Investing for 60+ yrs old

Hi,
After a little help. I am 64 and live in the UK. My Trading 212 ISA is currently empty and I am looking for something ‘safe’ to bring in a return better than a savings bank account within say the next 4-5 years. Any thoughts on some products I could add? I am a beginner so totally confused by jargon, so simple would be great, thanks.

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Trading212 is probably not for you.

Short term investors looking to access funds in 4-5 years should be looking for low volatility, you probably want a cash ISA.

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I’ve typed a long reply but T212 has decided that it has to be approved by a moderator so will have to see how long that takes on a Sunday

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Hi, thanks for the reply. The best cash ISA is only giving about 5% about the same as a bank, the saving grace that you don’t have to pay tax. I was hoping for something a little better, maybe a bond/gilt fund or something like that. the problem is I don’t know what I’m looking for.

Thanks, I’m looking forward to it.

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No-one knows the future, but there are very little bond funds that could be considered ‘safe’.

This is probably a good reference:

https://www.moneysavingexpert.com/savings/best-cash-isa/

Lock in returns that you are happy with, and focus on enjoying your life.

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Hi an welcome

I struggle with “safe”. What one person thinks of as safe may not be for the next person. You give a timescale for 4-5 years but it isn’t clear whether that’s just saying that you are looking at the long term (ie not looking how much you can make in 1 month but judging return over years) or are saying you need to withdraw all of your money in 4-5 years. Obviously how significant the money is too you and your timescales affects what you do with it and what is the best choice.

If you don’t understand any terminology just ask there is always someone who will explain or clarify.

There are some fixed return investments such as gilts and I believe that you can hold gilts in an ISA but I’ve never held gilts so other people can comment. Essentially these will just provide a defined interest/return on your investment. As I say I’ve never held them so can’t help much.

In terms of more conventional investments there are some basic choices. You can buy and sell shares in individual companies (ie shares in BP) or you can buy and sell funds. There are several different type of funds but basically you are buying/selling an investment in multiple companies. So, for example, you can buy shares in a FTSE100 tracker fund and that will follow the FTSE100 and thus is equivalent to owning shares in all 100 companies in the FTSE100.

There are all sorts of “funds”. So some simple ones are the tracker funds that just follow something - ie a FTSE100 tracker. So if you invest in a FTSE100 tracker and the FTSE goes up then your investment goes up and if it goes down then your investment goes down. The advantage is that you don’t have to buy/sell shares in individual companies and the risk is spread because you are indirectly investing in lots of companies (ie 100 companies that make up the FTSE100).

The next complication comes from the choice between funds that may spread your investment equally and those that may do so on a weighting. So to explain this. Say you invest £100 by buying a FTSE100 tracker fund. The fund could be designed to invest your £100 as £1 in each of the 100 companies whereas another fund might invest your £100 based on the relative size of the 100 companies so if company A is twice as big as company B then it will invest proportionately more in A than B. This means you have more exposure to the big companies than the smaller ones - you decide whether that increases or decreases risk.

So there are lots of funds and products like this. There are products that track indexes or markets. There are products that are geographically focused (ie US, UK, Europe, Far East…) and some that are based on sector (ie tech).

So all funds generally have costs. You don’t generally pay these costs directly but they are taken from the money within the fund. So if you put your £100 into a tracker fund the people who operate the fund will take a fee out of the money in the fund. Generally the tracker funds have low fees because they are just operated/managed by computers - its just an automatic process that they will spread investments across the companies reflected in the fund (ie your FTSE100 companies). Another type of fund is where there are people who actively manage the fund. So there you are basically giving your £100 to this management team and they decide which companies to invest in and that will change over time. You are trusting them to make good investment decisions. These actively managed funds have slightly higher fees (again taken from the money in the fund so you don’t have to pay them separately) but generally they are modest.

So for actively managed funds you have all sorts of options. There are funds focused on geography, sector, type/size of company… So you might have UK Small Cap, European Growth… Fundamentally you should consider the geographic area - eg recently China has not performed well so even the best China funds probably haven’t performed well but that doesn’t mean they won’t in the future…

There are some here that love funds. Personally I’m not a fan. The return is often small but they are probably much safer than investing in individual companies because risk is spread. However, it isn’t hard to find funds that have lost money or performed badly compared to the market overall.

This then comes onto the types of fund. Others can probably explain the different types better than me but you’ve got lots of different types of product include EFT, Trusts, Funds… Essentially they are all forms of product that spread your investment across a multiple companies.

With some types of actively managed fund you also can look at NAV and discount to NAV. So NAV is net asset value. Essentially if the fund has £100 million and invests that money into lots of different companies than at any point in time NAV will be the current value of all of those investment and you buy and sell a share of the fund just like you can buy or sell a share in a company. The price of the shares in the fund are based on whether people want to hold that fund (ie buy into it) or not. So the investments owned by the fund are worth £100 million the price to buy a share of the fund may or may not value the fund at £100 million. So if people thought the management team were fantastic the fund could be valued at more than the total of its investment (ie more than NAV) but it people thought that the fund was going to be a poor investment the price could be at a discount. There is a fund with the symbol SMT (Scottish Mortgage Inv Trust) and the price of shares in SMT dropped because there were internal management disagreements and people lost confidence in the fund so it started trading at a massive discount (because people didn’t want to buy it) but that didn’t change the value of the investments or the actual value of the fund (NAV). The discount to NAV is important because it can tell you how the market thinks the fund will perform in the future and can also provide opportunities to buy things cheaply (at a discount).

A good source of information is a website called investopedia. They have lots of good articles explaining everything.

I hope I haven’t confused things. Basically in terms of funds there is a massive choice but they don’t always perform well and just like investing in individual companies can lose money as well as go up in value.

If you are decide to invest in individual companies do your research and don’t put too much into any individual company. You may decide that the best strategy is to have a small number of funds and a part of your total portfolio in individual companies.

Some people are obsessed with companies that pay dividends. So a dividend is simply when a company decides to give shareholders part of the profit they make. So BP will pay a dividend where it takes some of the profits that it makes and gives that to shareholders. Another way that companies potentially return value/profit to shareholders is with buybacks. There the company decides to use some of its profits to buy back its own shares. This effectively increases the share price because there are then less shares available for shareholders. However!!! So dividends sound great - you get paid money on a regular basis for owning shares. However, if a company pays a dividend of 10p/share (meaning you get paid 10p for every share you own) the share price usually goes down by 10p or more on the exD date (the date after the day that you had to hold shares to get the dividend). Thus look at the overall performance of the company. Its not much use getting regular dividends if the share price is simply going down because overall you are probably losing money. Also many US companies have historically paid little or no dividends but have performed exceptionally well in terms of share price and growth so I would prefer a company that grows 20% than one that pays a 1% dividend and has a share price that decreases.

In terms of share buybacks these can be really good for the share price but can also be used to disguise/hide the directors giving themselves lots of new shares (ie “we’re announcing a buyback programme to buy 100 million shares that’s great for shareholders … oh and by the way we’re going to issue 60 million new shares to ourselves”).

So dividends can be nice but beware don’t be simply blinded by “oh I’ll get 4% dividend that must be great”.

Personally I invest in individual companies. There is a view that the far east has some risks at present so I guess the obvious markets are UK, Europe and US. Some companies can be cyclical so go through periods where they perform well and then have periods where they perform badly. Thus if you hold for a very long time these may average out but beware. Oil and energy companies can be examples of this. Also there can be risks with even the biggest companies. A utility company can be considered safe but can still suffer a huge problem. An oil company can produce huge profits but a major disaster will hit the company value hard. Retail is notoriously risk for years. Banks have obviously had good and bad times recently. House builders can go through cycles and can pay high dividends. During the good times they can perform really well but at other times not so. Pharmaceutical companies also can perform really well but have bad times and have risks - last week a Court ordered damages against one big Pharma company because of an issue with baby formula.

For the last year tech, semiconductors and AI have been superb and most have performed very well.

I say all of this to highlight there are no simple choices. I like tech stock because that’s my background and something I understand but someone else will avoid tech. One person will like big companies because they generally offer safer returns whereas another person will like small companies because they have the potential to offer fantastic returns.

If you decide to invest in individual companies there is a lot of information. Companies such as HL - hl.co.uk and ii publish lots of articles for their clients many of which are publicly available on their websites. There are websites such as Motley Fools and Investors Chronicle (and plenty of others) that offer free and paid content and some people say its rubbish and some will use it to read about companies… Essentially if you like reading there are plenty of sources of info for you to read whether you decide to invest in funds or individual companies.

If you use some common sense then I personally think that investing in individual companies (perhaps holding a couple of funds as well) is a good option. It is fairly easy to do research on a small number of companies and use your own experience of the companies - for example its not hard to see that Amazon and Google will have performed well over the last decade. When ChatGPT was released 15 months ago it was fairly obvious that it was a very significant development and relied on use of Nvidia chips but it took a month before Nvidia’s share price really started to react (so you had a month to see the opportunity) and the share price was about £150 and its now $900.

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Wow, thank you. A ton of information that will take me a little while to unpick properly. Thank you for taking the time to give me such an in-depth reply, I really appreciate it.

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Cool, thanks again for the link. I have lots to research

I did type another reply to you but after an hour it still isn’t approved.

Whatever you decide to do, T212 does give you a cheap way to invest and trade. Thus even if you decide to put most of your money under the bed (or in a bank account) you have the option of putting a small amount in T212 and just enjoying investing in some companies. Even if it is simply the cost of a nice night out it can be fun to invest in Amazon or M&S or BP or to look at charts and find a company that you think is good and has good analyst ratings but has taken a dip recent… Maybe you’ve got plenty of hobbies and a busy life but some people get a lot of enjoyment out of investing and T212 does provide the option of doing that with very small amounts of money

My long reply is fairly long (possible rambling) but I guess that a lot depends on your willingness and ability to learn. If you simply want to put in some money and leave it for a few years and then get all of the money out that probably makes a big difference to what is the right option. Investing does not need to be that daunting and it is possible to learn the basics fairly easily but that depends on whether you have any interest in doing so.

There are some people who take some of their savings and invest it in companies because they really like doing so. Along the way they learn about the companies that they invest in and learn a lot about the world that we live in. War, politics, environmental policy, etc. all have significant affects on investments (some investments more than others) so for some people investing can be a way of engaging with the world even if they are only dealing with a tiny part of their savings. It can also be an interesting thing to learn how to analyse charts or to assess companies.

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I am in this position at the moment.
My brother has seen my returns and he now wants to invest in a stocks and shares ISA, but he is risk averse.

My solution for him was to suggest two bonds.
One a money market bond. Think CSH2, or iShares GBP Ultra Short Bond. They are coming in at 5.5% at the moment and are low risk.
The other was a Corporate Bond ETF which has higher gains and only carries a slight risk. I chose SPDR Bloomberg 0-5 Year Sterling Corporate Bond SUKC. This is currently giving a Yield of 12% annualized, but it will fluctuate. I chose these after comparing the performance and risk of many similar ETFs.
This is not advice… Merely my choices.
I was unable to find any Gilts at all which had the stability and yield tht came anywhere near these two. The Gilt market is currently inverted and short term Gilts have better Yields than longer term ones. And those yields a currently dismal.

From this ‘safe’ position you will be able to secure your ISA and as you gain more knowledge you can use the editing tool to move some of the investments across to slightly higher risk funds which give better yields. Something like a World ETF whose spread will give you more stable exposure.
It is generally accepted that picking narrow ETFs such as commodities or single companies is the sphere of experts trying to beat the market. Stats are that over 90% of these folks do not match the Index never mind beat it.

I hope this gives you a possible way forward. I strongly recommend you watch a good YouTube channel such as Pension Craft. He is well informed (ex senior investment banker) and sensible.
Good luck.

BTW Just ETF is free and you can check out ETFs for past performance and risk and it is free.

First recognise that most of the products you’ll see at say a bank or Hargreaves Lansdown (don’t use them like I did their fees are too high) are what are called managed funds. They might hold hundreds of stocks in tiny %ages, all chosen by the fund manager.
EG if you look at L & G Artemis global Equity you get a mix of stocks, and if you compare with L & G Neptune G. E you get a different mix. Artemis is less heavily in the USA… Those are always slow to switch and the bank/HL takes a while to do it.
If you go to the box
via the little blue + in the new platform
image

to search for a product in the ISA section here and type “ishares” you’ll see a load of funds which are more transparent about what they’re invested in. DItto for “L&G” or “abrdn”. They might each be all about Japan or World technology or Financials or tracking some Index, or whatever.
Some will be a mix of treasury bonds & corporate bonds with stock or include government funds of some sort.
If this site doesn’t give all the details on what they include, others will. Morningstar is a major reference, As far as I know there’s no SCREENER here so google ETF Screener and you’ll see a load of performance numbers. No platform has all the funds they’ll list.

Basically, the more “secure” they’re deemed to be, the less return you’ll get, some are even negative most years. (Go figure!!)
Most returns come from US, & mostly technology stocks. If you pick a Global Equity fund, you’ll get a highish percentage of those. If you go for Nasdaq 100 you get the top tech stocks in the USA, S&P500 gets you the top 500 stocks of all types. Those are both pretty safe , unless the entire market drops. A rising tide raises all ships and vv.
Traditionally, bonds go up when stocks go down but that has changed recently, so the trad choices won’t give the protection they used to.
You can diversify yourself from US tech eg by going for Japanese Large Cap, Or India, or Europe. First two are doing well at the moment. My Jupiter India fund grew 54% in the last year. Past performance is unreliable, and all that - regimes change. If it has done well for 3 years then your chances for the next 6 months are reasonable
If you poke about you CAN find boring funds which have returned several percent or better every year for the past 3, or 5, say. Look at L & G Artemis. just as an example off the top of my head. . You may not find a fund here QUITE the same, but pretty close.
Changing between funds is very easy. You really cannot expect to pick one forever. Sit down every 3 months say, and compare what’s doing what.
You can have several, If one is marching on at say 9+% a month because it’s in US semiconductors and they’re flying, you may as well get a bit of the action. Even if they have a pullback, you’re likely to be well up on the deal if you’ve been in for a few months.

One other thing. look at SECTORS. You will find the market is split into a several - about 12 -20 main ones, and you can easily get info on how they’re doing. Over time a sector such as Healthcare will move up or down the rankings. SMH about 70%

Sectors have odd tickers you can search on, such as SMH for semiconductors , XLK for tech, another(???) for healthcare, another for regional banks, one for Energy (XLE) and on and on.
The more you learn the better you’ll do, in spades. I would urge you not to go for something like 8% just to beat the building societies, that’s still not beating inflation. Lots of well diversified funds got 20+ percent in the last year. That’s = more than 2x in 4 years.

Some of mine have done 35 odd percent, some like India 50+, Tech and semiconductors much better. I put some in a couple of individual stocks I thought would do well. One (SMC) doubled in about 3 weeks and the other was NVD3. Look up NVD3 and you won’t settle for 8%!
It was only a percentage, but well, it was enough. I avoided some dips but mostly held it “in” and the price went from 108 to 800. Between them, “Car” amount to “V Large house” amount in under a year.
It wasn’t here, I don’t think they had ISAs when I started, but it could have been. I did pay some fees!

“Won’t beat the market or Won’t beat the index” are often heard. Which index?? There are hundreds of indices. A year in the FTSE 100 would have done you no good at all. About 1% when I looked last.

You have to avoid the less good parts of the market. S & P 500 has done I think 30%, Nasdaq 100 40+%, Tech sector overall about 60%. S & P or Nasdaq aren’t as diversified or deTrumpified, as say using more bonds, or investing globally, though. I think I’ve measured my risk better than that, and have come out north of 100%, overwhelmed by the few that did very well indeed, (SMC, NVD3, SMH3, Mara) but it has taken effort, and if you aren’t looking at it at all, my choices would have been too risky. As it happened they needed only minor attention. Horses and courses.
Don’t pick a nag!
For just one fund, Global equity, check the content doesn’t have overwhelmingly US chip/AI stocks.
Something like an 50 50 or 25/75 bond/stock ratio would be “safer” but get you less return. Every flippin year. You have what, 25 years to plan for??

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Thank you for your reply, there’s a lot to consider. I have gone into learning mode

You can do it. Good gawd man you can put a coherent sentence together, that rates you far better equipped than average! You don’t have to be an expert. I certainly am not. And I’m older than you.
T212 lets you do it quickly clearly and free of tax without the high charges which are so common. This is not “financial advice” , but that seems to me like a pretty good start.
A friend of mine was explaining the tactics and strategy in his vegetable-producing allotment. That was far more complex, and some of his investments die in the ground.

Hi I am 68 and took my first ISA investment out in December 23. To date I have made just under 2k. On a 20k investment.

Wakemeup has given you some good advise. If you don’t feel confident in investing you could try bonds. I have bonds and gilts in my main pension and I always telling my Finance advisor to get rid of them but they have a balanced view.

I would advise you to look at ETFs. Such as IITU, low cost tracker, tracks the S&P 500 tech sector does what it says on the tin. Gone up circa 15% in last 3 months. So you can see i have made some bad investments.

Long story short I saw a company I knew their software was the de facto standard in industry and academia ANSYS rumours, being taken over was on a run, missed the boat. So bought into the purchaser Synopsys a good strategic fit after checking their last years results. Then an analyst down grades them saying they paid over the top. Price dropped until another analyst reported the synergy then price went up made 6%. Got out.

I bought 200 Sondrel shares at 4p sold at 14p. I checked the company finances. They could not pay the staff Dec salaries. They missed deadlines and therefore did not get paid on time everything told me to walk away.

Yet I bought Lyyods, Barclays, that took me ages to get in profit, BT I am still down 17%.

I still have a few dogs in my portfolio, which I will have to take some judgement.

Take it steady, you get 5.2% for all cash held.

I think looking into dividend stocks could be a smart move. These are just pieces of companies that give you a little bit of their earnings every now and then, usually four times a year. You’ll want to go for big, steady companies that have a good track record of giving these payments out without fail. This way, you can get some regular money from the dividends and maybe even see the value of your stocks go up over time.

I’m with Warren Buffett, he doesn’t like dividend stocks!
The stock price drops when the divi is paid, though sometimes by less than the divi.
Take Aviva, one of the best divi companies. Stock dropped a lot when they paid their dividend, and the stock stayed low for the year. Don’t believe the “stats” figure for their year’s growth, it’s a bit misleading due to the date, look at the chart.
But, if you need income and it’s not in an ISA , remember there’s a small dividend tax free allowance (£1k) and the tax rates are lower (8.5% std rate).

If a fund says (Acc) he divi is paid back into the fund, if it’s (Dist) then it’s distributed, ie it’s paid to you. You get it tax free if it’s in an ISA or a pension.
If the dividend is only 8% and the stock hardly rises though, you’d probably better off in a decent growing stock.

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The current yield is 3.99%

There’s a bit of a tax break for dividends, which can make these stocks more appealing for people who need some extra cash, especially if they don’t have their money in special accounts like ISAs.