Question
My financial situation has recently improved due to various personal factors and I now have quite a large lump sum that I would like to learn to manage myself for growth and income.
(I've used various Financial Advisors in the past but I'm beginning to see through the obvious self interest in what they advise!)
I would like to take a course in Financial Planning/Managing personal finances so I can at least understand the basic prinicples of different financial products and learn how to develop an investment strategy/portfolio for myself.
Is there anything you can recommend? I live in London.Answer
Congratulations on deciding to take a more active interest in managing your money.
There are really five key aspects to saving and investing.
1. Get a clear idea of what you want to achieve, including how long you can tie up the money, how much income you’ll need and how much risk you can tolerate (i.e. how much could you stomach losing if markets fall).
2. Work out a sensible mix of savings and investments in line with the answers to (1) – called ‘asset allocation’.
3. Consider tax efficient ways to hold the savings and investments, for example within ISAs and pensions, as well as bearing in mind annual income and capital gains tax allowances.
4. Choose the actual products, savings, investments themselves. For example, funds or shares and, if relevant, the ISA or pension in which they’re held.
5. Once the savings and investments are in place review regularly to check whether any changes might be worthwhile (for example, a fund manager might quit affecting a fund you own or maybe your income requirements might change).
There’s no reason you can’t do this yourself with some effort and willingness to learn. And let’s face it; experience suggests a number of financial advisers make a hash of this anyway as they’re more concerned about making themselves rich rather than you.
You should be more than capable of answering (1) without too much help. The main thing is to map out a general plan of your income and expenditures over the next five to ten years to get a feel for how big a margin for error (i.e. losses) you have. If things are tight you’ll probably want to take very little risk, but if you can afford the possibility of losses it allows you to take more risk in pursuit of higher profits. It’s basically a balancing act and the correct balance is the one that allows you to sleep comfortably at night.
Working out a sensible mix of savings and investments is a bit harder, but not impossible if you use a good dose of common sense. If you’re likely to need any money within the next five years then put it in a savings account where it can’t fall in value. Any balance can then be used for investing over a realistic timescale of at least five to ten years (although you may obviously switch between investments during that time). As a starting point I’d suggest reading the investment pages on this site which should give you a good feel for the various investment (or asset) types. Most investors will tend to have a mix of stockmarket, fixed interest, commodity and property investments with proportions depending on their income requirements, risk appetite and views on markets.
To get a feel for what proportions might be appropriate you could take a look at those suggested by financial advisers and used by ‘fund of fund’ managers. For example, Bestinvest shows its suggested allocations on its website and you can look at www.trustnet.com to find the portfolio breakdowns for unit trusts – try looking at funds in the Cautious Managed sector.
When it comes to tax efficiency the investment, pension and tax pages on this site should tell you pretty much all you need to know.
Choosing the actual investments themselves is probably the hardest part and something that even professionals regularly get wrong. I’d start off by looking at funds rather than shares, as there’s less chance of making an expensive mistake. And maybe consider using low cost tracker funds where appropriate. A good way to get a feel for which actively managed funds are probably better than not is to see what investment advisers such as Bestinvest and Hagreaves Lansdown are recommending and also see which funds fund of fund managers are holding (you can use Trustnet for this). If a fund consistently appears across these mediums then it means the experts must reckon its worthwhile - no guarantee of success but a more sensible approach than simply picking what’s done well in the past.
As for courses, it’s not something I’ve ever looked at (aside from university, I've found learning from books/the web works best for me). The Chartered Institute of Insurers offers courses aimed at those studying for financial adviser exams, but they do look quite pricey and might not arm you with that much useful knowledge in practice. You could try looking on http://www.hotcourses.com, although having just had a quick search I’ve struggled to find any relevant courses.
Perhaps start by following my suggestions above then feel free to ask me any follow up questions you might have along the way.
Good luck!
My financial situation has recently improved due to various personal factors and I now have quite a large lump sum that I would like to learn to manage myself for growth and income.
(I've used various Financial Advisors in the past but I'm beginning to see through the obvious self interest in what they advise!)
I would like to take a course in Financial Planning/Managing personal finances so I can at least understand the basic prinicples of different financial products and learn how to develop an investment strategy/portfolio for myself.
Is there anything you can recommend? I live in London.Answer
Congratulations on deciding to take a more active interest in managing your money.
There are really five key aspects to saving and investing.
1. Get a clear idea of what you want to achieve, including how long you can tie up the money, how much income you’ll need and how much risk you can tolerate (i.e. how much could you stomach losing if markets fall).
2. Work out a sensible mix of savings and investments in line with the answers to (1) – called ‘asset allocation’.
3. Consider tax efficient ways to hold the savings and investments, for example within ISAs and pensions, as well as bearing in mind annual income and capital gains tax allowances.
4. Choose the actual products, savings, investments themselves. For example, funds or shares and, if relevant, the ISA or pension in which they’re held.
5. Once the savings and investments are in place review regularly to check whether any changes might be worthwhile (for example, a fund manager might quit affecting a fund you own or maybe your income requirements might change).
There’s no reason you can’t do this yourself with some effort and willingness to learn. And let’s face it; experience suggests a number of financial advisers make a hash of this anyway as they’re more concerned about making themselves rich rather than you.
You should be more than capable of answering (1) without too much help. The main thing is to map out a general plan of your income and expenditures over the next five to ten years to get a feel for how big a margin for error (i.e. losses) you have. If things are tight you’ll probably want to take very little risk, but if you can afford the possibility of losses it allows you to take more risk in pursuit of higher profits. It’s basically a balancing act and the correct balance is the one that allows you to sleep comfortably at night.
Working out a sensible mix of savings and investments is a bit harder, but not impossible if you use a good dose of common sense. If you’re likely to need any money within the next five years then put it in a savings account where it can’t fall in value. Any balance can then be used for investing over a realistic timescale of at least five to ten years (although you may obviously switch between investments during that time). As a starting point I’d suggest reading the investment pages on this site which should give you a good feel for the various investment (or asset) types. Most investors will tend to have a mix of stockmarket, fixed interest, commodity and property investments with proportions depending on their income requirements, risk appetite and views on markets.
To get a feel for what proportions might be appropriate you could take a look at those suggested by financial advisers and used by ‘fund of fund’ managers. For example, Bestinvest shows its suggested allocations on its website and you can look at www.trustnet.com to find the portfolio breakdowns for unit trusts – try looking at funds in the Cautious Managed sector.
When it comes to tax efficiency the investment, pension and tax pages on this site should tell you pretty much all you need to know.
Choosing the actual investments themselves is probably the hardest part and something that even professionals regularly get wrong. I’d start off by looking at funds rather than shares, as there’s less chance of making an expensive mistake. And maybe consider using low cost tracker funds where appropriate. A good way to get a feel for which actively managed funds are probably better than not is to see what investment advisers such as Bestinvest and Hagreaves Lansdown are recommending and also see which funds fund of fund managers are holding (you can use Trustnet for this). If a fund consistently appears across these mediums then it means the experts must reckon its worthwhile - no guarantee of success but a more sensible approach than simply picking what’s done well in the past.
As for courses, it’s not something I’ve ever looked at (aside from university, I've found learning from books/the web works best for me). The Chartered Institute of Insurers offers courses aimed at those studying for financial adviser exams, but they do look quite pricey and might not arm you with that much useful knowledge in practice. You could try looking on http://www.hotcourses.com, although having just had a quick search I’ve struggled to find any relevant courses.
Perhaps start by following my suggestions above then feel free to ask me any follow up questions you might have along the way.
Good luck!
Read this Q and A at http://www.candidmoney.com/questions/question204.aspx
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