RFI: Savings/Investment

Um... ok, that's as much as I can remember from the investment section of my Intro to Business Finance class. *laughs* Anyone out there with an actual degree in finance want to REALLY help out this person?

Unless I'm wrong, in which case I am opening a US bank account like yesterday.

I've finally reached a point where I can actually put enough money away now. But I'm unsure as to what kind of savings account to get and who with.

Any UK people have any tips or recommendations based on the current state of play (i.e. bit worried about the much-discussed impending crash so wary of using a bank)? What type of ISA do you have and who with?

If you just want a cash ISA, check in the papers which has the highest rate (and that any conditions attached aren't a problem), and take it out. It really is that simple. I think they're going to abolish them soon so get in while you can. If you're fussed about ethics and the like, go for a building scoiety (Nationwide, Britannia, others) or an ethical bank like smile/Co-operative bank.

I'm not sure what you mean about being wary of using a bank. I don't think they're going to go under, recession or otherwise.

I think they're going to abolish them soon

rly?

Aren't they? They are only guaranteed to exist until 2009 and I thought that, like Tessas before them, they were going to be scrapped/replaced.

there has been talk for a couple of years now of reducing the maximum yearly investment to £1000 (from £3000) but they keep extending it. not heard anything about abolition though.

http://www.find.co.uk/investments/isas/back_to_basics_guide_to_isas :

"The new rules follow an announcement in which the Government confirmed ISAs were to continue indefinitely, as it is keen to increase the number of people who save money for their futures."

my advice would be to use a current account with a high rate of interest - i have a nothingy bank account and a high interest saving accounts but never get around to transfering money from the one to the other, which is costing me about £500 interest a year. um, must do something about that.

i'd probably set it up to automatically transfer a fixed amount from current account to isa every month.

a has a smile isa so may go for that too. cheers tho.

The new rules follow an announcement in which the Government confirmed ISAs were to continue indefinitely

that sounds sensible, although abolition wouldn't surprise me. i don't pay enough attention to these things, really. i mean, i have an RBS mini-cash-ISA which seems to perform reasonably well, but for all i know it could be being humped by every other provider going.

i've had a little note on my to-do list for more than a year now saying: "look at better savings options". just next to the one saying: "investigate that better mortgage deal". hmm. whatever: i wouldn't recommend a bank account as a way of getting decent interest, though. there are all sorts of half-decent savings accounts out there; if i'd bothered to look for one, i'd have better advice. heh.

remember that, on most of them, you'll be paying tax on the interest -- an ISA is still your best bet for that reason alone, of course.

I love Smile. They totally don't have the best rates, though.

Can anyone (and I'd be seriously grateful here) suggest how to go about setting up a private pension?

I too would be seriously grateful to hear that, since it's something I've been thinking about too. Given that the chances of my employer making any contribution any time soon seem pretty minimal.

I don't know, at what age is it advisable to start thinking about pensions?

the earliest possible. i took out a private pension at 22, but then i'm fucking weird.

i went to see an independent financial adviser. "hello," i said. "i'd like a pension. gotta be ethical, mind. o ye."

"you sure?" he said.

a week later i went back to see him. looking at the figures, i quickly realised that investing in clouds and sky and friendly wood-folk wasn't going to provide me with anything approaching a comfortable income in retirement. in fact, it would provide me with fuck all.

having dropped my ethical standards a few notches, i ended up with a pension through norwich union -- frozen for the past seven years or so as my work pension isn't bad. (that said: there's grimness looming on the horizon, but hey.) so i guess i did three years of contributions to the private pension ... maybe less ... i put in about 200 quid a month, IIRC. i was earning about 16 or 17k. so it was quite a hit, but ... i dunno. i want to be a drunken miserable old man in the pub all day, not a sober miserable one on a park bench with a flask of tea.

obviously, the IFA takes a wee cut from the pot -- annoying, as the (very good) dude i dealt with left the (not so good) firm who employed him shortly afterwards. but given that i wouldn't have had a clue what to do otherwise, there's not much i can do.

so there you go. succinct precis: go see an IFA.

I suggest putting all of your money into this:

http://www.boingboing.net/images/_images_2007_05_29_magazine_03matter450.1.jpg

Joanie was me, but I don't remember using a fake name? Maybe I was really paranoid.

I bought a Leica. It's worth exactly the same thing now as it was then.

Actually, I might be able to clear a couple hundred more on Ebay.

what's the advantage of a private pension over an ISA? higher rate of contribution from provider?

people still do pensions??

yea, stevem, i wouldnt worry too much about banks going under (er...tho i wouldnt be putting any money in northern rock). i think up to 32k your money is protected by the govt anyway (in the event of a run on the bank i guess)

is there really talk of isas being stopped? thats kind of surprising. anyway the next few years should be good for savers, after a long period of being encouraged to borrow as much as possible, the pendulum is about to swing the other way

i don't think even the best stocks-and-shares ISA will give you anything like the return of a private pension over that length of time. that said: i know fuck all about maxi-ISAs.

i'm still reluctant to get an ISA thru my existing bank if even just out of curiosity of new customer experience elsewhere. i guess the 'ethical' thing too.

"people still do pensions??"

uh yeah, i'm self employed. if i don't do it, i'll get a whopping 600 euros PER MONTH. woohoo!

you have about a month to open an isa if you didn't already.

and, contrary to what i said upstairs (which was true at the time, i think), next year the allowance goes up to £3600 pounds.

Northern Rock now have some of the best rates and safest ISAs in the business.

i did get an ISA (altho it's with NS&I) but tried to set up standing order and for a few months the money was going from my bank account into the ISA but then bouncing back out a few days later and I couldn't work out why (after checking all the numbers and taking necessary papers to bank) so in the end just did manual deposit online feh.

NS&I are good for the inflation linked certificates.

for ISA I'm going to go with Scarborough Building Society

Northern Rock probably best for a standard savings account now

If I have an ISA with a not very good interest rate and want to move my savings for next year into a better account, is there a way to transfer the whole balance to a different building society, or do you have to keep under the 3k annual limit even for transfers? Does the concept of "transferring" even exist? Should I move before or after the end of the tax year?

Sorry if this is a confused question, I don't really know what I'm doing, I just converted my kids' account to an ISA at the same branch ten years ago when I got too old for it because the woman behind the counter said it was the best deal, and I've never tried to shop around, but I know I could get more interest somewhere else if I could be bothered to sort it out.

(counts minutes until everyone on this thread is shouted at for being a thrusting capitalist thatcherkid pigdog)

> If I have an ISA with a not very good interest rate and want to move my savings for next year into a better account

into another isa somewhere else you mean, or just a different account?

but yes, apparently you can move totals between isas:

http://www.hmrc.gov.uk/isa/transfer-isa.htm

"Similarly, current year subscriptions to a cash mini ISA can only be transferred to another cash mini ISA. However, previous years’ subscriptions a cash mini ISA can be transferred to the cash component of a maxi ISA or another cash mini ISA."

> Northern Rock now have some of the best rates and safest ISAs in the business.

> "i think up to 32k your money is protected by the govt anyway (in the event of a run on the bank i guess)"

people who took up isas early and have invested the max every year are approaching this limit about now, i think.

Thanks for the link, koogs! Yes, at a different bank/building society, the current one doesn't have any better accounts and has closed down the local branch, which was the only reason I was there anyway.

Best ISA rates/info on transferring:

http://www.moneysavingexpert.com/savings/cash-isa-transfers

gotta love that compound, tax-free interest... >£1400 today

that said, stood in the queue in the halifax this morning and it was all primary colours and ads showing staff members boxing and others holding up championship belts and all, felt more like macdonalds than a bank, somehow. they also seem to have done away with anywhere to write whilst you are queuing (the barrier used to be wooden with a top deep enough to write cheques on, is now one of those Tensa barrier things).

bloke in front of me at the counter: "can i move £300 from this card to that one?" "no, that's a card account. take it out of the machine over there and then i can put it into the other one". pointless. how much of the money they saved by introducing accounts that don't require counter staff do they lose by adding extra work for counter staff like this?

they also have nothing with the address i need to send cheques to for my postal / phone account printed on it.

Ok, so I've never had a 401k, and my job just started a matching plan. Thing is, there's a strong chance I'll be leaving my job in four months. Is there any point in me enrolling just to take advantage of the match? Can I keep the 401k if I'm in school?

Haven't really had a look at the ISAs this time round yet. Nationwide at 6.15% seems ok - looks like rates will continue falling (especially for savers) so it makes sense to move into a fixed ISA?

you might as well have your employers match for the 4 months you do stay. once you leave your money will still stay in the 401k and you can always roll it over to another broker if you start another job that requires it to be somewhere else. I think I have had a piddling amount in a fidelity 401k for 3 years without any contributions.

you could also look into self select ISAs so you have some control over where the money goes.

Please more U.S.A. advice on this thread. What is an ISA btw? Is it like a government bond?

Hurting, I had money from a year's job put automatically into a 401K (or something similar). Thing is, when I left the job, they gave me 3 months to transfer it to a new account, or cash it out (with taxes taken out). I couldn't figure out a new plan soon enough, and they cashed it out, and it's very heavily taxed. But I guess you would be paying those taxes anyway, just upfront? I personally wouldn't go through the hassle of it, just for 4 months, when you know you will soon be in school full time. But I am lazy financially. I think I still have money in a 401K from a job I had 94-96 (or would that be social security)? Who knows?

Hurting, why give away 4 months of free money? If you are 100% vested in the company's contributions and can max out your contributions to whatever level it takes to get their full match, it's probably worth it. Depending on the plan, you may be able to simply keep the money in the plan (it will convert to an IRA generally, so you can't take a loan out against it), or roll it over to an IRA your bank offers.

Virginia Plain, you would have been paying an early withdrawal penalty (10%) on top of taxes when that was cashed out. And generally after cashing out a 401k, you have an additional 90 days to get the money into an IRA or SEP or another employer's plan. Or, you can just take the tax+penalty hit.

The other thing about a 401K - whatever amount you contribute reduces your taxable income. Most people can usually contribute 3-5% and still have the same amount of take-home pay.

yeah i think it's worth the company match if you can contribute a respectable amount in the 4 months + roll it over. my company only matches up to (20% of) 6%, unfortunately their offerings suck so i don't want to contribute more just for the tax offset
i've also dithered on getting a roth ira for 2007, i'm with vanguard already for other stuff but i doubt they'll open it for me prior to tuesday

You never know, tremendoid, they might have the process streamlined this time of year.

<i>Most people can usually contribute 3-5% and still have the same amount of take-home pay.</i>

Really? One reason I was loathe to set up a new one is that I need every last percent of my paycheck at this point. But I guess adding 3% to the already large NY state & city taxes wouldn't really be that bad. Current employer doesn't match though, so I didn't see that much incentive to join. Plus it was complicated! I guess I'll look at those folders again.

I do have a New York state pension through the job, though I can't imagine staying in the system for the 30 years it would take to make that worthwhile. We contribute I think 3 or 5 percent for 3 to 5 years, and then the employer contributes an undisclosed amount (I asked about it at orientation and they couldn't tell me the specifics) and then we become vested after 10 years maybe. Is this how government pensions usually work?

The tax break is only on the money put into the 401, so your take-home will be less, but you should still put as much as you can into it if they're matching.

xpost jaq, done and done. now to watch my fund tank into nothing...

zzz I'm in a phone-conference/"webinar" for the plan right now. So far I have learned

1) What compound interest is.
2) That OMG Social Security won't cover my retirement needs!

3) What compound interest is.

VP, an ISA is a tax free wrapper that you can apply to savings and investments in the UK. The sums are relatively small (max £7500 a year, max £3600 in cash).

I need to start a pension, anyone have any views on self select versus managed pensions? (USer can probably contribute to this question too)

4) Skip that daily cup of coffee, it adds up!

hmm - anyone have a c/d opinion on auto-rebalancing?

VP, here's a calculator that estimates your take-home pay with various levels of 401k contributions: http://www.why401k.com/kcheck.asp

I was able to put 3% in without impacting my take-home too much, upping the level to 6% (to get my employer's full match) ended up making sense because I was 100% vested in their match (I knew I'd be leaving after 3 years or so).

never mind all that high level stuff, how do ppl manage to find money to put away?

Who's a saver? Who isn't? Was it something you were brought up doing or did you kickstart yourself?

I'm self-employed; if I don't put a certain % of my yearly income into a retirement account, I have to pay taxes on it. I'll have to pay taxes on it when I retrieve it from the account, of course, but there's the possibility that interest accrued on the account will take care of some/all/lol none of the tax I have to pay on it when I retire.

I learned how to save when I owed the state of California what was to me at the time a lot of money; until then I was a person who couldn't hold onto money for a day

I'm making an effort to save at the moment. Not necessarily regularly but £500 or £1000 when i think i can spare it into a building society account.

I can see why people don't bother, tbh, particularly in London. The idea of saving for a deposit on a mortgage is probably the primary driver for most people but it can seem completely unrealistic to think about putting a 15% or 20% deposit down when flats are going for £160k - £200k.

I also take part in a savings scheme at work that takes £150 out of my salary every month over a period of three years and gives me the option of buying shares at a fixed price at the end of it.

i'm that guy at present, but i'm having as much of a ball as one can on no discernible income.

that was xp...

I'm in the public sector pensions wheeze, so hopefully i don't need to ever worry about starving in my old age, but i'm kinda in a place now where the deposit question begins to rear its ugly head alright. My rent just doubled and i'm scratching my head as to how i'll eke anything else out of my income to put aside for the rainy day.

That's the difficulty - a mortgage makes much more sense than paying Dublin / London rents but it's ridiculously hard to save for a deposit while paying Dublin / London rents.

heh i'm certainly wondering what i did with my cash the past two years, alright.

Nationwide at 6.15% seems ok
― laxalt, Saturday, April 12, 2008 6:59 PM (4 years ago) Bookmark Flag Post Permalink

fucking lol; cash ISA interest rates are pitiful these days. transferring my cash ISA to stocks & shares I think, more fun and better returns (theoretically)

Beware of chasing greater risk to make up for shitty returns.

uh, i am very confused because although i'm certainly no expert in finance, i thought that i had a decent grasp on basic concepts like interest rates, APY, etc. so someone please help me out here.

i'm thinking of opening up a savings account. just for simplicity's sake, let's say i'm going to invest $1000 (i'm actually planning on investing 8 billion dollars. i am very wealthy and my hat is very tall)

my bank is offering a basic savings account with an Annual Percentage Yield (APY) of 0.05%. as i understand, that means if i put $1000 in on day one, at the end of the first year i will have a total of...$1001.

WTF?

why would anyone do that? am i understanding the APY incorrectly? when i first started looking into savings accounts and investing options, i told myself that i was under the assumption that "safe" investments like bonds had interest rates around 3.0% or so. 0.05% is 1/60th of that!!

just to check myself, i've entered in 0.05% into several online calculators, including this one: http://www.mybanktracker.com/apy-calculator

and they all come out to $1001 at the end of the year, if you started with $1000. it's just such a bad deal that i must be making some sort of terrible miscalculation.

General savings accounts have very poor interest rates at the moment. You might be able to find
A better rate with an Internet-only account. Even money markets and CDs have pretty low rates at the moment.
If you want to see some return on your money, you should invest it conservatively. If you just want to save some money,
But have it readily available you can't really
Expect the banks to reward you too much. I think there's a site that compares the rates of the various banks. A wise person on this board once
Told me the important thing is saving, not how much the bank is going to give you.

Yeah, you used to be able to make 1 to 5 % in a savings accounts and CDs, but those days are gone. Save some money in a savings account (if free) until you have an emergency fund built up, and then look into an IRA (if you don't have 401k access), and get a low cost stock market index fund. You'll get a small tax advantage, and the market eventually goes up (awesome last 3 years, but that ends). At your age look into some Roth IRA stuff too (tax savings at retirement instead of now).

yep, i had a money market account a few years ago that paid nearly 4% making for a nice little bonus each month. then interest rates dropped way down, where they remain now.

The Only Investment Guide You'll Ever Need by andrew tobias has good advice on investing (including basics like zachary's above).

thanks for the comments! yeah, i guess i'm just behind the times because the last time i was actually learning about these things (in undergrad and grad school, several years ago), i think the interest rates were much higher. i guess that ship has sailed.

If you just want to save some money,
But have it readily available you can't really
Expect the banks to reward you too much.

yeah, that's the thing though, is that i was looking for bonds or CDs for maybe 3 to 5 years! and i didn't expect to make tons of money off of them, i just thought that i could make enough off of them to keep pace with inflation. that doesn't seem to be the case!

i feel like i'm still misunderstanding fundamental here - what is the incentive to save money? looking at concepts like net present value, saving money only makes sense as an investment if the returns equal at least the inflation rate. from what i'm seeing with the available interest rates on CDs, they're orders of magnitude less than the inflation rate.

afaik interest rates are being kept low to deter saving (among other things like helping ppl pay off debts etc) isms encourage things like eg consumer spending. in the uk at least

when I worked in a stockbrokers rece they wd all say saving cash is a mugs game in this economy due to the corrosive effect of inflation. stocks & shares are where it's at bebe

financial education and sophistication (or access thereto) yet another way the rich accelerate away from the poor

"kept low" is a strong statement. at the moment they're naturally low because there's too much cash with too little to do with it for everyone

The incentive to save money is to provide yourself with funds in the case of
A Job loss or other emergency. You have to have some money that you can get to
Easily. Or If you want to save for a goal, like buying a house or going on vacation.
I think people put money in CDs and bonds as a way of diversifying their savings...
I read you could stack your CDs so that they become due at different times, but it seems
Like kind of a hassle to me. I agree, if you want to make serious long-term savings open an Ira account
Or max out on your retirement contributions at work, or both. What do you want to save for? That should determine where you
Put your money.

when I worked in a stockbrokers rece they wd all say saving cash is a mugs game in this economy due to the corrosive effect of inflation. stocks & shares are where it's at bebe

Half tempted to do this (or put it on the 4:15 at Kempton). Currently being offered a 1% rate in a restricted access account (or 0.5 in a regular account) while the properties I'm theoretically saving for a deposit for are increasing at 10 to 16 per cent per annum. Would probably invest badly though.

buy into mutual funds... they give you exposure to the stock market without having to do any choosing.

I inherited an IRA; it's now a beneficiary IRA. This is through TD Ameritrade. Now it is an Amerivest account and they asked me whether I choose to invest in Mutual Funds or ETFs. Does it matter? I think there is a 1% fee to manage the fund regardless, but I have no intention of making my own trades or anything like that. I don't even know what balancing is or how to do it.

Advisor dude is claiming that with a "Growth" strategy (the tier below "Aggressive") I can earn 8-10% returns long term--is that really feasible or accurate? Should I be doing something differently? I read things that say how easy it is to manage your own funds and it's not necessary to pay fees, but I really have no interest in that.

I'm not certain but I think you can transfer the IRA to any brokerage.
You may want to do this if there is a maintenance fee.
The 1% fee sounds like a total waste since they'll likely be investing in funds that already have a built-in fee. So you'll be paying fees on top of fees if that's how it works?
Vanguard funds typically have really low fees but there are some ETFs that are even cheaper to own.
http://seekingalpha.com/article/15170-etf-investing-guide-etfs-are-cheaper-than-index-mutual-funds

8-10% is historically around what the S&P500 has returned, which is the no-brainer fund, and they shouldn't be charging you 1% to do no better than that.
http://en.wikipedia.org/wiki/S&P_500

The vanguard symbol for it is VFINX, the ETF version is IVV

I would agree with transferring it to a different brokerage with lower fees -- I have mine through Charles Schwab.

You can probably get an S&P 500 index fund that would be comparable, or what's called a target fund, where the growth and risk are based on your retirement age.

Thanks guys. I already signed the paperwork for TD (path of least resistance) but I think as I learn more I could transfer it to another brokerage. Oh, and looks like they put me in Mutual Funds, not ETFs.

Looking at a SEP IRA for 2014 for tax purposes and working with fidelity. Gonna be a lot more talking.

I'm w fidelity and while I have no complaints vanguard has lower fees w basically the same access

all this ruling class shit is new to me and super weird but basically everybody is telling me i have to do it.

It's a bet either way. Ur betting on the faith and credit of the U.S. gvt AND that you're going to live long enough for it to matter

right; both of which appear to be sounder bets in my advancing age than they ever felt like when i was on the other side of the fence
so it's sorta major step of sloughing off idealism/youth/whatever ya got
most people likely do this through marriage or kids or a serious job or something but no bell rang, just gotta figure what now

i uh i now save 10k a year despite paying rent that still doesnt bear thinking about and jesus what did i use to spend money on curse you young me curse you yet again we could have speedboats by now

All my money goes to lunch

i have a feminist investment account now

https://www.ellevest.com/

ytd10

I've been trying to help a friend (50yrs old) save money. He only started his 401k 3 years ago (he missed out on 8 years and it was matching!?!). He makes low 6 figures. Basically his money is spent on taking too many taxis, takeout, thinking spending money at sample sales is saving money, and his required vacations a year that wipes out any savings he could have.

Darragh, that's really good! Keep going!

I am looking at that ellevest site right now. More things like that.

aw but i love all of those things too 😐

I love those things too, but we are oddly super frugal which comes from wanting to save money and not wanting more useless shit. I do heavy calculus each time I think about hiring a car (maybe do it less than 10 times a year excluding airport rides). We do takeout once a week (Friday night). We bring lunch to work 90-95% of the time (when trying to eat healthy this is a must anyway). We only go out to restaurants when on holiday or for a special occasion, only buy coffee out while on vacation or in need of wifi. Rarely buy clothes anymore especially since I get annoyed about how many clothes/shoes I have already that I don't wear. That said we go on vacation a lot (but we are economic while abroad and get cheapish places with kitchens so we can cook a lot and make coffee). And I do spend a lot of money on wine. But at the same time we own both of our apartments with no mortgages. No debt anywhere else, liquid savings. Thank goodness neither one of us had student debt.