The Money Thread...

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Jenuall
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PostRe: The Money Thread...
by Jenuall » Wed Nov 25, 2020 12:58 pm

I've been surprised at how well my pension has held up in what has been a pretty volatile year. I'd moved most of it out of the default investment option that our company scheme uses a few years ago and stuck a bunch of it into some higher risk funds so was concerned that it would have taken a bit of a hit over the last year but it seems to be mostly on track with where I had expected it to be now. Most of what I was invested in seemed to bounce back pretty quickly after a (major!) dip in March/April

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PostRe: The Money Thread...
by Dual » Wed Nov 25, 2020 12:59 pm

Watch those stonks go up

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PostRe: The Money Thread...
by Oblomov Boblomov » Wed Nov 25, 2020 1:07 pm

Grumpy David wrote:
Oblomov Boblomov wrote:Does stock investment ever actually end, or is it just a perpetually swinging state ranging from panic to glee and back again?


On an individual level? Yes, as you use your working life to pay in and use your retirement to have it pay out. To reduce the wild swings you'd normally look to have a higher percentage in bonds and a lower percentage in shares by the time you're looking to retire. Most default workplace pension funds offer this as the default investment option but I prefer being 100% in the stock market at my age.

And at least with passive index trackers (which I stick to) you generally don't have super wild swings either way due to how heavily diversified they are in sheer numbers of companies, geographical locations and that they are therefore also diversified in business sectors too. This year has been an exceptional volatile year of course!

Individual stock picking is more prone to the terrifying roller-coaster ride. Especially if using leverage and doing meme investments:




So it is essentially a mechanism in pursuit of an early retirement. Fair enough. Until then, enjoy the drama as the pendulum swings!

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PostRe: The Money Thread...
by Skarjo » Wed Nov 25, 2020 3:29 pm

Hey what are Mexican cartels like as investment vehicles?

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PostRe: The Money Thread...
by Oblomov Boblomov » Wed Nov 25, 2020 4:16 pm

Skarjo wrote:Hey what are Mexican cartels like as investment vehicles?

I knew we'd steer you back onto the straight and narrow :wub:.

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PostRe: The Money Thread...
by Skarjo » Wed Nov 25, 2020 4:17 pm

You joke but it was suggested by my HSBC relationship manager.

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PostRe: The Money Thread...
by Tomous » Mon Nov 30, 2020 7:50 am

Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!

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PostRe: The Money Thread...
by Grumpy David » Mon Nov 30, 2020 9:19 am

Tomous wrote:Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!


Lifetime ISAs will give you a 25% bonus so the 4k becomes 5k.

HR tax relief is 40% so putting 4k in becomes £6,666.

If your work offers Salary Sacrifice for the pension method rather than the pension contribution showing in your deduction column of your payslip then you also avoid paying NI on it too and student loan payments if you have one. So you get an effective rate of 51% (assuming student loan plan 1).

If the payment into the pension is showing in the deductions column then you need to contact HMRC as HR relied is not automatically applied to it.

1 interesting idea I've heard of is essentially double dipping. Do the lifetime ISA until you can withdraw the funds and then put that into the SIPP in your 60s. I've not been able to confirm if this is allowed but I would expect this loophole to be closed and treated like "pension recycling" if it is allowed. And HR tax relief could be eliminated by the time you're old enough to withdraw from the lifetime ISA so it has risks to it.

I've decided to hold off on the lifetime ISA being used as a retirement vehicle because salary sacrifice on the pension is so much more tax efficient.

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PostRe: The Money Thread...
by Dual » Mon Nov 30, 2020 9:40 am

Tomous wrote:Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!


You started a Halifax Regular Saving account for the baby? It's 4% on £100 p/month!

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PostRe: The Money Thread...
by Tomous » Mon Nov 30, 2020 9:40 am

Grumpy David wrote:
Tomous wrote:Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!


Lifetime ISAs will give you a 25% bonus so the 4k becomes 5k.

HR tax relief is 40% so putting 4k in becomes £6,666.

If your work offers Salary Sacrifice for the pension method rather than the pension contribution showing in your deduction column of your payslip then you also avoid paying NI on it too and student loan payments if you have one. So you get an effective rate of 51% (assuming student loan plan 1).

If the payment into the pension is showing in the deductions column then you need to contact HMRC as HR relied is not automatically applied to it.

1 interesting idea I've heard of is essentially double dipping. Do the lifetime ISA until you can withdraw the funds and then put that into the SIPP in your 60s. I've not been able to confirm if this is allowed but I would expect this loophole to be closed and treated like "pension recycling" if it is allowed. And HR tax relief could be eliminated by the time you're old enough to withdraw from the lifetime ISA so it has risks to it.

I've decided to hold off on the lifetime ISA being used as a retirement vehicle because salary sacrifice on the pension is so much more tax efficient.



I am actually starting a new job in Feb where they are matching 5% against my 5% contributions. So, if they offer SS I should look to invest more from my payslip via that, and if not set up a SIIP?

And then, I understand you get £20k stocks and share ISA allowance a year-if we want to get money in index funds should we be doing it via that?


Thank you, always a huge help :wub:

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PostRe: The Money Thread...
by Tomous » Mon Nov 30, 2020 9:41 am

Dual wrote:
Tomous wrote:Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!


You started a Halifax Regular Saving account for the baby? It's 4% on £100 p/month!



Ah yes, we were going to do that, just had to register his birth first which I've finally just done. Thanks for the reminder :D

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PostRe: The Money Thread...
by Grumpy David » Mon Nov 30, 2020 9:49 am

Tomous wrote:
Grumpy David wrote:
Tomous wrote:Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!


Lifetime ISAs will give you a 25% bonus so the 4k becomes 5k.

HR tax relief is 40% so putting 4k in becomes £6,666.

If your work offers Salary Sacrifice for the pension method rather than the pension contribution showing in your deduction column of your payslip then you also avoid paying NI on it too and student loan payments if you have one. So you get an effective rate of 51% (assuming student loan plan 1).

If the payment into the pension is showing in the deductions column then you need to contact HMRC as HR relied is not automatically applied to it.

1 interesting idea I've heard of is essentially double dipping. Do the lifetime ISA until you can withdraw the funds and then put that into the SIPP in your 60s. I've not been able to confirm if this is allowed but I would expect this loophole to be closed and treated like "pension recycling" if it is allowed. And HR tax relief could be eliminated by the time you're old enough to withdraw from the lifetime ISA so it has risks to it.

I've decided to hold off on the lifetime ISA being used as a retirement vehicle because salary sacrifice on the pension is so much more tax efficient.



I am actually starting a new job in Feb where they are matching 5% against my 5% contributions. So, if they offer SS I should look to invest more from my payslip via that, and if not set up a SIIP?

And then, I understand you get £20k stocks and share ISA allowance a year-if we want to get money in index funds should we be doing it via that?


Thank you, always a huge help :wub:


Yes, if they offer salary sacrifice, it's easily the most tax efficient return on investment. Even if you sacrifice enough to bring you below 50k then you'll still get a 32% return so it beats the LISA.

I set up a SIPP even whilst doing SS since I periodically transfer the workplace balance to the SIPP (due to lower fees).

Yeah, I use an ISA for investments rather than the lifetime ISA because I suspect I'll likely want access long before the age of 60.

JISAs might be worthwhile too if you plan to fill your ISA allowance each year. A SIPP can also be set up for a new born baby too. You can put £2880 in there and it'll become £3600 with tax relief. The compound interest of 60+ years of stock market returns. :datass:

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PostRe: The Money Thread...
by Kezzer » Wed Jan 27, 2021 11:52 am

Grumpy David wrote:
Kezzer wrote:I have a few funds that I put money into, but I do have a small lump of cash in a bank account that I just have no idea what to do with - I always seem to be in the wrong place at the wrong time in regards to being able to drop some of it. Maybe that is the research part, but even then where do you start the research??


The money thread is probably better for advice on this rather than the meme based portfolios consisting of Bitcoin, Tesla, Palantir, Gamestop etc being discussed in Bitcoin thread.

Day trading is a good way to lose a lot of money.

What's your goal of the money?

Why did you choose the current funds you invested in?

What timeline do you envisage needing to take the money out?

I don't have time to find the needle in the haystack so I just buy the haystack i.e. Index trackers.


Bringing the discussion in here. (Thanks!)


I have short term goals and long term goals.

Short term, I want to build up a deposit for a house and for a car (which is going slowly)
Long term, I want to be able to pad out my income a bit or alternately just have a batter interest rate than my bank.

Jenuall wrote:I probably should get more savvy about what I do with my short-mid term savings. I pay quite a bit of attention to my pension and try to make sure that is showing decent growth but anything more short term I either just stick in an ISA or buy shares in the company that I work for which has done okay for me so far.



I am the same, but I just see missed opportunities and thank "Damn, I could really have done with that"

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PostRe: The Money Thread...
by Grumpy David » Wed Jan 27, 2021 1:22 pm

Kezzer wrote:
Grumpy David wrote:
Kezzer wrote:I have a few funds that I put money into, but I do have a small lump of cash in a bank account that I just have no idea what to do with - I always seem to be in the wrong place at the wrong time in regards to being able to drop some of it. Maybe that is the research part, but even then where do you start the research??


The money thread is probably better for advice on this rather than the meme based portfolios consisting of Bitcoin, Tesla, Palantir, Gamestop etc being discussed in Bitcoin thread.

Day trading is a good way to lose a lot of money.

What's your goal of the money?

Why did you choose the current funds you invested in?

What timeline do you envisage needing to take the money out?

I don't have time to find the needle in the haystack so I just buy the haystack i.e. Index trackers.


Bringing the discussion in here. (Thanks!)


I have short term goals and long term goals.

Short term, I want to build up a deposit for a house and for a car (which is going slowly)
Long term, I want to be able to pad out my income a bit or alternately just have a batter interest rate than my bank.

Jenuall wrote:I probably should get more savvy about what I do with my short-mid term savings. I pay quite a bit of attention to my pension and try to make sure that is showing decent growth but anything more short term I either just stick in an ISA or buy shares in the company that I work for which has done okay for me so far.



I am the same, but I just see missed opportunities and thank "Damn, I could really have done with that"


The flowchart from /r/UKPersonalFinance is well worth looking over:

https://flowchart.ukpersonal.finance/

General consensus is short term savings aren't suitable for being used in investments. A Lifetime ISA should be the first product to use if saving up to buy your own home. Once you've maxed out the 4k limit for the tax year, then other cash savings would be next.

Cash savings offer such miserable interest rates that I just use Premium Bonds instead. Might as well gamble the interest into a raffle ticket system.

Relying on investments for a passive source of income is a very long term goal. The assumption is that in a globally diversified portfolio, you can take out 4% per year from the investment and the average growth will exceed this percentage in the long run. But even assuming your annual outgoings amount to £20,000 then that's £500,000 you'd want invested.

It's very easy to get FOMO when seeing these meme based portfolios sky rocketing (to the moon!), but if you look at say Trading212, they say 76% of their users doing CFD investments lose money. There's far more incentive to share screenshots of crazy gains rather than the terrifying lows although there's plenty of people still sharing their losses over on wall street bets.

If doing meme based investing, it really ought to be using non essential money and after doing the boring things (having no credit card debt, maxing out the lifetime ISA etc). It's money you need to be prepared to accept might dramatically reduce in value. Often a 10% cap is advised e.g. If you have £10,000 saved, then no more than £1,000 should be used in these super speculative "fun" investments, everyone's risk tolerance is different though. If due to WFH and lockdown you're saving a significant amount of money then it's easier to do meme investing which is probably why it's happening in the first place. Lots of people have far more leftover earnings currently and these trading apps are examples of gamification making it "fun".

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PostRe: The Money Thread...
by Tomous » Wed Jan 27, 2021 1:39 pm

Gotta be honest, the way you keep calling it meme investing has made me realise I dont need to do this yet

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PostRe: The Money Thread...
by Jenuall » Wed Jan 27, 2021 1:42 pm

:lol:

I think the key is in the point about "non essential money". Do all of the sensible savings things that are not necessarily exciting or likely to rake the returns in but are reliable. If there's anything left after that then as an individual you can decided whether you want to chance any of that on the possibility of sticking it in a riskier investment that might pay off

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PostRe: The Money Thread...
by Kezzer » Wed Jan 27, 2021 4:13 pm

Grumpy David wrote:
Kezzer wrote:
Grumpy David wrote:
Kezzer wrote:I have a few funds that I put money into, but I do have a small lump of cash in a bank account that I just have no idea what to do with - I always seem to be in the wrong place at the wrong time in regards to being able to drop some of it. Maybe that is the research part, but even then where do you start the research??


The money thread is probably better for advice on this rather than the meme based portfolios consisting of Bitcoin, Tesla, Palantir, Gamestop etc being discussed in Bitcoin thread.

Day trading is a good way to lose a lot of money.

What's your goal of the money?

Why did you choose the current funds you invested in?

What timeline do you envisage needing to take the money out?

I don't have time to find the needle in the haystack so I just buy the haystack i.e. Index trackers.


Bringing the discussion in here. (Thanks!)


I have short term goals and long term goals.

Short term, I want to build up a deposit for a house and for a car (which is going slowly)
Long term, I want to be able to pad out my income a bit or alternately just have a batter interest rate than my bank.

Jenuall wrote:I probably should get more savvy about what I do with my short-mid term savings. I pay quite a bit of attention to my pension and try to make sure that is showing decent growth but anything more short term I either just stick in an ISA or buy shares in the company that I work for which has done okay for me so far.



I am the same, but I just see missed opportunities and thank "Damn, I could really have done with that"


The flowchart from /r/UKPersonalFinance is well worth looking over:

https://flowchart.ukpersonal.finance/

General consensus is short term savings aren't suitable for being used in investments. A Lifetime ISA should be the first product to use if saving up to buy your own home. Once you've maxed out the 4k limit for the tax year, then other cash savings would be next.

Cash savings offer such miserable interest rates that I just use Premium Bonds instead. Might as well gamble the interest into a raffle ticket system.

Relying on investments for a passive source of income is a very long term goal. The assumption is that in a globally diversified portfolio, you can take out 4% per year from the investment and the average growth will exceed this percentage in the long run. But even assuming your annual outgoings amount to £20,000 then that's £500,000 you'd want invested.

It's very easy to get FOMO when seeing these meme based portfolios sky rocketing (to the moon!), but if you look at say Trading212, they say 76% of their users doing CFD investments lose money. There's far more incentive to share screenshots of crazy gains rather than the terrifying lows although there's plenty of people still sharing their losses over on wall street bets.

If doing meme based investing, it really ought to be using non essential money and after doing the boring things (having no credit card debt, maxing out the lifetime ISA etc). It's money you need to be prepared to accept might dramatically reduce in value. Often a 10% cap is advised e.g. If you have £10,000 saved, then no more than £1,000 should be used in these super speculative "fun" investments, everyone's risk tolerance is different though. If due to WFH and lockdown you're saving a significant amount of money then it's easier to do meme investing which is probably why it's happening in the first place. Lots of people have far more leftover earnings currently and these trading apps are examples of gamification making it "fun".



That flow chart is useful! I think the only thing I am missing out on is the Lifetime ISA - my thoughts being that it prefer to have the 'cash' ready for a house deposit as I see that as materialising in the next 2 years. (that being said I am still putting money into my help to buy - if that is even worth anything... who knows)

This post is exempt from the No Context Thread.

Tomous wrote:Tell him to take his fake reality out of your virtual reality and strawberry float off


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PostRe: The Money Thread...
by That's not a growth » Wed Jan 27, 2021 4:43 pm

Most help to buy isa's have slashed their interest rates. I'm lucky that mine isn't one of them to do this so far, and it's still at around 3%, but I'm sure virgin will fix that once they finish replacing their credit card website with an app to spite everyone.

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PostRe: The Money Thread...
by Kezzer » Wed Jan 27, 2021 4:53 pm

That's not a growth wrote:Most help to buy isa's have slashed their interest rates. I'm lucky that mine isn't one of them to do this so far, and it's still at around 3%, but I'm sure virgin will fix that once they finish replacing their credit card website with an app to spite everyone.


Yeah the interest rate is garbage, but the government still pay in though at the end right? (hahahaha)

This post is exempt from the No Context Thread.

Tomous wrote:Tell him to take his fake reality out of your virtual reality and strawberry float off


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PostRe: The Money Thread...
by Jenuall » Wed Jan 27, 2021 4:56 pm

Not entirely convinced by the ordering of steps 1 and 2 on that flowchart, feels to me like ensuring you are bought into a work pensions scheme should come before (or at least alongside) building up the small emergency fund. 1-3 months of outgoings can take a long time for people to save and that is potential quite a bit of lost time where pension contributions could be growing.


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