Investments - Strategies, Ideas, Options & advice

[Mudball]

Finally, my teen asked me what stocks I have invested in. I have been trying to get him to learn about the markets since he was 10.. but nada. So it was a good conversation. The fun bit ends there.

On digging deeper, I learnt that he is not inspired by my many achievements but because his classmate has made about 600k in trading. So he has been looking at stock research, finviz, various apps. He had looked up world’s most valuable companies. He has now bought 3 Nvidia and some Microsoft stocks. He had bought them because it was cheaper than Berkshire Hathaway. Now he wanted to know what to do next.

All the above is in demo accounts. It has taken him 2 afternoons with a mate to understand what his Dad had been telling him for 6 years. Anyways rant aside. What advice would you give a teen who has recently discovered fire? I must warn his attention span is that of a goldfish, got great at Maths or taking advice from anyone over 20

 

[The Squirrel]

Finally, my teen asked me what stocks I have invested in. I have been trying to get him to learn about the markets since he was 10.. but nada. So it was a good conversation. The fun bit ends there.

On digging deeper, I learnt that he is not inspired by my many achievements but because his classmate has made about 600k in trading. So he has been looking at stock research, finviz, various apps. He had looked up world’s most valuable companies. He has now bought 3 Nvidia and some Microsoft stocks. He had bought them because it was cheaper than Berkshire Hathaway. Now he wanted to know what to do next.

All the above is in demo accounts. It has taken him 2 afternoons with a mate to understand what his Dad had been telling him for 6 years. Anyways rant aside. What advice would you give a teen who has recently discovered fire? I must warn his attention span is that of a goldfish, got great at Maths or taking advice from anyone over 20

He's going to lose cash trying and make £1 million in a month like his mate using ultra-high-risk investments and leverage. He's going to end up paying to find out that there's no easy route to fast wealth.

You can't stop that so accept it, but try and get him to put a little money into something like a pension as well; something where he can't lose it all.

My favourite investment stat.

Person 1 puts £100/month into a pension pot of typical investments starting at age 20. Stops contributing at age 30 completely
Person 2 puts £100/month into a pension pot of typical investments starting at age 30. Stops contributing at age 60.


Despite person 2 putting in x3 as much, person 1 ends up with the bigger investment pot; their early investments have so many years to earn compound returns that person 2 simply cannot catch up.

Talk through that and really try to get him to understand it.

The real moral of that stat is to open up a pension and make contributions to it EARLY in life; like ideally the first month you leave school/college/uni and start work type early. DO NOT WAIT. Even if it is only very small amounts because that's all you can afford in your early years at work, it will still make a HUGE difference to your eventual retirement funds later in life because those small contributions have so long to earn compound returns (which are, of course, incredibly powerful).

 

[SwingsitlikeHogan]

He's going to lose cash trying and make £1 million in a month like his mate using ultra-high-risk investments and leverage. He's going to end up paying to find out that there's no easy route to fast wealth.

You can't stop that so accept it, but try and get him to put a little money into something like a pension as well; something where he can't lose it all.

My favourite investment stat.

Person 1 puts £100/month into a pension pot of typical investments starting at age 20. Stops contributing at age 30 completely
Person 2 puts £100/month into a pension pot of typical investments starting at age 30. Stops contributing at age 60.


Despite person 2 putting in x3 as much, person 1 ends up with the bigger investment pot; their early investments have so many years to earn compound returns that person 2 simply cannot catch up.

Talk through that and really try to get him to understand it.

The real moral of that stat is to open up a pension and make contributions to it EARLY in life; like ideally the first month you leave school/college/uni and start work type early. DO NOT WAIT. Even if it is only very small amounts because that's all you can afford in your early years at work, it will still make a HUGE difference to your eventual retirement funds later in life because those small contributions have so long to earn compound returns (which are, of course, incredibly powerful).

It’s a bit like the old chess board question when the king rewards the serf for his good deeds. He has a choice of taking:

1) all of £1 on square 1 plus £2 on square 2 up to £64 on square 64 or…
2) all of 1d on square 1 plus 2d on square 2 plus 4d on square 3 plus 8d on 4… all the up to ???d on square 64.

 

[Mudball]

He's going to lose cash trying and make £1 million in a month like his mate using ultra-high-risk investments and leverage. He's going to end up paying to find out that there's no easy route to fast wealth.

You can't stop that so accept it, but try and get him to put a little money into something like a pension as well; something where he can't lose it all.

My favourite investment stat.

Person 1 puts £100/month into a pension pot of typical investments starting at age 20. Stops contributing at age 30 completely
Person 2 puts £100/month into a pension pot of typical investments starting at age 30. Stops contributing at age 60.


Despite person 2 putting in x3 as much, person 1 ends up with the bigger investment pot; their early investments have so many years to earn compound returns that person 2 simply cannot catch up.

Talk through that and really try to get him to understand it.

The real moral of that stat is to open up a pension and make contributions to it EARLY in life; like ideally the first month you leave school/college/uni and start work type early. DO NOT WAIT. Even if it is only very small amounts because that's all you can afford in your early years at work, it will still make a HUGE difference to your eventual retirement funds later in life because those small contributions have so long to earn compound returns (which are, of course, incredibly powerful).

I have lost plenty trading.. I treat it at as an expensive lesson. It taught me many things about myself. For one, I can’t handle the stress of a short time frame. So after I burned thru two (real) accounts, I stopped it. Now I just focus on longer timeframes and no leverage. Just buy and hold.

Agree about pensions.. should have started a SIPP for him but I do have an ISA which if he holds and continue to invest for the next 15-20 years, he will hit the same jackpot as you mention. Only thing, it just has index funds

 

[PNWokingham]

Fun fact of the day - Nvidia is worth more than the entire global pharma industry combined! Anyone mention bubbles or tulips!

 

[Doon frae Troon]

I think the Chancellor will increase Premium Bond holdings to £75k but reduce interest rates by 5%.
Sending a million pensioners into a decision panic.

 

[PNWokingham]

The state pension is due to increase 4.8% next April from £11,973 to £12547.6!! This will be £22 under the personal allowance, so it seems almost definite that in 2027 tax will be due on state pensions unless we have a disinflationary spiral and recesssion next year - the former highly unlikely although the latter has a fair chance. A lot more people are going to need to be in contact with HMRC - good luck if they try the telephone route! The cost of the state pension is become a larger elephant in the room cost wise although hard to see any changes for the next few years

 

[backwoodsman]

The state pension is due to increase 4.8% next April from £11,973 to £12547.6!! This will be £22 under the personal allowance, so it seems almost definite that in 2027 tax will be due on state pensions unless we have a disinflationary spiral and recesssion next year - the former highly unlikely although the latter has a fair chance. A lot more people are going to need to be in contact with HMRC - good luck if they try the telephone route! The cost of the state pension is become a larger elephant in the room cost wise although hard to see any changes for the next few years

Genuine question...

Anyone know how many (or what proportion of ) people are only getting the state pension, and do not have any other source of income at all. If you're getting more than just a few quid of other income, you're already paying tax on the state pension anyway.

 

[Hobbit]

Genuine question...

Anyone know how many (or what proportion of ) people are only getting the state pension, and do not have any other source of income at all. If you're getting more than just a few quid of other income, you're already paying tax on the state pension anyway.

31% of pensioners only have the state pension. Not sure where pension credits come in, and if another household income impacts on that.

 

[Voyager EMH]

Genuine question...

Anyone know how many (or what proportion of ) people are only getting the state pension, and do not have any other source of income at all. If you're getting more than just a few quid of other income, you're already paying tax on the state pension anyway.

I think the income tax is taken from that other income so that the state pension is not taxed, if it is below the income tax threshold.

 

[backwoodsman]

I think the income tax is taken from that other income so that the state pension is not taxed, if it is below the income tax threshold.

Precisely. The state pension is taxable, but not taxed directly - the equivalent amount is taken away from the other income

 

[PNWokingham]

Precisely. The state pension is taxable, but not taxed directly - the equivalent amount is taken away from the other income

yes. But things will change in the coming years when it exeeds the personal allowance. The question itself will be getting a lot of debate in the next year or so but i can't see them lifting allowances for pensioners and nobody else...hence i don't see the personal allowance being lifted. So the interaction with HMRC will be getting infinitely heavier for a lot of peoplae as they have already started sending a lot more letters out to people about bank interset needing taxing

 

[SwingsitlikeHogan]

31% of pensioners only have the state pension. Not sure where pension credits come in, and if another household income impacts on that.

Pension credits come in to top up an individual's state pension when the individual doesn't qualify for the full pension. I'm not sure the extent to which other sources of income or savings come into the calculation (I did it for my BiL but can't remember Off top of head) - but I think that there were 'personal circumstances' considerations that meant pension plus pension credit could be close to full state pension. The financial circumstances of others in a household were not part of the calculation - it was specific to the individual.

My daughter works financial services and she says it's quite worrying how little many individuals who come to her have saved to supplement their state pension. I can't recall the average pension fund stuff but for over 55s drawing some personal pension the median is under £60k; for over 55s not drawing one the pot is under £20k. Sounds quite a lot of money - but for a pension it's diddly-squat...unfortunately.

 

[hairball_89]

I'll be coming into some inheritance in the next month or so. it's a fairly hefty chunk of cash so want to be sensible with it... Current thought is to roughly split it in 3 as follows:

1. hit the max overpayment on our mortgage (mortgage is 3.99%)
2. lock some away for 12-24 months in a high(er) interest savings account
3. the rest into our normal savings account

any thoughts or suggestions welcome!

 

[3offTheTee]

I'll be coming into some inheritance in the next month or so. it's a fairly hefty chunk of cash so want to be sensible with it... Current thought is to roughly split it in 3 as follows:

1. hit the max overpayment on our mortgage (mortgage is 3.99%)
2. lock some away for 12-24 months in a high(er) interest savings account
3. the rest into our normal savings account

any thoughts or suggestions welcome!

The first question is without knowing your circumstances it is almost impossible to comment. questions include, married/ single, family, age, risk averse or otherwise, existing savings and your own circumstances/ tax position. Attitude to stock market. Mortgage outstanding, credit cards.

You seem conservative with your planning and there are some people better equipped than I to offer advice on here.

Generally. I would consider the maximum in a Cash ISA prior to the budget. Also can you get a better rate allowing for tax than paying off mortgage? What is your attitude to The stock market for more long term.

You need independent Financial Advice with all your details available.

 

[PhilTheFragger]

Agree with 3ofthetee , get advice

The general rule of thumb is that you get rid of any debt, ( not necessarily your mortgage) - if your in a fixed rate at 3.99 and you can get 6% plus on a savings / investment then pay the mortgage off later.

Have a look at stocks & shares ISA’s
You can put 20k a year each in.

When I got my inheritance, I put 20k in in early March, followed by another 20k after 5 April , I then ran the rest in a general investment account and each new tax year, took another 20k into the ISA.

Inflation is one area you need to consider, it’s currently 3.8 % , so if your savings account is playing 3% or less, it’s losing you money

Definitely get an independent financial advisor

 

[IanM]

There's lots of other issues to think about. Age, job security, time to retirement, dependents, heath, other liabilities, existing products, current tax status, personal goals, attitude to risk etc etc

That's scratching the surface. Get advice.

 

[RichA]

You'll struggle to get much more than 4% from a savings account at the moment.
Better off investing it in champagne and a new car.

 

[PNWokingham]

I'll be coming into some inheritance in the next month or so. it's a fairly hefty chunk of cash so want to be sensible with it... Current thought is to roughly split it in 3 as follows:

1. hit the max overpayment on our mortgage (mortgage is 3.99%)
2. lock some away for 12-24 months in a high(er) interest savings account
3. the rest into our normal savings account

any thoughts or suggestions welcome!

as mentioned, all circumstances are different. IFAs all charge now so they are not for everyone. There are plenty of advice videos from IFAs on YouTube to help as well. I totally agree with with paying off debt as the first priority. Cash is the only risk-free option although bear in mind with inflation at 3.8% you need to be earning more than this just to stand still in real terms - and tax is due on all savings income over 1k/year (if basic rate tax payer, 500k Higher rate and zero if Additional rate). Personally, i would not rush into stock markets unless you know what you are doing atm as most markets are hitting all-time highs. Although if you want income and not so worried about mark-to-market values of all investments, there are lots of investment trusts and funds that yield 5%-6% and more (REITS and infrastructure funds esepcially) and if they are inside an ISA it is all tax free. But, as stressed, all circumstances are very different so impossible to to work out a plan without a lot of details, aims, ambitions and risk tollerances etc

 

[The Squirrel]

I'll be coming into some inheritance in the next month or so. it's a fairly hefty chunk of cash so want to be sensible with it... Current thought is to roughly split it in 3 as follows:

1. hit the max overpayment on our mortgage (mortgage is 3.99%)
2. lock some away for 12-24 months in a high(er) interest savings account
3. the rest into our normal savings account

any thoughts or suggestions welcome!

Well paying off any unsecured debt and, after that, the mortgage, is basically never a bad option. Beyond that, depends what a hefty chunk of cash means (5k and 500k both qualify but are very different amounts), and …

Are you retired or working?
Are you a taxpayer? Basic/higher/top rate?
What are your plans for the money left in savings after 24 months?

These make a huge difference. If you’re a working taxpayer, and especially if you’re a higher rate taxpayer then one good strategy is to pay some of your inheritance into your pension (easy to open one if you don’t have one). Essentially, simply moving money from your savings account to your pension then means you get given even more money in the form of a tax rebate. This is because the pension contribution is assumed to have come from (and so reduced) your taxable income. The fact that in reality it’s from your inheritance matters not a jot. Nothing to stop you gradually using your inheritance in this way every year - for example if the last 10k of your income is taxed at 40% each year then making a 10k pension contribution by moving 10k out of your savings account and into your pension each year means that HMRC will throw £2k into your pension, on top of your contribution, and simply give you 2k cash back to use as you please. 10k becomes 14k like magic. Nice, eh?!

Other thought: savings may seem “safe” as you can’t lose money like you can with investments. BUT you are in fact just swapping one type of risk for another. If inflation goes above the interest rate then your savings are gradually but inevitably dwindling to complete worthlessness. Doesn’t sound so safe any more, yes? A mix of savings and investments is far more sensible if you plan to hang on to the money as a nest egg long term.