Ok, here goes.
My grandmother wants to know what is a safe way to invest £3000 with maximum interest.
Any ideas?
My grandmother wants to know what is a safe way to invest £3000 with maximum interest.
Any ideas?
Investment advice
- Thread starter Communist Hamster
- Start date
Well, you sure as hell shouldn't listen to any investment advice you find at THIS damned place!!! Good god, do you want granny to lose all her money?
Geez, go to a good, reputable investment counselor or, if you want, check out the services available for management of investments with outfits like Fidelity or other investment firms.
But asking for such advice at a place like this is just asking for trouble ....for you and for your granny's money!
Baron Max
Geez, go to a good, reputable investment counselor or, if you want, check out the services available for management of investments with outfits like Fidelity or other investment firms.
But asking for such advice at a place like this is just asking for trouble ....for you and for your granny's money!
Baron Max
Peace.
Communist Hamster said:
I agree about the merits of asking such advice around here, but that’s not going to stop me throwing in my 2 cents!
Interest isn’t all it’s cracked up to be. It’s not even anything it’s cracked up to be. Interest is taxable and doesn’t represent any real earning value unless you have millions to invest. Capital gains are the way to make money ie. buying something that increases in value. Yes, you typically have to pay a capital gains tax when you sell, but you still end up ahead compared to some crappy fixed-term investment account with a crappy interest rate. £3000 is not nearly enough to get you a good rate.
I’ve got one word for you – property. It’s the king of all long-term investments. (However, I do stress long term.) There’s more chance that property will increase in value than anything else you can buy. Take out a mortgage loan and use the £3000 as a deposit for a house which you can then rent out to help pay off the loan. Owning rental properties has significant tax advantages compared to other investments.
Is she a risk taker? Is she a consevative? Does she want a quick return or is she in it for the long term? These are important in any investing anytime and without those questions answered it is hard to say what to do, do you know what she is?
JamesMorrison
Registered Member
In the world of investing, safety (capital preservation) and high interest (maximum return on investment) are conflicting terms. In fact, as a rule of thumb, the higher interest promised is a direct indicator of that investment's risk. The higher the interest or expected return the more risk that, if realized, will result not in a low rate of return but in the actual loss of principle. (e.g. if one invests 100 dollars in January of 2005 and then only gets back 90 dollars in January of 2006 you have suffered a 10% loss of principle).
I live in the U.S. and am only familiar with this area and, although I am sure that the following particulars may apply in the U.K., you should consult your financial advisor before finalizing any such decisions. Don’t forget that this is free advice and you get what you pay for, so here goes.
Your Grandmother should first answer these questions: What is she going to use the expected return for and what is her risk comfort level?
Regarding the former, if the interest will be used as income then more conservative, less risky, guaranteed instruments such as CD’s (Certificates of Deposit) might be in order these currently return higher interest than Savings accounts and even Money Market Mutual Funds but are not as liquid (easily turned into cash in financial emergencies). These (CD’s) come in different term lengths: from 3 months up to 5 years. The longer you lock up the principle (at least $500) the higher the interest rate (currently 3 months gets you 2.75 %.)
If she is financially able to sustain a greater risk (of principle erosion) and willing to invest long term (at least 5 years) balanced mutual funds may be attractive. This is where a little research is in order but generally she may want a ”fund of funds”. These try to balance risk by diversifying the principle invested into different types of investment funds which are, in turn, diversified into stocks and bonds. The concept of diversification is meant to decrease risk by ensuring that all your money (eggs) is not put into one particular vehicle (basket). So, if one vehicle, say bonds, goes south you don’t lose too much but then your overall gain may decrease. I mention these as long term because at any given point in time (like in the very late 90’s and 2000) your interest rate for any one year may be negative but overall (5-10 years) you will come out ahead.
It gets even more complicated when one considers what particular stocks (Small-Cap Growth, Large-Cap Value, etc) or bonds (Investment Grade Corporate, Government Securities) will help obtain you financial goals while sustaining your risk comfort level. Just another piece of “Free Advice”: if you start to look at Mutual Funds, after risk considerations, one should note the fund’s overall expense ratio (this is found in the fund’s prospectus which tells you, among other things, generally how the fund intends to invest your money). The better fund’s ratios are 0.5% or less. As an example let’s say your fund has an expense ration of 1.5% and its overall annual performance is 4.25%. Sounds pretty good until you subtract out the fund cost ratio and end up with only a 2.75% gain (4.25% - 1.5% = 2.75%). This you could have received with a modest CD investment vehicle with practically no risk to your principle!
A little research here goes a long way, but remember the balancing act involved: return vs. risk. Read some simple layman’s guides such as: “Investing for Dummies” they are easily read in sections and explain using everyday English how to avoid pitfalls.
Real Estate is probably a good hedge against inflation (but not always), but presents liquidity and tax issues that increase legal complications. Capital gains are a good thing if you can get them but remember the flip side called capital losses. Additionally, capital gains (especially short-term capital gains) are a taxable event which must be considered in the overall framework of your financial situation.
It would not hurt to consult a professional on a “fee for” basis (as opposed to a percentage of assets fee). Stick to “no-load funds”. These Loads are just fees that you pay up front before the fund even garners any return (if it does) for you. Remember any Load, Fee, or expense cuts down on your return and must be calculated out of the final percentage of return on investment!
JM
I live in the U.S. and am only familiar with this area and, although I am sure that the following particulars may apply in the U.K., you should consult your financial advisor before finalizing any such decisions. Don’t forget that this is free advice and you get what you pay for, so here goes.
Your Grandmother should first answer these questions: What is she going to use the expected return for and what is her risk comfort level?
Regarding the former, if the interest will be used as income then more conservative, less risky, guaranteed instruments such as CD’s (Certificates of Deposit) might be in order these currently return higher interest than Savings accounts and even Money Market Mutual Funds but are not as liquid (easily turned into cash in financial emergencies). These (CD’s) come in different term lengths: from 3 months up to 5 years. The longer you lock up the principle (at least $500) the higher the interest rate (currently 3 months gets you 2.75 %.)
If she is financially able to sustain a greater risk (of principle erosion) and willing to invest long term (at least 5 years) balanced mutual funds may be attractive. This is where a little research is in order but generally she may want a ”fund of funds”. These try to balance risk by diversifying the principle invested into different types of investment funds which are, in turn, diversified into stocks and bonds. The concept of diversification is meant to decrease risk by ensuring that all your money (eggs) is not put into one particular vehicle (basket). So, if one vehicle, say bonds, goes south you don’t lose too much but then your overall gain may decrease. I mention these as long term because at any given point in time (like in the very late 90’s and 2000) your interest rate for any one year may be negative but overall (5-10 years) you will come out ahead.
It gets even more complicated when one considers what particular stocks (Small-Cap Growth, Large-Cap Value, etc) or bonds (Investment Grade Corporate, Government Securities) will help obtain you financial goals while sustaining your risk comfort level. Just another piece of “Free Advice”: if you start to look at Mutual Funds, after risk considerations, one should note the fund’s overall expense ratio (this is found in the fund’s prospectus which tells you, among other things, generally how the fund intends to invest your money). The better fund’s ratios are 0.5% or less. As an example let’s say your fund has an expense ration of 1.5% and its overall annual performance is 4.25%. Sounds pretty good until you subtract out the fund cost ratio and end up with only a 2.75% gain (4.25% - 1.5% = 2.75%). This you could have received with a modest CD investment vehicle with practically no risk to your principle!
A little research here goes a long way, but remember the balancing act involved: return vs. risk. Read some simple layman’s guides such as: “Investing for Dummies” they are easily read in sections and explain using everyday English how to avoid pitfalls.
Real Estate is probably a good hedge against inflation (but not always), but presents liquidity and tax issues that increase legal complications. Capital gains are a good thing if you can get them but remember the flip side called capital losses. Additionally, capital gains (especially short-term capital gains) are a taxable event which must be considered in the overall framework of your financial situation.
It would not hurt to consult a professional on a “fee for” basis (as opposed to a percentage of assets fee). Stick to “no-load funds”. These Loads are just fees that you pay up front before the fund even garners any return (if it does) for you. Remember any Load, Fee, or expense cuts down on your return and must be calculated out of the final percentage of return on investment!
JM
Actually you can forget this thread now. I can't belive I started it in the first place.
I'd invest in oil.
"Why buy oil when the price is so high?" you may ask. The price may seem high now, but it's low compared to what it's going to be since we're hitting the geological limits of extraction and production is about to go southbound due to a well-known and widely documented geological phenomena known as peak oil.
"Why buy oil when the price is so high?" you may ask. The price may seem high now, but it's low compared to what it's going to be since we're hitting the geological limits of extraction and production is about to go southbound due to a well-known and widely documented geological phenomena known as peak oil.
No We have not reached the limit of extraction we still have huge pools and reserves in many parts of U.S, Northern Europe and the mid east. Furthermore fossil fuel recycles, remember oil is a fossil fuel so a slong as organic mater still decays the earth(maybe not us) may never run out of oil. Besides with nuclear energy oil is not our chief source of energy though used more often.The reason why the price is so high is because the oil cartels are making a ton of money. I don't think its a coincidence that the U.S presidency is an oil family and oil prices also hit all time highs. I like Bush but he messed up there. Now people are talking about $80 a barrel, are these people out of their minds? Thats the breeding ground for inflation and economic recession.
That would work great in some places. But he is talking about England!!!!!!!!!!!Hercules Rockefeller said:
Indeed....Communist Hamster said:
Please just let it die.
No!
Since this thread was brought back, I'll ask for some advice. What the hell could I do with $30,000? I want to start a business or invest in real estate. NO STOCKS! (I got screwed enough). I what to start something while keeping my day job but eventually quit my job and go it full time.
INvest in real estate? I suggest you buy some highland near New Orleans.
Or buy oil. Strong demand will continue for decades, and it will be 2 or 3 years before increased refinery etc capacity comes online to feed us more.
(And by the way Chatha is wrong about oil. It takes millions of years to form and we're using it up faster than it is formed.)
Or buy oil. Strong demand will continue for decades, and it will be 2 or 3 years before increased refinery etc capacity comes online to feed us more.
(And by the way Chatha is wrong about oil. It takes millions of years to form and we're using it up faster than it is formed.)
dsdsds said:
You give us no particulars, yet you expect advice?
Are you married? Planning marriage soon?
Do you have children/or planning children?
Do you own a home or rent?
Own a car? What kind? How old?
What's your yearly salary? How much of it do you save?
What's your level of education? In what field?
What are the chances of advancement in your present career?
How long have you been with your present employer?
$30,000? That ain't much money to be planning to start your own company! In fact, that ain't much money to be doing much with UNLESS you have another good savings amount somewhere else. If you were to have an accident and couldn't work, how would you survive? ...on only $30,000?
My advice? Keep working and save more money.
Baron Max
Baron Max said:
30K is not part of my savings. It's an amount I've just come into recently and I'm ready to "gamble" it away (sort of). I guess the level of risks I am willing to take is a major consideration. I really want to put it towards a shot at a business. I'll be dissapointed in life if I don't (at least attempt) become my own boss.
But you're right, 30K is not alot of money and my decision will depend on many factors as you have stated.
buddhaman386
Registered Member
Kill the thread!
This is for you, comrade ;-)
This is for you, comrade ;-)