Author Topic: UK First time investing - change tack?  (Read 2118 times)

StiffUpperLip

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UK First time investing - change tack?
« on: January 23, 2017, 12:00:12 AM »
I intend to make my first investment through a SIPP before end of the FY to keep my taxable income under 50k so I can keep all my Child Benefit. 

My intent initially was to simply buy the lowest cost global tracker and figure out diversification for next year's contributions... I know, such a slacker... but in my defence sleep deprivation is not good for critical thinking!

Now, with the drop in value of the pound in s global sense I wonder if I need to change this approach?   Please help, I can't figure this out right now...

Butterfingers

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Re: UK First time investing - change tack?
« Reply #1 on: January 23, 2017, 01:56:24 AM »
Nobody can predict what's going to happen to the pound, so I plan to just keep plugging the cash in, month after month. I sometimes bang the drum around these parts for Vanguard Lifestrategy built-in diversification and rebalancing. It's the ultimate lazy portfolio. It's not the absolute cheapest (fees are 0.22%) but the advantages for a lazy investor like me are worth the 0.05% I could save by doing it myself.

Have you thought about reducing your salary to 43k to take you into basic rate tax? Whether this is a good idea would depend on a few factors including time to retirement, lifetime pension contribution limit (currently 1m), and your expenditure. But it's worth investigating.

StiffUpperLip

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Re: UK First time investing - change tack?
« Reply #2 on: January 23, 2017, 04:20:27 AM »

Have you thought about reducing your salary to 43k to take you into basic rate tax? Whether this is a good idea would depend on a few factors...

Thank you. I would love to get my income under the basic tax limit especially as I'd get my tax rebate from investing in a SIPP...

However, there are a number of reasons why it's not on the horizon for me. One is childcare costs which mean I don't have the disposable at the moment to bump up my contributions. I already have a company pension I can access at 60 alongside the SIPP from 55.  I am also tentative about putting all my savings/investment in a pension wrapper, despite the obvious tax benefits,  due to the risk of the rules changing against me especially around withdrawal age.  I'm planning to invest via an ISA also once I've got the spare cash, proportion in SIPP vs ISA as yet to be determined...

Thanks for the advice re this year's contribution, maybe sticking with my original plan wouldn't be the worst idea? It just seemed that buying global with a weak pound might not be the smartest plan and maybe I should invest in the UK as at least then I'd be dealing apples with apples?

Butterfingers

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Re: UK First time investing - change tack?
« Reply #3 on: January 23, 2017, 08:27:14 AM »
However, there are a number of reasons why it's not on the horizon for me. One is childcare costs which mean I don't have the disposable at the moment to bump up my contributions. I already have a company pension I can access at 60 alongside the SIPP from 55.  I am also tentative about putting all my savings/investment in a pension wrapper, despite the obvious tax benefits,  due to the risk of the rules changing against me especially around withdrawal age.  I'm planning to invest via an ISA also once I've got the spare cash, proportion in SIPP vs ISA as yet to be determined...
All valid points (though 43k is still 32,400 after tax, plus your child benefit, which seems a heck of a lot to live off for a non-Londoner like me). What age are you planning to retire? The earlier you want to do it, the more that tilts the scales in favour of ISAs.

Quote
Thanks for the advice re this year's contribution, maybe sticking with my original plan wouldn't be the worst idea? It just seemed that buying global with a weak pound might not be the smartest plan and maybe I should invest in the UK as at least then I'd be dealing apples with apples?
Honestly, I don't know. I'm not sure that anyone else does either, which is why common advice round these parts seems to be "pick a long-term investment plan and stick with it". Over a long enough period there are bound to be spells when you see the value of your fund dropping month after month. Having an investment approach that you rationalise in advance, and stick to, will hopefully give you the mental fortitude to get through the bumpy times.

StiffUpperLip

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Re: UK First time investing - change tack?
« Reply #4 on: January 23, 2017, 10:14:03 AM »

All valid points (though 43k is still 32,400 after tax, plus your child benefit, which seems a heck of a lot to live off for a non-Londoner like me). What age are you planning to retire? The earlier you want to do it, the more that tilts the scales in favour of ISAs.


I honestly have no idea when we can retire as yet as need to track 2017 for a better handle on what we're spending. There was so much cash withdrawn in 2016 that my attempt to review last year's spending was a bit unenlightening.

Although I do know we spent over 13k on childcare last year and it's a while til Littlest will go to school.  I intend to do a case study once I've got January's spending details so that'll be interesting...

frugledoc

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Re: UK First time investing - change tack?
« Reply #5 on: January 23, 2017, 12:42:56 PM »
Just become a die hard passive investor and keep plugging away.  Does it matter if you lose money in the short term given you are investing for 10 plus year?  If the market drops you can always buy some more then with new money.

Playing with Fire UK

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Re: UK First time investing - change tack?
« Reply #6 on: January 24, 2017, 09:39:45 AM »
[1]I intend to make my first investment through a SIPP before end of the FY to keep my taxable income under 50k so I can keep all my Child Benefit. 

[2] My intent initially was to simply buy the lowest cost global tracker and figure out diversification for next year's contributions... I know, such a slacker... but in my defence sleep deprivation is not good for critical thinking!

[3] Now, with the drop in value of the pound in s global sense I wonder if I need to change this approach?   Please help, I can't figure this out right now...

[1] Good stuff
[2] Great, do this and go for a nap.
[3] No, you do not. You need to read the business pages less and sleep more.


I honestly have no idea when we can retire as yet as need to track 2017 for a better handle on what we're spending. There was so much cash withdrawn in 2016 that my attempt to review last year's spending was a bit unenlightening.

Although I do know we spent over 13k on childcare last year and it's a while til Littlest will go to school.  I intend to do a case study once I've got January's spending details so that'll be interesting...

In the nicest possible way, was ANY of this cash put back into a savings account or investment account or in a mattress? If not, the money was spent. If yes then there will be records of the deposit or lumps in the mattress. If you have regular cash spending that you can identify, make an estimate and put that into your records.

The first thing to understand is how much was spent vs saved. It would be good to know where it was spent, but knowing how much was spent is a Very Good Start. I categorise all my cash spending that I can't remember as Non-essential Crap. This motivates me to either remember what I spent it on or not spend cash. Let's be fair, most of my cash goes behind a bar.

Please post the case study!

StiffUpperLip

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Re: UK First time investing - change tack?
« Reply #7 on: January 24, 2017, 03:12:10 PM »

I honestly have no idea when we can retire as yet as need to track 2017 for a better handle on what we're spending. There was so much cash withdrawn in 2016 that my attempt to review last year's spending was a bit unenlightening.

Although I do know we spent over 13k on childcare last year and it's a while til Littlest will go to school.  I intend to do a case study once I've got January's spending details so that'll be interesting...

In the nicest possible way, was ANY of this cash put back into a savings account or investment account or in a mattress? If not, the money was spent. If yes then there will be records of the deposit or lumps in the mattress. If you have regular cash spending that you can identify, make an estimate and put that into your records.

The first thing to understand is how much was spent vs saved. It would be good to know where it was spent, but knowing how much was spent is a Very Good Start. I categorise all my cash spending that I can't remember as Non-essential Crap. This motivates me to either remember what I spent it on or not spend cash. Let's be fair, most of my cash goes behind a bar.

Please post the case study!

Thank you for your help, I'll stick with plan A as you suggest and try to avoid the analysis paralysis!

Last year was a wash really!  The cash was spent I'm sure, and I assume more on eating out and takeaways and soft-play rather than any crap in a physical stuff I could put my hands on sort of way... But 'Non-essential Crap' nonetheless.

I found myself with a lot of cash on hand last year due to having to have a certain amount for breakfast club at school, my girl's nursery etc so i just kept topping it up without watching where it was all going! We're trialling an envelope method this month which seems to be working so far for those areas which can only take cash. Otherwise I'm spending on my card so I can at least see where the money is going, even if it's <1! Feels really odd but it's the first step towards monitoring our spending transparently...

Look out for the case study once I have January's numbers in!

Playing with Fire UK

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Re: UK First time investing - change tack?
« Reply #8 on: January 25, 2017, 12:42:12 AM »
...
Last year was a wash really!  The cash was spent I'm sure, and I assume more on eating out and takeaways and soft-play rather than any crap in a physical stuff I could put my hands on sort of way... But 'Non-essential Crap' nonetheless.

I found myself with a lot of cash on hand last year due to having to have a certain amount for breakfast club at school, my girl's nursery etc so i just kept topping it up without watching where it was all going! ...

Look out for the case study once I have January's numbers in!

Great, when you post the case study can you add a link here please?

The envelope method sounds great for tracking cash (I use a card any time I can so that it's on a statement somewhere like you).

StiffUpperLip

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Re: UK First time investing - change tack?
« Reply #9 on: February 05, 2017, 02:29:49 PM »