Author Topic: UK Investment advice for an absolute beginner.  (Read 12174 times)

grace

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UK Investment advice for an absolute beginner.
« on: October 10, 2013, 02:53:02 PM »
I'm about to turn 20, I started reading MMM by accident on my bus into work and now I've decided I'd quite like to get a headstart on investing because I would reeeeally like to spend as little time as possible working. When I say I am a beginner I mean I have literally never considering saving money until now. One little spanner in the works is that investing goes straight over my head. I tried to weigh up my options using various websites but none of it really means all that much to me and I'm getting no closer to starting to invest. I want the highest growth I can possibly achieve so that I can eventually retire with an income of about £1500 per month (after tax). My income at the moment is about £1100 per month after tax & pension deductions and because I've moved back in with my mother, I've got a savings rate at the moment of about 50% (but I'm constantly trying to boost that by a % or two every month or so).

I've read websites that sing the praises of investments, but every website I've read about HOW to actually go about investing is double dutch to me. Or I find one that makes a little bit of sense then I realise it's actually American so it doesn't take into account ISAs and so on. So I'm looking for either advice from another lovely UK-based mustachian investor, or a push in the right direction for where to actually learn these things from books or websites.

Thank you!

daverobev

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Re: UK Investment advice for an absolute beginner.
« Reply #1 on: October 10, 2013, 05:45:55 PM »
Ok, the easy and "I'm telling you what to do" version:

1. Open a share dealing ISA account - I use iWeb Sharedealing

2. Set up a monthly contribution for as much as you can (I'm going to assume this is LESS than the annual ISA allowance! Don't put in too much!!)

3. Set up a monthly purchase for:
   - HUKX.L x 25%
   - HMCX.L x 25%
   - IGLT.L x 20% ('bonds' are called Gilts in the UK)
   - IWRD.L x 30%

That's all. Leave it alone, rebalance back to those percentages yearly. Or increase the %age bonds by your age (maybe to 25% at 25, 30% at 30).

This is called a 'couch potato' portfolio. You have 25% UK large companies (HUKX tracks the FTSE 100); 25% medium (HMCX tracks the FTSE 250); your age in government-backed stuff; and the rest is 'world'.

IF YOU STICK TO IT it'll do you right. Don't panic sell, don't buy more when things look 'hot'.

There are plenty of books (sorry, I don't know any UK-based ones... I left Blighty before I learned about couch potato, or investing at all).

Bear in mind this puts the money 'away' - 5 years ABSOLUTE MINIMUM to invest - if you want the cash back before then, find the highest interest savings account you can.

Have a read through the thread with BritishBob - I think I covered most of your stuff there, too :)

daverobev

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Re: UK Investment advice for an absolute beginner.
« Reply #2 on: October 10, 2013, 06:13:14 PM »
Links:

iWeb: http://www.iweb-sharedealing.co.uk/share-dealing-home.asp

There are PLENTY of others such as iii.co.uk, I'm sure many of the banks have something, but iWeb is who I use.

HSBC ETFs: http://www.etf.hsbc.com/etf/uk/retail - they are the ones that 'do' HUKX.L and HMCX.L. What I think you need to know: These are *index tracking* ETFs. They buy, in the same proportions as the index itself, the constituents of the FTSE 100 and FTSE 250, respectively. So when you buy HUKX.L you are buying a tiny fraction of each of the 100 companies in the FTSE 100. For the 0.35% 'MER' or - basically - management fee, they deal with buying, holding, and rebalancing those 100 shares. "You are buying a tiny fraction of the companies that make up the index".

The point is that, with the correct asset allocation, you don't have to worry what the market does - if stocks go nuts, great. If they crash, great. You just keep plugging along. A good analogy is: A man walks a dog. The dog runs back and forth, back and forth - that is the stock market. But you watch the man, who is steadily making his way forward. IE don't panic sell when everyone else is (the dog! Oh GOD look at the dog!), and panic buy back again when everyone else does (doooog!!). You just keep plodding along, ignoring what is quite frankly bullshit (FTSE was up 0.6% due to strong men drinking Irn Bru... due to haircuts... due to the long weekend, the price of plastic bags).

The asset allocation I proposed - 80% stocks, 20% bonds - is more stocks than 'usual' but you're young and you want it to grow. This kind of think does not 'protect' you from market corrections. It *does* protect you from most fund managers 'churning' stocks - they are watching the dog. You don't need to worry about 'what's big!!' because, if it's really big, it will make its way into the index, and you'll own a piece of it.

Hope that helps.

grace

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Re: UK Investment advice for an absolute beginner.
« Reply #3 on: October 10, 2013, 11:35:14 PM »
Ok, the easy and "I'm telling you what to do" version:

*snip*

This is precisely how I was hoping someone might explain it. All of that makes perfect sense. I think that avoiding panic buying/selling might be easy for me because of my relative inexperience, and everything I've read tells me to stick it out no matter what's happening. I'm looking to keep most of it away for as long as I have to contribute to it to get enough to retire so leaving it alone will be easy. Another quick question! Qould you happen to know off the top of your head how much I should be trying to invest in total before I can reasonably expect to live off of the proceeds?

daverobev

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Re: UK Investment advice for an absolute beginner.
« Reply #4 on: October 11, 2013, 08:49:22 AM »
Sure - 1500 quid a month x 12 is 18k.

'Standard wisdom' dictates a 4% 'safe withdrawal rate' - so to get your yearly amount, simply multiply it by 25.

So in your case 18k x 25 = 450k

Now - you said 'after tax' but 1) stuff in your ISA is tax free anyway and 2) there is the lovely personal allowance, so you *should* be able to save in the right places so you won't pay any tax on that.

As to how long it'll take you to reach 450k (multiplied by inflation each year) that's anyone's guess. Normally one spends less in retirement than when working, but you are at the start of your working life. Having a house plays a huge role too - life is *really* cheap if you don't have to pay rent or a mortgage. I'd say you could live on 500 GBP or less IF you don't have a housing cost.

The best thing is the point at which your investments start earning a significant amount all on their own.

lizfish

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Re: UK Investment advice for an absolute beginner.
« Reply #5 on: October 31, 2013, 08:28:43 AM »
A good analogy is: A man walks a dog. The dog runs back and forth, back and forth - that is the stock market. But you watch the man, who is steadily making his way forward. IE don't panic sell when everyone else is (the dog! Oh GOD look at the dog!), and panic buy back again when everyone else does (doooog!!).

Best analogy for the stock market and active trading I've ever heard. LOOK AT THE DOG!

I am also a young Brit (not as young as Grace, alas) who has never invested a penny in her life (except that which was invested in my pension(s) which I have yet to regain control of and understand) I mean to start walking with the man and the dog can do what it likes! :-) It's just having the courage to take the plunge I guess.

johnsmith

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Re: UK Investment advice for an absolute beginner.
« Reply #6 on: October 31, 2013, 04:01:41 PM »
Grace,

Im in a similar position to you, although im 25.

I decided that I wanted to take all the hassle out of investing and just set up a direct debit and forget about it. Im trying to just fill up my ISA allowance every year, and should be able to retire in 15 years(touch wood).

I went for the vanguard lifestrategy 80% through Hargreaves Lansdown, monevator did a really good piece about it, he also has a chart which compares brokers pricing in the UK.

http://monevator.com/vanguard-lifestrategy/

I would say that 15000 is quite a lot, are you sure you will need that? I'm aiming for about 12,000 and i think its achievable anywhere but London. Especially if housing is taken care of.

Best wishes

gmuk

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Re: UK Investment advice for an absolute beginner.
« Reply #7 on: December 04, 2013, 03:42:38 AM »
+1 for Lifestrategy 80% through Hargreaves Lansdown. Also a UK-based investor. :)

Snoozing

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Re: UK Investment advice for an absolute beginner.
« Reply #8 on: December 04, 2013, 07:19:58 AM »
I also have Lifestrategy 80% at Hargreaves Lansdown. You should be aware HL are soon to change their platform pricing model, and it looks like it will become more expensive for a single fund investor.

http://www.thisismoney.co.uk/money/diyinvesting/article-2516906/Hargreaves-Lansdown-reveals-new-fees-superclean-funds.html

todd89

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Re: UK Investment advice for an absolute beginner.
« Reply #9 on: October 11, 2016, 12:11:17 PM »
I'm pulling up an old thread here but I'm UK based and wondering what the best solution is in order to match the vanguard index funds in the US.

I have heard I need 100k to invest in vanguard as a European citizen. The above suggestions looks pretty complicated. I have £10,000 and would like to stick in one index fund.

Hope someone can advise after making a mistake with RL360!

daverobev

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Re: UK Investment advice for an absolute beginner.
« Reply #10 on: October 11, 2016, 02:11:29 PM »
I'm pulling up an old thread here but I'm UK based and wondering what the best solution is in order to match the vanguard index funds in the US.

I have heard I need 100k to invest in vanguard as a European citizen. The above suggestions looks pretty complicated. I have £10,000 and would like to stick in one index fund.

Hope someone can advise after making a mistake with RL360!

You don't need any amount to buy ETFs. You just need a brokerage account.

Try the Monevator (?) comparison of UK brokerage accounts, and find the one that fits you best.

For 10k, you probably want the most diversified ETF you can get - probably VWRL, https://www.vanguard.co.uk/uk/portal/detail/etf/overview?portId=9505&assetCode=EQUITY##overview

frugledoc

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Re: UK Investment advice for an absolute beginner.
« Reply #11 on: October 11, 2016, 02:47:28 PM »
Hi Grace.  I would recommend Vanguard Lifestrategy 100 fund for you.

It is the only investment you will need. 

I would recommend opening an ISA with Hargreaves Lansdowne.  They do charge 0.45% per year but they are easily the most user friendly and have the best customer service.

I would also recommend you check out monevator.com

daverobev

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Re: UK Investment advice for an absolute beginner.
« Reply #12 on: October 11, 2016, 03:52:37 PM »
Hi Grace.  I would recommend Vanguard Lifestrategy 100 fund for you.

It is the only investment you will need. 

I would recommend opening an ISA with Hargreaves Lansdowne.  They do charge 0.45% per year but they are easily the most user friendly and have the best customer service.

I would also recommend you check out monevator.com

You should NOT need a particularly user-friendly setup if you're just doing one buy a month or something.

From http://monevator.com/compare-uk-cheapest-online-brokers/ it looks like Halifax would be a better idea. Only &gbp;12.50 fee for an isa. Nearly half a percent in management fees? For want of a better phrase: fuck that.

todd89

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Re: UK Investment advice for an absolute beginner.
« Reply #13 on: October 11, 2016, 09:37:10 PM »
I'm pulling up an old thread here but I'm UK based and wondering what the best solution is in order to match the vanguard index funds in the US.

I have heard I need 100k to invest in vanguard as a European citizen. The above suggestions looks pretty complicated. I have £10,000 and would like to stick in one index fund.

Hope someone can advise after making a mistake with RL360!

You don't need any amount to buy ETFs. You just need a brokerage account.

Try the Monevator (?) comparison of UK brokerage accounts, and find the one that fits you best.

For 10k, you probably want the most diversified ETF you can get - probably VWRL, https://www.vanguard.co.uk/uk/portal/detail/etf/overview?portId=9505&assetCode=EQUITY##overview

Where can I find a reputable broker account for the ETF you have suggested? I cannot buy direct from vanguard uk, correct?

Simple _Socrates

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Re: UK Investment advice for an absolute beginner.
« Reply #14 on: October 11, 2016, 11:07:22 PM »
I'm new to this stuff also, I found MMM and, from here other like minded uk sites about May of this year, believe me you're going to be doing a lot of reading, but like every thing as you go along you'll understand more and more. Here is as basic as I can put it. (I stand to be corrected if needs be)

You can't buy direct from vanguard with less than 100k, so what you do is go to a uk broker who takes many little/medium contributions from lots of people to make up the 100k and they buy the fund from vanguard on your behalf. The broker then charges a % fee for the privilege, bear in mind that vanguard also charges a % for running the fund.

I'm just at the start of my money building career and at 39 I'm starting late but "better late than never".

As advised above you should subscribe to monevator, he's a U.K investment blogger. Read through the previous posts from the beginning. Don't worry if you don't understand any of it as I didn't. The more you read the more you will learn. If after you have read loads it still doesn't interest you or you still don't understand any of it that doesn't matter as you will be taking a passive investing approach. This means you don't have to do anything other than put your money into the fund on an ongoing basis and vanguard will do the rest.

So from the monevator chart on U.K. Brokers I decided on cavendish as my broker. I opened an account with cavandish and chose a stocks and shares isa as my savings vehicle , the product I chose to invest in is the vanguard life strategy 80/20 acc( acc means your dividends are automatically reinvested into the fund).The vg Ls 80/20 with cavendish, as far as Iím aware the fees are 0.3% for cavendish(for buying on your behalf) and 0.24% for vg(for managing your fund) for a total of 0.54% of your portfolio per year.

I set up a direct debit for the same amount every month that goes into the fund and that's it. You don't need to do anything else. As your wealth grows you may need to move brokers to get better deals on fees as the lower the fees the better the return on your portfolio. Changing broker is like changing car or home insurance, you weigh up the options and decide of its worth moving for a better deal. But like me since you are at the start of your build you have time to figure these things out BUT in the meantime get your money into something.

Link to monevator U.K broker list.

http://monevator.com/compare-uk-cheapest-online-brokers/comment-page-26/#comments

SpreadsheetMan

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Re: UK Investment advice for an absolute beginner.
« Reply #15 on: October 12, 2016, 03:29:32 AM »
The man+dog analogy for the stock market is brilliant!

todd89

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Re: UK Investment advice for an absolute beginner.
« Reply #16 on: October 13, 2016, 09:28:44 AM »
I'm new to this stuff also, I found MMM and, from here other like minded uk sites about May of this year, believe me you're going to be doing a lot of reading, but like every thing as you go along you'll understand more and more. Here is as basic as I can put it. (I stand to be corrected if needs be)

You can't buy direct from vanguard with less than 100k, so what you do is go to a uk broker who takes many little/medium contributions from lots of people to make up the 100k and they buy the fund from vanguard on your behalf. The broker then charges a % fee for the privilege, bear in mind that vanguard also charges a % for running the fund.

I'm just at the start of my money building career and at 39 I'm starting late but "better late than never".

As advised above you should subscribe to monevator, he's a U.K investment blogger. Read through the previous posts from the beginning. Don't worry if you don't understand any of it as I didn't. The more you read the more you will learn. If after you have read loads it still doesn't interest you or you still don't understand any of it that doesn't matter as you will be taking a passive investing approach. This means you don't have to do anything other than put your money into the fund on an ongoing basis and vanguard will do the rest.

So from the monevator chart on U.K. Brokers I decided on cavendish as my broker. I opened an account with cavandish and chose a stocks and shares isa as my savings vehicle , the product I chose to invest in is the vanguard life strategy 80/20 acc( acc means your dividends are automatically reinvested into the fund).The vg Ls 80/20 with cavendish, as far as Iím aware the fees are 0.3% for cavendish(for buying on your behalf) and 0.24% for vg(for managing your fund) for a total of 0.54% of your portfolio per year.

I set up a direct debit for the same amount every month that goes into the fund and that's it. You don't need to do anything else. As your wealth grows you may need to move brokers to get better deals on fees as the lower the fees the better the return on your portfolio. Changing broker is like changing car or home insurance, you weigh up the options and decide of its worth moving for a better deal. But like me since you are at the start of your build you have time to figure these things out BUT in the meantime get your money into something.

Link to monevator U.K broker list.

http://monevator.com/compare-uk-cheapest-online-brokers/comment-page-26/#comments

Thank you very much for such a detailed answer.

Talking of the life strategy, did you find this to be the most cost effective?

What about currency risk etc with Cavendish? What happens should they go bust?
I'm just very cautious like most people and since I am new to this.
I'm sticking my money in a government ISA at the minute. What the benefits of the ISA you have opened?

Simple _Socrates

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Re: UK Investment advice for an absolute beginner.
« Reply #17 on: October 14, 2016, 06:38:46 AM »
For me I found the 0.54% fee to be acceptable, if you're going to ACTIVELY invest your chosen broker may charge a fee for each transaction, but because I'm PASSIVELY investing there's no charge other than the set fee.

The vanguard life strategy is an all in one diversified passive portfolio so they do all the movements to rebalance your allocations to the percentages set out in the structure. You don't need to be involved(unless you want to be, but unless you know exactly what your doing I'd leave well enough alone).

Regards to risk, what happens if your bank goes bust or your house burns down or you're  in an accident and can't work. All you can do is keep abreast of what's happening. Subscribe to investing blogs and if there's things going on in the market or with companies  you'll get wind and can take action.

I believe the uk government protects your money up to 75k, so if your not at this level yet you should be able to invest with your chosen platform with confidence, but do your own research.
 
Money savings expert(is your money safe)
http://www.moneysavingexpert.com/savings/safe-savings

This is money(is your money safe)
http://www.thisismoney.co.uk/money/experts/article-2553851/How-I-know-DIY-investing-platform-safe.html


BrokenBiscuits

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Re: UK Investment advice for an absolute beginner.
« Reply #18 on: October 15, 2016, 10:47:39 AM »
Hello there.

I'm in the uk and use Cavendish to invest in vanguard's lifestrategy. It's likely to be the cheapest and most effective way of passively investing for you right now. You may have to consider moving away from Cavendish if you build up a considerable amount of money , as a fixed fee account will most likely be cheaper than a percentage on a large 'stache... that's a while off yet though.

Cavendish is a bit  no frills, but the kind people at Hargreaves lansdown let you use their site without having an account with them. So I invest at the cheap end and browse the info available paid for by the fancy pants higher fees for free.

If you are starting out as a novice, a good book to read would be Tim Hale's "Smarter investing". You should be able to get it for free from your local library.   As others have mentioned monevator is the go to site for finance in the uk too.

Cheers




frugledoc

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Re: UK Investment advice for an absolute beginner.
« Reply #19 on: October 15, 2016, 12:18:19 PM »
Hargreaves Lansdowne is only expensive for funds.  If you hold any other investments the annual fee is capped at £45 pounds in the ISA and £250 in the SIPP.

Seems cheap as chips to me.

todd89

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Re: UK Investment advice for an absolute beginner.
« Reply #20 on: October 18, 2016, 11:31:24 AM »
Thanks guys.

I am going to set up an SIPP with Cavendish online and contribute the maximum contribution of £2880 in order to get the government tax relief of 20%.

I will then look to make personal lump sums or set up a monthly direct debit of at least £200.

Would personal lump sums or a steady amount each month be better?

Simple _Socrates

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Re: UK Investment advice for an absolute beginner.
« Reply #21 on: October 21, 2016, 04:07:14 AM »
Depends on the lump sum, if you put in let's say 10k and the market drops tomorrow by 5% you might panic and pull you money, were as if you drip feed you're buying when the market is both up when it's expensive to buy and also down when it's less expensive.

There was a recent post by RIT(retirement investing today, another U.K. Blogger) who on putting 3k into his portfolio at the end of the month, seen his shares drop by 4K thus losing 1k on that month. BUT, he knows that the market goes up and down so he had no problem sticking to his monthly commitment on investing. This is a guy who went from financially dependent to FIRE with a net worth of 1 million in 9 years, you can trace his progress from the start on his blog.