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Novice Question

Investment discussion for beginners. Why you should invest your money, get help getting started
NotSoSupernova
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Re: Novice Question

#311150

Postby NotSoSupernova » May 22nd, 2020, 5:43 pm

Hi Lemons,

Sorry to hijack this thread but I too have a novice question and I didn't want to start a new topic every time I have a question.

I don't know correct terminology so forgive me for being simplistic. I'm trying to build a pot of money (I don't have much to start with so I'm thinking of this phase as capital generation), I'm happy to be using more risky options for 10-20 years or so and then settle down to holding a more sensible portfolio and generate more stable returns later on.

It occurs to me that there's a wealth of knowledge on here that I would do well to listen to given the chance. Is there anything I should stay well away from? I figure if there are things like that then at the other end of the spectrum there will be better things to get invloved with. While I understand that there will be no "best" way to go about this, how would you go about it if you were in my position?

Alaric
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Re: Novice Question

#311157

Postby Alaric » May 22nd, 2020, 6:07 pm

NotSoSupernova wrote: Is there anything I should stay well away from?


Anything that promises rapid riches from a single type of investment. Jojoba plantations, carbon credits, container leasing, that sort of thing. Bonds offering 10% supposedly with guarantees perhaps. For that matter, putting money into a single Company or just a handful can be a double or quit type of investment. Probably steering clear of currency trading or Contracts for Differences is wise.

Perhaps jot down in this thread what you might be considering.

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Re: Novice Question

#311162

Postby dealtn » May 22nd, 2020, 6:16 pm

NotSoSupernova wrote: how would you go about it if you were in my position?


What's your risk appetite? Could you handle losing 50% of your money?

Best time to find out is when you are starting out, and have little to lose.

NotSoSupernova
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Re: Novice Question

#311163

Postby NotSoSupernova » May 22nd, 2020, 6:18 pm

Alaric wrote:
NotSoSupernova wrote: Is there anything I should stay well away from?


Perhaps jot down in this thread what you might be considering.


I fear it's nothing as glamorous as you've suggested. I'm thinking more along the lines of small - midcap US based companies with a few of the big boys thrown in just because of their current domination (I can't see Google tailing off any time within the next few months for example). I'm thinking more along the lines of 20-50% per year rather than 200-500%. I realise that those numbers may well end up at -20 and -50% but I'm happy with the risk factor for now.

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Re: Novice Question

#311164

Postby kempiejon » May 22nd, 2020, 6:19 pm

NotSoSupernova wrote:Hi Lemons,

Sorry to hijack this thread but I too have a novice question and I didn't want to start a new topic every time I have a question.

I don't know correct terminology so forgive me for being simplistic. I'm trying to build a pot of money (I don't have much to start with so I'm thinking of this phase as capital generation), I'm happy to be using more risky options for 10-20 years or so and then settle down to holding a more sensible portfolio and generate more stable returns later on.

It occurs to me that there's a wealth of knowledge on here that I would do well to listen to given the chance. Is there anything I should stay well away from? I figure if there are things like that then at the other end of the spectrum there will be better things to get invloved with. While I understand that there will be no "best" way to go about this, how would you go about it if you were in my position?


It has been said that many professionals fail to beat the market. What that market is does vary quite a bit, for UK centric residents the FTSE100 or Allshare are obvious start points but of course there are markets all round the world, Europe, Asia, the US S&P has done well for me and on most metrics has beaten the FTSE100.
I recon equity risk is worth it for the returns but that risk is being demonstrated by recent 30% falls in global stock markets. I'm not sure that moving to "more sensible portfolio" is a good move, find a strategy you like and understand and stick with it. I started buying FTSE100 trackers I now like global trackers but I also buy single shares.

Alaric
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Re: Novice Question

#311213

Postby Alaric » May 22nd, 2020, 8:49 pm

NotSoSupernova wrote: I'm thinking more along the lines of small - midcap US based companies with a few of the big boys thrown in just because of their current domination


Investing in individual Companies outside the UK is regarded as "advanced" investing. One reason being is that you don't really know how they are doing from your day by day experience. Unquoted US Companies have in the past been promoted by fraudsters.

tikunetih
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Re: Novice Question

#311217

Postby tikunetih » May 22nd, 2020, 9:16 pm

NotSoSupernova wrote:I'm happy to be using more risky options for 10-20 years or so and then settle down to holding a more sensible portfolio and generate more stable returns later on.


Something to consider is that while younger your theoretical risk/loss tolerance is greater than someone who's older, since you hopefully have years and years of future earnings to recover using, there can often a gap between this theory and actual practice...

What can happen is that despite reading all the books and blogs, large losses experienced early on in someone's investment lifetime can prove to be a lot more difficult to endure than some expect leading to psychological "damage" that puts them off investing for the rest of their life.

Based on your investing experience to date you may already know for sure that that isn't you, if so all good; but otherwise bear the above in mind until you do have a bit of experience of, for example, suffering and then recovering from the larger setbacks that a more concentrated and riskier portfolio can entail.

Itsallaguess
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Re: Novice Question

#311219

Postby Itsallaguess » May 22nd, 2020, 9:30 pm

NotSoSupernova wrote:
While I understand that there will be no "best" way to go about this, how would you go about it if you were in my position?


One bit of advice that I would perhaps give my younger self would be to ensure that one of your earliest 'decent sum' investments is a simple world tracker, such as VWRL, the Vanguard FTSE All-World ETF -

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucits-etf-usd-distributing

That wouldn't be any sort of advice to say that such an investment will definitely 'do well', but I do think it's very important for someone that's finding their feet with personal-investment to have a clearly-visible 'do-nothing comparison' in their portfolio, so that, no matter what other 'more colourful' strategies you might also wish to investigate, there is always an ongoing +/- tracker figure there, sitting in your investment portfolio, just letting you clearly know what you might be able to achieve by simply 'going broad' and staying invested...

Take your time, and make sure you've always got some powder dry...

Good Luck.

Cheers,

Itsallaguess

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Re: Novice Question

#311226

Postby mc2fool » May 22nd, 2020, 10:09 pm

NotSoSupernova wrote:I'm thinking more along the lines of 20-50% per year rather than 200-500%.

Ahem. You need to adjust your expectations! Even "just" 20% a year would make you the envy of not only every one here but of just about all investors everywhere. 20%pa is what Warren Buffett, often talked of as the world's most successful investor, managed over the long term.

Sure, you may have the odd year where the gain is 20% or more, but over the longer term even 10%pa would be good.

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Re: Novice Question

#311241

Postby JohnB » May 22nd, 2020, 11:17 pm

First thing to do is buy Lars Krojer's book Investing Demystified and decide whether you are active or passive investor. If the latter, consider whether broad brush trackers that follow the FTSE 100 or S&P 500 are good enough. If so you can get them as ETFs with which are cheap (0.1% annual charge) to run and cheap or free to hold. If you want to be an active investor and buy clever stuff, your charges will be much higher, and you need to be confident you have a true 'edge' by applying your specialist knowledge to overcome those charges.

Have a geographical spread. Whether you have bonds depends on your attitude to risk.

Expect to pay between £100 and £200 a year to have a SIPP.

If you are happy to pay £200 and can accept ETFs, HL is a good choice, as it caps the management fees foe ETFs there at that.

Use a different broker for your ISA, and don't buy all your funds from the same provider. In theory all your investments are ring-fenced, but you don't want to be locked out of your money for 6 months in the (very unlikely) failure of a provider or broker

NotSoSupernova
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Re: Novice Question

#311244

Postby NotSoSupernova » May 22nd, 2020, 11:37 pm

mc2fool wrote:Even "just" 20% a year would make you the envy of not only every one here but of just about all investors everywhere. 20%pa is what Warren Buffett, often talked of as the world's most successful investor, managed over the long term.

Sure, you may have the odd year where the gain is 20% or more, but over the longer term even 10%pa would be good.


This is great advise that I'm happy to take onboard. I don't have many people I can talk to in real life about this so my results are based on my limited exposure. My expectations at the moment are based on returns to date (which have been 32% and 18% after charges for the two years I've owed holdings for). I'll gladly adjust that down to 10% if that what the market dictates when I turn more defensive.

Itsallaguess wrote:
One bit of advice that I would perhaps give my younger self would be to ensure that one of your earliest 'decent sum' investments is a simple world tracker, such as VWRL, the Vanguard FTSE All-World ETF -


My world tracker of choice is the following:

https://www.hl.co.uk/funds/fund-discoun ... cumulation

It's less invovled in emerging markets than the Vanguard ETF by the look of it (which I'm interested in becoming more exposed to ironically), but with the low OCF (0.08%) I was under the impression that it may be more sustainable in the long run? I'll be happy to hear your thoughts on the choice though and I like that your words echo what I'd like to work up to.

tikunetih wrote:
What can happen is that despite reading all the books and blogs, large losses experienced early on in someone's investment lifetime can prove to be a lot more difficult to endure than some expect leading to psychological "damage" that puts them off investing for the rest of their life.

Based on your investing experience to date you may already know for sure that that isn't you, if so all good; but otherwise bear the above in mind until you do have a bit of experience of, for example, suffering and then recovering from the larger setbacks that a more concentrated and riskier portfolio can entail.


That's a sensible way to think about it. I've been invovled for a couple of years now (since April 2018), so while I'll admit to not being completely happy to losing almost 20% of my portfolio value, I think (as much as one can guage themselves) that I was comfortable enough to take a measured look at the market with a mind to seeing opportunity. I've now broken even (I'll not go into how I shifted my holdings here) to where I was pre-March and think I'm better prepared to weather a second blip.

I'm am a little bookish (I'm guessing that you can tell that stuff from my question) but I like to take most books on the market as personal advise from the author rather than a map to follow. If only it were that easy...

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Re: Novice Question

#311245

Postby NotSoSupernova » May 22nd, 2020, 11:47 pm

Alaric wrote:Investing in individual Companies outside the UK is regarded as "advanced" investing. One reason being is that you don't really know how they are doing from your day by day experience. Unquoted US Companies have in the past been promoted by fraudsters.


Well I'm certainly not an advanced or even particularly sophisticated invester so I'll take that in the spirit it was said. I do however feel comforatble putting my money on the US market at the moment. I see a lot of the HYP investors talking about SMT at the moment and note that even the James Anderson article recognises the lack of quality available in UK investments at the moment.

One thing I feel confident of is London's ability to stay in the game and while I won't go into politics, I don't feel I'll not stay so lightly exposed to the UK market for long.

NotSoSupernova
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Re: Novice Question

#311247

Postby NotSoSupernova » May 22nd, 2020, 11:59 pm

JohnB wrote:First thing to do is buy Lars Krojer's book Investing Demystified and decide whether you are active or passive investor. If the latter, consider whether broad brush trackers that follow the FTSE 100 or S&P 500 are good enough. If so you can get them as ETFs with which are cheap (0.1% annual charge) to run and cheap or free to hold. If you want to be an active investor and buy clever stuff, your charges will be much higher, and you need to be confident you have a true 'edge' by applying your specialist knowledge to overcome those charges.

Have a geographical spread. Whether you have bonds depends on your attitude to risk.

Expect to pay between £100 and £200 a year to have a SIPP.

If you are happy to pay £200 and can accept ETFs, HL is a good choice, as it caps the management fees foe ETFs there at that.

Use a different broker for your ISA, and don't buy all your funds from the same provider. In theory all your investments are ring-fenced, but you don't want to be locked out of your money for 6 months in the (very unlikely) failure of a provider or broker


Thanks for taking the time to put that down. Investing Demystified is on the list but I'm looking at starting my first business shortly (don't worry, I'm going to wait until the time is right) and the reading list is pretty packed at the moment. Strangely enough, my wife and friends laugh at me for reading about finance and the markets for recreation :D

I solely use an ISA at the moment due to me having enough allowance per year (hopefully not for long!) but I have it spread over 2 brokers. I've very recently sold my full bond allocation to split between my All-World and S&P tracker. I think that probably shows my attitude to risk...

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Re: Novice Question

#311248

Postby kempiejon » May 23rd, 2020, 12:03 am

NotSoSupernova wrote:Hi Lemons,

Sorry to hijack this thread but I too have a novice question and I didn't want to start a new topic every time I have a question.
.
.
.
While I understand that there will be no "best" way to go about this, how would you go about it if you were in my position?


You said you're already invested but as a reminder to other readers other things to consider first are general financial health. Have a cash balance, how much will depend upon personal attitudes, at least enough to cover a major failure, like a roof or a car and enough to get you through a period of interruption to employment, other than a mortgage and perhaps student loans get debt free. Think about any expensive events you might need money for medium term, civill partnership or marriage, property, divorce, healthcare, kids, more kids and their education and other costs. A sipp is a handy place to save for retirement you can defer tax but once in it's stuck there until retirement, ISA savings are easier to get to but an ISA will be less well protected from bankruptcy and would stop you getting many benefits.

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Re: Novice Question

#311291

Postby GoSeigen » May 23rd, 2020, 8:57 am

NotSoSupernova wrote:Hi Lemons,

Sorry to hijack this thread but I too have a novice question and I didn't want to start a new topic every time I have a question.

I don't know correct terminology so forgive me for being simplistic. I'm trying to build a pot of money (I don't have much to start with so I'm thinking of this phase as capital generation), I'm happy to be using more risky options for 10-20 years or so and then settle down to holding a more sensible portfolio and generate more stable returns later on.

It occurs to me that there's a wealth of knowledge on here that I would do well to listen to given the chance. Is there anything I should stay well away from? I figure if there are things like that then at the other end of the spectrum there will be better things to get invloved with. While I understand that there will be no "best" way to go about this, how would you go about it if you were in my position?



How's your maths? Maths is a very useful asset for investing, so if you are not familiar with exponentials/compound interest at least start there. Next, learning about bond pricing will be provide the perfect base for your investing future. Bonds are fundamental to every type of investment: e.g. when you understand bonds you will understand why shares are ALWAYS harder to value and therefore more risky than bonds.

Always bear in mind correlation and try to diversify your investments with uncorrelated assets. Thus for example, if you decide to focus most your portfolios on junk bonds, for example, then you might also have a small allocation of shares, cash and maybe gilts or precious metals. There is always the chance of being wrong on your big calls and then you want the other stuff to be there to save you.

For building positions I try to follow a roughly fibonacci increment (1,1,2,3,5,8...): I start buying far smaller amounts than my final desired allocation and then increase them as time passes and my confidence grows.

That's enough maths for now. I think the most obvious danger to avoid early on is debt and leverage. If you make other mistakes, don't worry, it's part of the learning process and best to accept them and be comfortable with the fact that you'll get things wrong. I recently lost about £15k on a share and I've been doing this for almost 20 years...


Good luck.

GS

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Re: Novice Question

#311312

Postby TUK020 » May 23rd, 2020, 9:53 am

Itsallaguess wrote:
NotSoSupernova wrote:
While I understand that there will be no "best" way to go about this, how would you go about it if you were in my position?


One bit of advice that I would perhaps give my younger self would be to ensure that one of your earliest 'decent sum' investments is a simple world tracker, such as VWRL, the Vanguard FTSE All-World ETF -

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucits-etf-usd-distributing

That wouldn't be any sort of advice to say that such an investment will definitely 'do well', but I do think it's very important for someone that's finding their feet with personal-investment to have a clearly-visible 'do-nothing comparison' in their portfolio, so that, no matter what other 'more colourful' strategies you might also wish to investigate, there is always an ongoing +/- tracker figure there, sitting in your investment portfolio, just letting you clearly know what you might be able to achieve by simply 'going broad' and staying invested...

Take your time, and make sure you've always got some powder dry...

Good Luck.

Cheers,

Itsallaguess


Wish I had received this advice when I started my investment journey

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Re: Novice Question

#320079

Postby Pete675 » June 20th, 2020, 5:05 pm

I have always found HL to be excellent, but you do need a strategy to reduce costs.

Holding shares, ITs and bonds in a Fund and Share AC avoids platform charges entirely. The SIPP charges don't matter as much when set against the tax benefits, and you can just hold ETFs and ITs in it with maybe a couple of picked OIECs such as Fundsmith and LTG.


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