I'm 24 and would like to begin investing. The maximum I would be able to invest at the moment is £25 - £50/month. I have a house, no debts and a steady job. It's quite low pay at the moment, but it will increase in the future once I'm qualified. I am looking to invest for 5 years minimum, not for anything in particular, purely for growth. I have been reading your blog and would like to know your thoughts. Am I better off using a robo advisor such as Wealthify/Wealthsimple or a fund such as Vanguard LifeStrategy?
£25 to £50 a month at 24 is brilliant! And most people don’t invest for anything specific – just a general desire to build a stash and to do better than cash.
You have 2 options. You either pick a low-cost robo or a fund like Vanguard LifeStrategy. Or you pick a blend of pricier active funds which have the chance of doing better but no guarantees – and will cost you more.
Without sounding like a patronising old fart, you have years ahead of you to find out more about investing if you want to. So I would start with the easiest option. Once you’ve become Georgina Soros in 10 years time, you can start to spice things up a bit.
For me, I would pick the best combo of ease and cost. And that is a Vanguard ISA.
Trouble is they want at least £100 a month or a lump sum of £500. So you need £500 to start with and then a direct debit to set up maybe quarterly. A bit time consuming – so it depends how organised you are.
If you go down the LifeStrategy fund route, you will need to choose which one. They have 5 choices – from the blandest most cash-like one which won't shoot the lights out, but won’t give you any nasty surprises either. To the 100% equity one, which is the most likely to bounce up and down.
Will you really need the money in 5 years, or are you just saying this because it’s as far ahead as you can envisage right now?
I ask that because if you think it’s longer, then think about the 100% equity one. I have this in my pension, as it’s sitting there and I don’t particularly mind if it tanks one year because I'm pretty confident it will come back up.
But if it is a 5 year timeframe, then you might want to consider the 60% or 80% equity options. These will probably make less than the 100% over the very long-term, but be better protected against slumps when – as is inevitable – markets have a fall.
Another option is a group like Wealthify – they will charge you up to about 0.9% a year, but you can start from just £1 and add small amounts monthly. They are smaller and don’t have a long track record, but the large stake which household brand Aviva has in them gives comfort. It will likely be easier to set up regular smaller contributions here and automate it all, which is much less of a faff.
I would say that both of these options are fine.
The main thing is just to get into the markets with a diversified mix of stuff, and not pay too much. People spends years procrastinating and worrying, and then miss out.
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