'm thinking a DIY option would be better.

Plan:
1. Open a SIPP with BestInvest
It's my understanding that SIPP deposits get topped up 20% by the government, making it equivalent to a pre-tax deduction amount.  Seems to me that this would provide more value than an ISA or other investment platform.  I picked BestInvest because Monevator listed it as a good option for smaller value investments (platform fee is 0.3% with no fee for fund dealing). I wouldn't be able to withdraw anything until I'm 55, but I figure I can always start saving somewhere to cover that gap if I decide to stop working before that.

2. Invest in the following index funds:
70% VANGUARD FTSE DEVELOPED WORLD EX UK EQUITY INDEX
25% VANGUARD FTSE UK ALL SHARE INDEX A
5% VANGUARD EMERGING MARKETS STOCK INDEX GBP

I'm trying to get a decent coverage of markets without needed to invest in lots of funds, but I'm not sure if this is a good approach or if I should do further research to be able to make a more informed decision. My concern is that I'm prone to procrastination and I don't want to waste time out of the market looking for 'perfect' funds. On the other hand, if anyone has arguments about why these funds might not be a good idea/suggestions for better options I'm all ears.

3. ????
4. Profit

Thanks in advance and please let me know if there's any further information I should provide.

mohawkbrah

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Re: Starting investing (UK)
« Reply #1 on: July 23, 2015, 05:45:01 AM »
invest in ISA and max it out before you invest in a SIPP is usally best course to go. don't forget the government will tax the money you take from SIPP so that 20% they tack on doesn't really add as much as you think. SIPPS are better if you're in higher tax brackets (40%)

jaizan

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Re: Starting investing (UK)
« Reply #2 on: July 23, 2015, 03:53:25 PM »
You cannot raid your SIPP to fund the deposit on a house purchase.   You CAN do that with an ISA.

I agree on the tax issues.   A SIPP makes sense if you are paying higher rate tax now and expect to pay standard rate tax when retired.   If that is not the case, max out your ISA first.

Most world excluding the UK funds tend to have a very high percentage of US investments. The US market is not cheap and the dollar has had a good run in recent years.  By all means have some US exposure, however I would be looking at less than 20%.
If you go global, how about 20% UK, 20% other Europe, 20% US, 20% Asia and the other 20% split as you prefer (perhaps emerging markets).

Tyn

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Re: Starting investing (UK)
« Reply #3 on: July 24, 2015, 06:17:01 AM »
Thanks for the advice, I'll start comparing ISA options.

With US investments is it still an issue if the fund I'm buying is in GBP?

daverobev

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Re: Starting investing (UK)
« Reply #4 on: July 24, 2015, 12:49:30 PM »
Thanks for the advice, I'll start comparing ISA options.

With US investments is it still an issue if the fund I'm buying is in GBP?

You're mixing two concepts, currency and stock value. Convert the price to pounds to see if something is 'expensive' or not.

You can safely ignore all that, though. You need an asset alloc (%age of each asset type/location), then just buy to meet it. If US stocks are strong and the US$ is strong then yeah, in pounds, US stuff will be expensive. But US stocks could keep going up and the US$ could get stronger.

Roughly 50% of the world's market cap is US based stocks, but many of the large ones are of course international, so owning them is fine.

Your asset alloc is fine, actually. But yeah, ISA first.

Also re 'raiding your ISA for a house deposit' - DON'T. When you withdraw from an ISA that tax shelter room is LOST FOREVER.

Ideally start a house fund separately, in a few years closer to when you want to buy. Say 3-4 years out. In the mean time pump every penny into the ISA and leave it alone!

nobodyspecial

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Re: Starting investing (UK)
« Reply #5 on: July 25, 2015, 11:54:05 AM »
Ideally start a house fund separately, in a few years closer to when you want to buy.
Also think REALLY carefully about if you REALLY want to buy a house in the UK.

Everybody in the UK wants to buy a house, everybody has always been told they need to buy a house. If everyone was saying the same thing about any other "investment" you would be suspicious.