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Investment for Dummies - How to go about it?

Hello everyone,

I really want to start investing my money (I don't have much mind !) and a certain percentage when I start full time work. I have no idea where to begin - everyone in my family just leaves their money in the bank ! I've tried reading the thread and here but they're quite confusing tbh.

So.... help please ! I (and am sure many others) would appreciate any help I can get.

Reply 1

ddrrzzeerr

Bit to broad a question. There 1000s of ways to go about it.

If you don't know anything about it, I would get a stock and shares ISA and invest in funds.

Reply 2

ch0c0h01ic

Original post by givemestrength

The Boglehead's Guide to Investing is a good introduction to saving and investing. My only criticism is that it is aimed at American readers so a lot of the advice regarding tax and retirement savings (eg; discussion on IRA's and Roth IRA's) isn't applicable.

The Intelligent Investor isnt very beginner friendly and is primarily focuses on investing in stocks and shares. However as a beginner or passive investor it emphasises the cyclical nature of the markets and how even the best investors and fund managers cannot predict market movements and get it wrong (regularly).

I included The Millionaire Next Door not because it is a good investing book per se but that it emphasises and teaches the principles of saving and wealth generation through case studies.

---

You need to understand that choosing and investing in "the right stock" at "the right time" is like winning the lottery - only a tiny minority of wealthy people make their fortune's this way!

It may not be what you want to hear, but for most of us the key to wealth is consistently spending less than you earn, paying off high interest debt promptly and trickling money into low cost investments over the next 20-40 years.

(edited 7 years ago)

Reply 3

givemestrength

Original post by ch0c0h01ic

The Boglehead's Guide to Investing is a good introduction to saving and investing. My only criticism is that it is aimed at American readers so a lot of the advice regarding tax and retirement savings (eg; discussion on IRA's and Rothg IRA's) isn't applicable.

The Intelligent Investor isnt very beginner friendly and is primarily focuses on investing in stocks and shares. However as a beginner or passive investor it emphasises the cyclical nature of the markets and how even the best investors and fund managers cannot predict market movements and get it wrong (regularly).

I included The Millionaire Next Door not because it is a good investing book per se but that it emphasises and teaches the principles of saving and wealth generation through case studies.

---

You need to understand that choosing and investing in "the right stock" at "the right time" is like winning the lottery - only a tiny minority of wealthy people make their fortune's this way!

It may not be what you want to hear, but for most of us the key to wealth is consistently spending less than you earn, paying off high interest debt promptly and trickling money into low cost investments over the next 20-40 years.

Thankyou very much for this , I will look into them all.
Yes I will be saving but also thought I might try something else aswell.

Reply 4

ch0c0h01ic

Original post by givemestrength

Thankyou very much for this , I will look into them all.
Yes I will be saving but also thought I might try something else aswell.

Spending consistently less than you earn and the amount that you save as a proportion of your income are the most important factors, more so than fund choice or timing for a typical passive/buy-and-hold type investor.

The key is amassing a decent emergency cash fund first (ie; 3-12 months living expenses depending on job security) so that you don't have to dip into your investments for funds should something happen (eg; car breaking down, job loss, etc).

Don't think about investing unless you can afford to see your investments drop in value by as much as 50% in a day or have to hold onto them for the next 5-10 years before you see a return to profit.

(edited 7 years ago)

Reply 5

TaintedLight

Original post by ch0c0h01ic

Saving consistently more than you earn and the amount that you save as a proportion of your income are the most important factors, more so than fund choice or timing for a typical passive/buy-and-hold type investor.

The key is amassing a decent emergency cash fund first (ie; 3-12 months living expenses depending on job security) so that you don't have to dip into your investments for funds should something happen (eg; car breaking down, job loss, etc).

What is your investment portfolio like, kind stranger :biggrin:

Reply 6

ch0c0h01ic

Original post by TaintedLight

What is your investment portfolio like, kind stranger :biggrin:

As it stands I have about 50% in cash, 10% spread across two different company pension schemes and 40% in a stocks and shares ISA. Of that 40% I have 90% in Vanguard Lifestrategy 80 (cheap fees and it's pretty consistent) and a further 10% in a UK REIT index tracker (recently added for a bit more diversity).

I've been investing properly for less than a year - it's been a learning experience. I've averaged a 15% return but arguably I could have made more simplifying things from the start and not meddling in my investments.

Reply 7

midgetspinner

Index funds are the best investment. The probability of your stock picks beating the market average is very low, and if even if they do, by 1-2%, is the time investment worth it?

Reply 8

Reue

Original post by ch0c0h01ic

I have 90% in Vanguard Lifestrategy 80

Fellow LS 80 checking in!

Reply 9

estel

To the excellent suggestions above I'd add Tim Hale's Smarter Investing which I found really really useful.

Original post by ch0c0h01ic

Of that 40% I have 90% in Vanguard Lifestrategy 80 (cheap fees and it's pretty consistent) and a further 10% in a UK REIT index tracker (recently added for a bit more diversity).

If the main advantage of LS80 is automatic rebalancing, I'm curious why you've chosen to invest in REIT and negate that - do you think you'll move to hold the underlying LS funds directly? There's lots of discussion on the pros/cons of the LS UK tilt so it's interesting you've doubled down on that with a UK REIT.

Reply 10

ch0c0h01ic

Original post by estel

To the excellent suggestions above I'd add Tim Hale's Smarter Investing which I found really really useful.

Its on my reading list, does it add much more to the above books?

Have you read The Long and Short of It: A guide to finance and investment for normally intelligent people who aren't in the industry? That's next on my list.

Original post by estel

I included the REIT index over the last couple of months for diversity - LS 80 only includes around 2-3% in property (if that). Generally speaking real estate and the equity markets aren't well correlated. The theory is that it should help smooth out some of the bumps during the next bear market in the not so distant future.

As far as UK bias goes I did consider a global REIT index in the future (maybe only 5% and reducing the UK allocation to 5%) and maybe adding in a separate FTSE developed world ex-UK index. At the moment the UK REIT index was cheaper (fees wise) and my time scale is 30 years (give or take) it shouldn't make much of a difference (hopefully). A lot of the minimalist portfolios you wilI read about include UK (or domestic) biases of 25-60%.

I did consider holding LS funds directly and it makes more sense if I am going to diversify further in the future. The problems I encountered initially was that many of the listed funds (and alternatives listed in books and blogs) weren't available on my platform. At the moment I like the simplicity of being able to monitor all of my holdings and transactions from one platform and focus on my day job.

Longer term I am going to consider approaching the fund providers directly to cut down on platform fees. However, most places require >£100,000s in capital and its got to be balanced up with tax commitment (most fund providers do not offer ISAs or LISAs).

(edited 7 years ago)

Reply 11

Doones

Original post by ch0c0h01ic

Saving consistently more than you earn

How do you save more than you earn?

(I know you don't actually mean it like that, but might need editing to clarify :wink:

)

Reply 12

ch0c0h01ic

Original post by jneill

How do you save more than you earn?

(I know you don't actually mean it like that, but might need editing to clarify :wink:

)

Sorted

Reply 13

estel

Original post by ch0c0h01ic

I've not read any of those except the Intelligent Investor, so can only compare to your descriptions of them - Smarter Investing benefits from being written with a UK audience in mind (though it won't go into too many details about the pros/cons of investment wrappers such as SIPPS). As a beginner I also found it accessible - by itself it was more than enough to give a solid grounding in the principles. The only thing I felt I needed to do further reading about was for the choice of broker.

Longer term I am going to consider approaching the fund providers directly to cut down on platform fees. However, most places require >£100,000s in capital and its got to be balanced up with tax commitment (most fund providers do not offer ISAs or LISAs).