Investment & Investing

I've used premium bonds for a few months of cash stashing. The effective rate (1%) is low, but the gambling element is fun.

It takes up to a month to cash in Premium Bonds, so it's not so "emergency".

[EDIT] Ah, they seem to have sped this up, looks like a couple of working days now.

For example, after 8pm on a Friday and the money will be in your account on the following Wednesday.

Yep^^ Any gain you make on stuff ‘inside’ a pension is tax free until you withdraw / use the pension.

Stuff outside that I sell and make money on, then pay the proceeds in to a pension will still be CGT taxed before it goes in. Unless it’s a watch or something stupid.

Nah we’re on the same page - this is as I assumed. I hadn’t seen that Reddit before so will take a look through that plus speak with an IFA. Was avoiding getting dragged into the golf club chat hence being a little unclear. Cheers all!

Not mad, no. It's safe, it's all manageable online and paper free if that's your bag, you can set prizes up to auto-reinvest to grow your hoard. As others have said it's not instant access. Takes a few working days so you'd be wise to keep some cash instantly available.

Plus you could win a million... In reality you can expect the equivalent of a low (1%) interest rate.

For those who like there investment tips obscure
https://twitter.com/michaeljburry/status/1357857106959863809

If anyone is still interested in GameStop

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Vanguard S&S opened, although just in cash for now. Undecided as a beginner whether to go with Lifestrategy 80 or 100, inclined to say the former even though at 32 that I'm in it for the long haul...

LifeStrategy is the sort of thing you'd normally hold in a SIPP, where you'd expect it to start at 80 or 100% and gradually trade down to safer/more cautious stuff and eventually cash as retirement approaches.
Actually, I see they have Target Retirement 20xx funds specifically for that.

If I didn't already have something like that in a SIPP, I'd probably go for either one of those first.

For long-term growth since I already have the pension in place, I'd pick the lowest-fee (OCF) fund with the highest risk. The fees are what eat your net returns, and the risk generally means the price moves around a lot - which is OK so long as you won't need to sell at a low point.

This isn't advice, obviously, because I'm not qualified and your risk appetite will be different to mine.

^sound advice. it all depends on what you are saving the money for/how long you intend to keep it locked up. that should guide investment choice

What's the reasoning behind a low fee fund? I made some very back-of-napkin-research on Swedish funds and the low fee ones are pretty shit compared to the high fee ones. As in 15-25% up in 2020 for a low fee, or 40-60% with a high fee. Again, very amateur and quick research, but still.

Surely the higher fee (1.5% vs 0.2% or so) is well worth it?

Thanks both; started with £500 in LS100 for now as a starter, then drip-feed a few hundred in a month and take it from there if I want to spread out a little bit.

Also just noticed that Marcus have opened up their savings accounts again, even if interest rates are on the floor it's probably time to put somewhere as an emergency fund; going to put 2 months in for now, and then top up the remainder over the year...

Think the reasoning is:

• trackers tend to outperform active funds on average (although more risk - trackers can never be super above average performers by definition)
  
• on average it therefore means fees affect returns more than which fund - although that's a bit of an oversimplification as some active funds might outperform.
  
  

Tldr: if it's a tracker then only fees matter as there's no skill, pick the cheapest that'll track the market; if it's an active then on average fees still matter because average returns aren't better, but maybe you think you can pick a winner and get outsized returns that will dwarf the fee (but odds are against you)

The returns completely depends on what's in the fund. If you believe the high-fee (actively managed?) funds are going to beat the indexes by 25% every year then yes it's worth it I suppose but the evidence suggests they won't

Interesting points, thanks. Need to read up more about these things

Here you go: the Wikipedia page on Index funds has some links to the underlying research. The first one was started by John Bogle and turned into Vanguard.

You can always find at least one active fund that's recently done better than a given index - the problems are

• that your odds of identifying which one is likely to do better in the future are not great,
  
• that it's hard to tell when your outperforming fund has started underperforming before it wipes out most of the gains,
  
• that even if you can figure all that out, you still have to actively manage trading in and out of these active funds at the right time
  
  

so it comes back to stock picking and market timing, which are known to be difficult problems.

Just to add for a complete idiot like me, I've found Damien Talks Money on Youtube to be quite helpful into breaking things down and a lot easier to understand

Great to get some links to more reading, need to get my head around this properly I think. I've put my whole (but very, very, humble) pension into a single fund. It's been one of the best performers steadily over the last 5 years and over the last 12 months I'm up a fair chunk. My reasoning is that I can accept a higher risk to kick start my savings. If I lose a year or two so be it, I'm so far behind anyway.

I understand that it won't last forever so I'm checking it daily and also comparing it with other funds. There's been a few weeks where others have been better but they seem to come and go, none sticks around in the top 5/10 like mine does.

We'll see though. I might be properly fucked when I'm 65 but hopefully not.

tl;dr

A good investment returns inflation beating returns year on year on year until you cash out with low costs of entry, ownership and exit (both in terms of your money and your time).

Big generalisation but actively managed funds tend to not meet these requirements because they are expensive to own, hard to research and choose and their lifetime returns (i.e. the sum of all their returns from inception to close) tend to be lower than trackers albeit with a whooping great spike somewhere where a few early adopters get rich / do very well.

(also performance this / last year is a terrible lens through which to assess overall performance and value for a few boring reasons)

tl;dr if you can find a cheap investment that returns 10% a year for the next 40 years after costs, that's the one you should go for. It's unlikely to be an actively managed fund.

My research is as simple as checking a comparison site and compare fund performance over

• 1 week
  
• 1 month
  
• 3 months
  
• 1 year
  
• 3 years
  
• 5+ years
  
  

The one I've picked is in the top 10 on all those when compared to all managed funds from a major Swedish bank. Comparing it to the best performing index funds over the last 5 years (oldest data I can easily find) it's been steadily better and skyrocketed over the last 12-18 months.

As I'm new to this I'd be surprised if I'm not in the wrong, but this is what a few hours of reasearch has shown. Of course it's a gamble, but a tech fund that's been doing well over the last 5 years still feels fairly safe. I bet I'll eat my words though.

if you are all in on tech you may want to read up on the importance of diversification.
This is a pension fund, it's there for the long haul. Just get a cheap whole market tracker, drip feed, and forget about it.

This is all part of my plan, but for now, year 2 of my investment career, I'm going all in on high performance funds. Win or lose, it'll be revised in a year or so once I have some more monies in there.

This is a good blog on how to decide investment strategy, how to choose index funds, etc.
I used it a bit when I was doing those things a few years ago and what I learned from it has mostly stood the test of time.

https://monevator.com/

Yep, read a lot of Monevator's posts for a few months before starting to invest in Vanguard's LifeStrategy offering this time last year. The Escape Artist was another one.

There's lots of sites out there off the back of the FIRE movement, we found those two helpful at explaining things pretty simply with some good discussions underneath their posts too.

I'm going all in on high performance funds.

Crypto, weed, tech, clean energy... #YOLO