Reply to: What to do with £10k?

[lukemg]

I am guilty of some of these too. I can understand the attraction, I enjoy the excitement and ascribe skill rather than luck to some of the successes but as stated, when I do a proper analysis of if I had just invested the same amounts in a general index fund on the same dates, across the lot it is virtually identical to if I had just bought more of an all-share index (which is still a good result !)
It won't stop me buying more tho, cos I am interested and I like it BUT. I have also been shifting to lowest cost Index funds from actively managed. aim is 60% index, 30% active + individual shares and 10% fixed interest of some description (if I can find one, bonds seem to be shot to bits currently).
This would still be considered a very high risk strategy (many advocate 60% equity 40% fixed interest !)
But I offset this with cash holdings and housing asset (equity in house value) to give a more balanced view across my whole estate.
GLA

[lukemg]

Have a look at this from seeking alpha article

• In aggregate, individual investors underperform standard benchmarks (such as low cost index funds) even before costs — when they trade they are exploited by institutional investors — or taxes. Similar results are reported for individual investors in other countries.
•There is a wide dispersion of results among individual investors. However, even the best traders have a hard time covering costs. .
•They tend to hold undiversified stock portfolios, overweighting stocks of their employers and those who are located close to where they live, resulting in unnecessary levels of idiosyncratic (and thus uncompensated) risk.
One of the more interesting findings is that men trade more than women — the annual turnover rates of men are about 80 percent, while those of women are 50 percent. The excessive trading of men leads to poor returns. While both men and women earn poor returns, men perform worse. Virtually all of the gender-based difference in performance is due to the aggressive trending can by men —neither men nor women appear to have stock selection ability.

Why do investors with portfolios of individual equities trade actively when doing so lowers their expected returns?
Among the answers are:
•They are overconfident of their skills — an all-too-human trait that is well documented.
•Trading is entertainment and appeals to people who enjoy sensation-seeking activities such as gambling.
•They are unaware of how badly there are doing.

The authors of the study “Positive Illusions and Forecasting Errors in Mutual Fund Investment Decisions,” found that most participants had consistently overestimated both the future performance and past performance of their investments. In fact, more than a third who believed that they had beaten the market had actually underperformed by at least 5 percent, and at least a fourth lagged by at least 15 percent.
The authors of the study “Why Inexperienced Investors Do Not Learn: They Don't Know Their Past Portfolio Performance” found:
•Investors are unable to give a correct estimate of their own past portfolio performance. The correlation coefficient between return estimates and realized returns was not distinguishable from zero.
•People overrate themselves. Only 30 percent considered themselves to be average. Investors overestimated their own performance by an astounding 11.5 percent a year. And portfolio performance was negatively related with the absolute difference between return estimates and realized returns — the lower the returns, the worse investors were when judging their realized returns. It seems likely that investors are unable to admit how badly they have done. While just 5 percent believed they had experienced negative returns, the reality was that 25 percent did so.
•On average investors underperformed relevant benchmarks. For example, while the arithmetic average monthly return of the benchmark was 2.0 percent, the mean gross monthly return of investors was just 0.5 percent. And over 75 percent of investors underperformed.

[Zero Liability]

If you can build a portfolio of under-valued, solid companies which have good future growth prospects, you'll do well in all likelihood. I would also diversify with commodities (e.g. the Rogers International Commodities Index) and property (maybe REITs), however.

[Unix]

Wow, Motley Fool brings back memories. Dad used to use it when it before ADSL, I guess in the 90s. Is it as good/the same as it used to be?

I used to read MF, it boiled down to this..over the long term the stock market returns @ 12% a year so invest in an index tracker and keep adding to every month. If you did from when you were 18 every month, by the time you were 50 you would be rich due to compound interest.

[lukemg]

So do you buy per month, per week or per day? Also do these funds provide dividends, or is it purely capital growth over time?

You dont need the return currently so I always use the Accumulate funds which uses any dividends to buy more units to 'compound' your returns.
Monthly is fine and easy to setup as you can do this automatically with HL, you give them the amounts and which fund/funds it goes to and they take it from the account you specify, standing order style. From 50/month per fund.
More complicated with individual shares as you have to pay per purchase + stamp duty so have to do it yourself.
Next year S&S ISA allowance equates to 980/month which will soon burn through the 10k. Personally I would chuck that 10k in before April (spilt in monthly chunks - PCA). Then top up monthly from April using next years allowance, as much as you can live without (dont forget the YOU CANT TOUCH IT BIT, this is not for emergency funds).
Motley Fool is great for general guidance and I hear good things about the share advisor but I would caution all people who are just starting out that you haven't got a clue and a foundation of a diverse LOW COST fund will probably suit you better even if you then expand to some small percents in individual shares later to keep it 'interesting'.
My holdings are very varied and diverse but most of the extra effort and complication has NOT produced a meaningful amount over what a general fund would even if I have kidded my self over time/shorter time periods that it has/would. When I do a close backtest of amount invested against if I had just put it in a fund at that time, it is coming out fairly level with the UK all-share returns. some are ahead, some behind but close overall. I use this to check and remember its a 5 yr decision you are making so winning for a month matters not.
Chart Tool | FE Trustnet

[d000hg]

Wow, Motley Fool brings back memories. Dad used to use it when it before ADSL, I guess in the 90s. Is it as good/the same as it used to be?

[CheeseSlice]

Read The Motley Fool instead, go for a Dividend portfolio of blue chips in diverse sectors and look at it every 6 months.

Motley Fool Share Advisor is good if you just want share recommendations and when to sell without having to do the detailed analysis. Costs money but I've tried this and have beaten the FTSE 100 quite nicely with a stocks and shares ISA. Weekly guidance. With £10k you could do up to say 10 companies for balance.

[BigRed]

I've been reading Hargreaves Lansdown's Investment News a lot recently and I tend to feel a bit bewildered each time.

Read The Motley Fool instead, go for a Dividend portfolio of blue chips in diverse sectors and look at it every 6 months.

[b0redom]

UK Investment advice for an absolute beginner.

Vanguard LifeStrategy funds turn passive investing catatonic

Couple of links worth looking at for investing newbies.
Trouble is, if you haven't got a clue, you end up chasing last years winners/expensive managed funds/bottling it when it dips/poor diversification.
You could do a lot worse than the lifestrategy fund illustrated, it is a total low-fee global solution from the biggest investment firm on the planet.
Some areas will do better and worse each year but this will cover most of the options and re-balance the allocation automatically.
You only need to fire and forget, preference would be to setup a monthy contribution to use PCA and keep you disciplined (you will make the wrong decisions otherwise, virtually everyone does)
BUT - Only do this if you can hold your nerve and let it ride for AT LEAST 5 years, preferably 10, trust me, it will be the best financial decision you make....
DO NOT SELL UP IF IT DIPS EVEN BY A CONSIDERABLE PERCENTAGE.
GLA

So do you buy per month, per week or per day? Also do these funds provide dividends, or is it purely capital growth over time?

[TheCyclingProgrammer]

I don't think I have ever said this, but I agree with d000hg. £500 is a very good incentive for me to take my full annual dividend in one go.

£400 after tax (or £300 if you're on the higher rate)

And that was a back of a napkin calculation. It's probably less once you factor in that you're going to be withdrawing money from the savings account on a semi-regular basis.

[lukemg]

UK Investment advice for an absolute beginner.

Vanguard LifeStrategy funds turn passive investing catatonic

Couple of links worth looking at for investing newbies.
Trouble is, if you haven't got a clue, you end up chasing last years winners/expensive managed funds/bottling it when it dips/poor diversification.
You could do a lot worse than the lifestrategy fund illustrated, it is a total low-fee global solution from the biggest investment firm on the planet.
Some areas will do better and worse each year but this will cover most of the options and re-balance the allocation automatically.
You only need to fire and forget, preference would be to setup a monthy contribution to use PCA and keep you disciplined (you will make the wrong decisions otherwise, virtually everyone does)
BUT - Only do this if you can hold your nerve and let it ride for AT LEAST 5 years, preferably 10, trust me, it will be the best financial decision you make....
DO NOT SELL UP IF IT DIPS EVEN BY A CONSIDERABLE PERCENTAGE.
GLA

[RedSauce]

£500 seems like a non-trivial sum to me. That could buy you a PS4 or an iPad or a weekend in a 5* hotel.

I don't think I have ever said this, but I agree with d000hg. £500 is a very good incentive for me to take my full annual dividend in one go.

[d000hg]

£500 seems like a non-trivial sum to me. That could buy you a PS4 or an iPad or a weekend in a 5* hotel.

[TheCyclingProgrammer]

Why are people still taking div's this late in the year? Don't many of you divi the full wack first month in and then put it somewhere to earn a percent or two more than the business account?

I pay dividends quarterly. I could do one at the beginning of the year (more than enough retained profit in the co. account) but what's the point, when most savings accounts are less than 2%? We're talking about about £500 in interest at most (before tax).

[Gittins Gal]

I was in a similar position with this years ISA allowance, I split it over 2 funds and one has done really well (Old Mutual smaller UK companies), the other is an emerging market fund which has been less successful but still moderate growth.

I may look into that. Thanks for the gen - what sort of growth are you getting?