London | How to invest & save money

For those of you working in London, how do you invest you money? The fact that we cannot buy stocks (due to insider information etc) makes things complicated. I have heard of premium bonds, ISA etc. but don't really know what to do

Comments (37)

 
  • Analyst 1 in IB-M&A
Nov 21, 2020 - 5:05pm

If you could just give more details it would really help thank you

 
Nov 21, 2020 - 5:30pm

So an ISA is an investment account where you can invest up to 20k per year. These investments can really take any form - ie sitting in cash compounding at 1% p.a. or investing it in equities/fixed income ( can be single names or indexes, ETFs, Funds). 

The great thing about the ISA is that all of the returns will be tax free - so say in year one you invest 20k in there and make a 10% return. at the end of year one you have 22k sitting there being ready to be invested on a tax free basis (ie compounding) and you can add again another 20k the following year. So effectively you can invest 20k per year that will compound and will be tax free.

 
  • Prospect in IB-M&A
Nov 21, 2020 - 5:53pm

Do you have to pay any taxes once you retire that money from the ISA or is it capital gains free forever?

And would you also recommend to max the pension plan?

 
Nov 22, 2020 - 5:37am

Tax free for ever

I do not inject any money in my pension plan as I would rather save to buy a flat/house and once you are not renting anymore indeed max out your pension plan.

 
  • Prospect in IB-M&A
Nov 22, 2020 - 10:54am

I was thinking to max ISA and max the Pension Plan, but my big question was how pension plans work in the UK, cannot find much information about taxation when you rescue the plan or how much time you need to spend until you can take the money out from there, do you think doing this would be crazy if my aim is to reduce taxes paid and assumming I already have 5-8 months expenses of cash available

 
  • Analyst 1 in IB-M&A
Nov 21, 2020 - 9:24pm

Sounds cool, thanks. So in Year 2 I can invest 22k + 20k = 44k tax free right? Like I add 20 k per year tax free + the interest I earned

 
  • Analyst 1 in IB-M&A
Nov 22, 2020 - 8:26am

Many thanks! And so what king of ISA would you recommend? I am bit worried of EFT etc because I am very afraid to loose money tbh. I also just saw that the IR is only 0.5% per year... What's your view on that?

 
Nov 22, 2020 - 9:36am

Depends what you want to do with your savings and risk tolerance.

I have a GS marcus account where I have 3-6 months of costs available at any time if needed should I get fired compounding at 0.75%~.

I am happy to risk the rest in equities as it is aimed to be invested in the long run.

You need to think how you want to diversify and what you want to do with your money - I cannot decide that (WHERE to invest) for you but I can give you the tips on HOW to invest it to optimize for taxes and your situation. 

 
Nov 22, 2020 - 4:07pm

Your pension is often with your company or the big names (Fidelity, Vanguard, HL) - I actually need to look into this for me thanks for reminding that LOL

Given that I mostly (currently exclusively) use ETFs myself the best 2 providers are Vanguard and Fidelity (my bank only approves one of these two). For single name stocks Freetrade is good (low monthly flat fees and 0 trading costs). Not sure for cash accounts but just good around there's plenty of comparison websites for these.

 

 
Nov 22, 2020 - 4:14pm

There are different views on financial advice, I am of the view (and I speak free of any debt) that you should aim to have 3-6 months of expenses liquid at anytime (you never know when you get fired) - or are saving towards it.

Then you should invest you money in the risky investments over the long term - depends on your age and for when you are planning on buying a house obviously.

Visit reddit (FIRE) /ask the other guys on WSO about financial advice (ie the WM guys) thebrofessor has quite a few good posts about that -  I am not expert and would consider myself in a very good position due to external factors (family, inheritance etc) compared to the average 20 something years old user of this website so some of the more advanced stuff that I play in would not be applicable to you/most on here and is very situational (for tax purposes across different countries)

 
  • Analyst 2 in IB - Ind
Nov 22, 2020 - 6:16pm

Which ETF(s) did you choose within your ISA? My bank is quite strict too and I don't want to get caught up in compliance etc

 
Nov 23, 2020 - 7:47am

If you're allowed to own it, look at Vanguard's VTWAX or VT, or Fidelity's FSKAX + FZILX.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

  • 1
 
Nov 23, 2020 - 1:51pm

Lol man just classic ones I have more than 20 so not really relevant to list them all. Most/all ETFs are allowed or just ask your compliance team if you could invest in X or Y before doing so to be extra fine. 

 

 
  • Intern in IB-M&A
Nov 23, 2020 - 3:26pm

What recommendations do you have for platforms to invest in ETFs on, specifically looking for ones where you can invest in broad trends, e.g. green energy, tech etc.

 
  • Intern in IB-M&A
Nov 22, 2020 - 4:28am

I don't think you can find a decent flat for 500k in London. Unless it's 1 hour outside of the city..

 
Nov 22, 2020 - 2:26pm

you can get a two bed for £550k in aldgate east (20 year old building) 

Array

 
Nov 23, 2020 - 7:23am

I would take a look at Slough. Could be a good buy even if you work in Canary but only if you know that even after the pandemic your bank will allow you to work at east one day from home (say Friday).

There will be a cross rail station, which means (at least this is what i saw published) it will take you 46 minutes to get to Canary Wharf. I dont think prices have incorporated the cross rail effect fully just yet. Also the borough council is about to spend £3bn on housing etc (they call it a Slough regeneration project).

A ton of green space, good schools nearby including Eton.

You can buy a two bed flat in a new building for ~£360k.

 
Nov 22, 2020 - 11:29am

Really not worth it in my view. You can really target some stocks through sector/themes ETFs. Know some people that were locked with a stock as they covered the name as a junior and were on calls with CEOs even though there was no real insider information the bank didn't want to take such a risk. Also as you may know academics have basically proven that the average investor underperforms its benchmark. So don't waste time looking at stocks and just say I like automation and buy the automation ETF rather than looking into which firm will be the best one etc you won't have time as an analyst.

 
Nov 22, 2020 - 2:23pm

Depends how much you have to invest. If you have £300k+, there is a ton of opportunities now to buy property at up to 20% discount. Target studios and one bedroom flats because they are most liquid + they can still generate a nice yield (~4%).

 

Otherwise I would invest in ETFs. Shouldn't hurt you career (depends how strict your compliance team) because should you even receive some non-public info on one of the constituent stocks, you aren't the one actively managing your exposure to that company. Also you won't beat the market if you invest in individual stocks unless you are very lucky, have some insider info or work in a value HF (even then not guaranteed).

 
  • Intern in IB-M&A
Nov 23, 2020 - 3:26pm

What recommendations do you have for platforms to invest in ETFs on, specifically looking for ones where you can invest in broad trends, e.g. green energy, tech etc.

 
  • Analyst 2 in IB - Ind
Nov 22, 2020 - 4:40pm

Don't think you will need that much equity to buy a flat though right? Isn't ~10% enough these days? 

 

In that case you could get an ok flat with a few ten thousands... Curious to hear some thoughts on this vs stocks.

 
Nov 22, 2020 - 5:00pm
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