Tracker/Bonds/Stocks & Shares ISA? Noob

[JessUK98]

I've currently got 2 separate savings accounts (both with Lloyds) as there was a limit to how much you could put in them a month. One is £250 p/m @2% and the other is £400 p/m @3%. Both will revert to something like 0.02% after the year is up (which is April this year). I've been looking ahead at where I could move this money to but I'm quite horrified at how pathetic the interest rates on standard savings and Cash ISAs are. Even fixed rate bonds look naff (Lloyds is 0.40%).

I was thinking maybe putting this lump sum in a fixed rate tracker (FTSE 100 or FTSE All share) or a stocks and shares ISA. I'm quite risk averse though, so then I thought Premium bonds, but the last time I had premium bonds I never won anything at all in the entire 2 years I had them.

Any suggestions of where I can put this money? I plan on saving the same again this year in a normal savings account again if I can find another decent rate (or maybe £250 in tracker/ISA and £400 in savings account)

There is also a share buying scheme at work (they use Equate plus), so I'm going to start that in Feb, but only put £50 p/m in for now. Thought that would be a gentle introduction into the world of shares. Dog also has a savings account that I put £50 p/m in which is at something silly like 0.001%, but don't know whether it's worth doing anything about it as it's just in case she has a large vets bill.

TIA

[AleisterCrowley]

I've been fiddling with my various Lloyds 'saver' accounts this morning. They don't make life easy.

NSANDI do a 2.2% 3 year bond, if you are happy to lock up for part of your savings for that length of time
https://www.nsandi.com/investment-guara ... owth-bonds


(edit: may be some ideas here>> viewtopic.php?f=11&t=8544 )

[GeoffF100]

You do not have to lock it up. You can get out with a 90 day interest penalty. You still get a reasonable rate of interest provided that you do not need to access the money for at least a year.

[Alaric]

I was thinking maybe putting this lump sum in a fixed rate tracker (FTSE 100 or FTSE All share) or a stocks and shares ISA.

I'm not sure what you mean by a fixed rate tracker unless it's one of those ghastly hybrid products that gives you your money back if stock markets don't rise and x% of the increase if they do. In any event if you transfer to a stocks and shares ISA, you can invest in most things using the ISA as the platform.

In current circumstances unless you are prepared to accept the possible loss of monetary value, you are lumbered with insultingly small rates of interest.

[JessUK98]

I was thinking maybe putting this lump sum in a fixed rate tracker (FTSE 100 or FTSE All share) or a stocks and shares ISA.

I'm not sure what you mean by a fixed rate tracker unless it's one of those ghastly hybrid products that gives you your money back if stock markets don't rise and x% of the increase if they do. In any event if you transfer to a stocks and shares ISA, you can invest in most things using the ISA as the platform.

In current circumstances unless you are prepared to accept the possible loss of monetary value, you are lumbered with insultingly small rates of interest.

Yeah, that's what I meant a tracker that just follows the FTSE and requires minimum input.

I'm tempted by the NS&I bonds at the moment that AleisterCrowley mentioned. Maybe put the lump sum in one of those, and start regular £250 p/m contributions to a stocks & share ISA, and £400 p/m to a savings account (hopefully Lloyds will let me start a new monthly saver at 2 or 3%). That way I will spread the risk.

[Alaric]

Yeah, that's what I meant a tracker that just follows the FTSE and requires minimum input.

You can transfer the existing cash ISA to a Stocks and Shares ISA and then purchase a FTSE tracker as an investment inside the ISA. Your capital is at risk as trackers follow markets down as well as up.

[GeoffF100]

You might be better to track the world index, which is much more diversified. The cheapest fund is currently:

Fidelity Index World Fund P (GB00BJS8SJ34) OCF 0.13%

[GeoffF100]

Here is an article outlining the rationale for a world tracker:

http://monevator.com/why-a-total-world- ... -you-need/

[richfool]

So correct me if I am wrong, but in the (Monevator example of a) world tracker, the tracker would hold it's 3.5% (or whatever %) in Carillion, Pearson etc? And it would not respond to profit warnings like an active Manager can?

[GeoffF100]

A world tracker would hold only a tiny fraction of 1% in Carillion. On average, selling shares on a profit warning reduces returns, but it also reduces risk. In an efficient market, selling shares on a profit warning reduces the risk adjusted return because of the dealing costs. There is no evidence that any active manager knew the real value of Carillion after the profit warning any better than the combined wisdom of the market, unless, of course, he had illegal insider information.

A low cost tracker is guaranteed to finish in the top 10% of funds, because of its low costs. If you pick an active fund with typical charges, you have only a 10% chance of achieving that.

[GeoffF100]

Do not take my word for it. Here are several Nobel Prize winning economists saying the same:

https://www.youtube.com/watch?v=SwkjqGd8NC4

According to Morning Star, the Fidelity fund I suggested is large cap:

http://www.morningstar.co.uk/uk/funds/s ... F00000SRPN

Carillion probably would not have made the grade as medium cap in world terms, and certainly would not have been large cap. Large cap stocks as a class are less risky than small cap stocks, but have historically offered lower returns.

I have held Pearson for 20 years. It has had good times and bad times, but overall it has made me lots of money. I wish I could say that for every share I have owned.

[DiamondEcho]

Do not take my word for it. Here are several Nobel Prize winning economists saying the same: https://www.youtube.com/watch?v=SwkjqGd8NC4

I've just watched the whole prog, great stuff, heavens Jack Bogle etc are so on the ball.
Private investors really should watch things like this, and potentially shake up their thinking; some of the FACTS are so contrary to what the mass industry tells us.

[I say this having worked years in the private client brokerage division of a Wall St bank, ie that very same 'mass industry']