Best way to invest Ј50 pm

A question about : Best way to invest Ј50 pm

Hi,

I would like some advice on how to invest the above.

I'm 44 and currently envisage drawing my lgps at 65. Due to recently taking VR (after 26 yrs) and seeking a new and less well paid career (still contributing to lgps), I can afford to put away Ј50 per month which I would like to invest over the next 15 to 20 years in order to build up a fund which I could then use to retire slightly earlier. Hopefully this contribution could be increased slightly each year.

Having done some reading around the subject I was looking at one of the Vanguard funds, particularly given the low charges. I would say that I have a low to medium risk tolerance if that is of any help.

There are so many different funds and strategies out there I really don't know where to start. Any advice would be much appreciated.

Thanks in advance.

Best answers:

• Sorry but perhaps I didn't make my objective clear. The idea is to have a fund which could bring forward my retirement. For example the Ј20k could be used to retire at 64, live off for a year, and then draw my lgps at 65. Hope this makes sense.
  I do have sufficient cash savings so it's just about making the most of this investment.
  Thanks
• As there are so many funds and strategies out there, as you say, and so many interpretations of 'low to medium risk tolerance', it's pretty difficult to "advise". Still, my opinion:
  If you put Ј50 in a global equities fund tomorrow it is extremely unlikely it will be worth less than Ј50 in twenty years. If you put Ј50 in a global equities fund tomorrow it is extremely unlikely it will be worth less than Ј50 in nineteen years and eleven months. And so on. You could repeat that for many many months. For the first couple of years, you'll have less than Ј1000 out of your eventual many-thousands invested anyway, so it doesn't matter if the value shakes up and down.
  So having a 'normal' risk tolerance (everyone says they only want low or medium risk, until they realise low risk means virtually no returns, so they mean medium risk) you would be completely fine sticking your initial chunks of money into a fund with maybe 80% or more equities in it.
  If all the share in the world halve in price next year or the year after, who cares: your accumulated loss will bounce back at some point and you'll still have 95% of the money to invest over the next 18/19 years because you haven't even earned it yet, let alone lost it on the markets; and you'll be making new Ј50 contributions at lower prices.
  Of course at some point you will reach a tipping point. It's fine saying the Ј50 invested in shares today will be worth no less than Ј50 in 2035; but what about when it's 2034 and you have Ј30,000 invested in shares: can you still say it will be worth no less in 2035? No. So over time (not necessarily as late as 2034, but not as early as 2016) you can move some or all of your money into a lower risk fund to accommodate your 'low to medium' risk concerns.
  Low charges are good. So a fund that allocates your cash across a load of indexes in different parts of the world (like Vanguard Lifestrategy, or Blackrock Consensus, or L&G Multi-index, would be fine for now. Some funds use active management to allocate your cash among different types of assets and different parts of the world, and cost a bit more. But if their track record is good over the last 15 years then they will probably be fine over the next 15 too. I would go for something with a relatively high percentage of equities, because equities have always had the greatest long term returns - but that's personal.
  If you are dripping the cash in, remember that on average, most of your cash is being put in half way through the 15-20 year period, so it won't all have 20 years to go up and down in value before you want it back - rather less. However it does depend whether you are really thinking of definitely wanting the cash back to retire at age 63 or whether you will keep it invested providing an income up to age 93 or beyond. If the latter then you probably don't have to be as prudent about de-risking for a fixed deadline, imho.
  Quote:
• Thanks for that. I think you've just confirmed my thoughts. I would be using the fund to basically live off up until drawing lgps so it wouldn't remain invested. On that basis I would look to move it to a lower risk basis nearer to d day.
  The vanguard one does interest me and I was thinking of doing this as an isa. Where can I find the cheapest way of doing this.
  Kind regards.
• If you do a search on this forum for 'compare fund platforms' there are a whole load of different comparison tools.
  You just need to find one that charges percentage-based annual fees (i.e. cheap when your holdings are small) and that are good for an initial contribution of zero and monthly. Once a monthly feed is set up it needs zero maintenance so you don't need to pay big fees for bells and whistles
• Bowlhead99 gets my vote for Prime Minister.
  An excellent, clear and concise answer without too much jargon or confusion. Nicely balanced.
  Low risk = low returns (and probably not enough to keep pace with inflation which devalues each pound saved over time).
  Given the timescale involved, investing in the markets would seem like the sensible choice as long as you can stand seeing the pot diminish at some undefined point in the future knowing that it will rise back up again. As you get nearer to needing the money you can gradually rebalance to reduce your exposure to the market's volatilities by moving to cash/bonds.
• Instead of an ISA you could consider a Personal Pension and thus gain tax relief on your payments in at your marginal rate.
  Assuming you are a standard rate taxpayer HMRC will make up your Ј600 pa contribution to Ј800 for you, and then (assuming rules are the same) you can take out 25% tax free once (at 57/58+) with the remainder taxed as you draw it.
  If that will be your only income for that last year or so before the LGPS pays out you could pay no tax by keeping the "income" part below your tax allowance.
  Downside of this approach is that you cannot access it until late 50s so can't use it as an "emergency fund" but it sounds like you have that covered already.
• Hi,
  Thanks for the help so far. I've had a look around the charges aspect but I've found it a little confusing so far. Can anyone explain in simplistic terms which broker offers the lowest charges for this type of investment strategy.
  Thanks.
• I've seen https://www.comparefundplatforms.com recommended as somewhere you can enter your data and find the cheapest provider. I've not used it in anger myself, but played with it a few months ago and it looked good.
• Board member Snowman created this spreadsheet to compare platforms https://forums.moneysavingexpert.com/...9&postcount=15
• The monevator blog carries a recent comparison of SIPP providers. Be sure to read the comments thread. Myself I'd be tempted to put the monthly money into a regular saver or high-interest current account, and then invest it in a pension once a year. That'd keep charges down.
  P.S. My own modest SIPP is with Hargreaves Lansdown,with whom I'm perfectly happy. But if you don't want all the features of a SIPP you can probably find a Personal Pension that's cheaper.
• It seems that the best you could hope for at 65 as a cash investment is 12-20K. Not a lot to get excited about.
  As you have an index linked income to look forward to with your LGPS, why not go for a gold sovereign every four months. CGT, and VAT free to boot.
  You would have little, or no chance, of losing your spending power when you get to 65.
  I've always viewed gold as a safe bet over 5+ years of drip feeding. Been that way for Digger Mansions, should be for you as well.
  ..._