I'm in my late 20s and have just reached a level of earnings (and let's say 'maturity') to actually put money away regularly. At some point in the next 5 years I would like to buy property in the UK.
I wanted to reach out for some advice, as I have very little knowledge of what the best options are for saving/investing.
So in the first instance my question is - what resources are there for impartial and free or inexpensive financial advice, and can anyone provide experience based recommendations?
I am not necessarily reaching out to EFers for actual financial advice, or though it would be gratefully received.
Saving for use in the next 1-2yrs: just put in a bank account
Investing, usually for more than 1-2yrs: open an interactive brokers account and invest in a broad stock market ETF like SPY, VT. Open a Kraken account and buy some Bitcoin & Ether.
Without knowing the OP’s risk profile you suggest ‘investing’ in crypto. Equally you suggest equity investments with a 1-2 year time horizon. OP wants to buy UK property which suggests at least a UK nexus and one of the ETFs you propose tracks a US index. I’m sure your advice is well meaning, but it isn’t good without knowing a lot more about the OP.
OP investing isn’t a one size fits all strategy and advice given on the internet is often worth at best as much as you have paid for it. There are huge amounts of resources out there for you to learn from. 5 years is the minimum time period generally agreed is suitable for an equity portfolio, so that could be an option, but it depends upon your capacity and tolerance for risk - simply put if your investment is worth less than you put in after 5 years is it a) something you can afford b) something you are ok with. There are online tools to help you figure this out.
If equities are a suitable investment, what Poot suggests regarding VT is a sensible suggestion. This is an exchange traded fund that tracks the performance of world developed market equities. It is also low fee and as tax efficient as possible for a Swiss investor in non-Swiss domiciled ETFs.
A key to maximising your investment performance is to keep the fees and taxes as low as possible. This website has some very simple and well written blogs posts on investing from a Swiss point of view. Personally I’d ignore the side hustle and living frugally parts of it, but the investing part is sound. https://www.mustachianpost.com/
I didnt suggest equities for 1-2yrs if you read again.......also the OP is still in his 20s, he asked for financial advice/opinion and got some. Someone else may recommend investing in oil stocks.
OP can also go and pay some boomer in a bank selling funds with high fees, or an official 'independent financial advisor' selling crappy products for extortionate fees.
btw the S&P500 consists companies which trade on the US stock market, but is generally regarded as 'the stock market' as almost all have a significant worldwide income. The OP being British doesn't mean the FTSE100 is better, in fact it's probably way less diversified than the S&P500.
It funny I was just thinking the best investment advice I ever got was to decided what to save, and save it; then you can spend what is left.
Most people do it the wrong way around, they spend what they like and then save what they got left.
That and the obvious advice, it if sounds too good to be true, it most probability is too good to be true.
I recall reading no so long ago that bitcoins and alike are six times more risky than the stock market and very bad for the environment. Avoid them like the plague.
I have lost as much money as I have made in shares over the years. Because they are a high risk, so money you put into them needs to be money you can afford to lose, not your life savings.
1500 a month is quite respectable amount really, some 18K a year, looking ahead if you manage to keep it up, 36K year2, 54K year3; by year six you'll have over 100K.
The only reason not to put it in a Bank would be because it will be worth less in three years than it is now. So 1500 can buy you more today than it will in 3 years time. I don't think it worth worrying about that aspect, just bank it .
I would focus on trying to save more , the faster you can get the minimum you need to invest in property the better.
My final word on investing in property [that yes EF I have done so]. Be-warned once you invested the property will continue to cost you money, don't be fooled in thinking it won't. Things will break, things will get broken... and you'll need to keep investing in as long as you own it.
5 years is kinda of a borderline time horizon where it is not shortest term but you can't really call it long term neither. A lot will depend on your personal situation and don't take too seriously any specific investment advice you see here.
I'd suggest to star with some literature and see where you go from there, even if you then decide to go to a specialist - at least you have background knowledge to understand what they are saying, but you can then also do it yourself. For example A Random Walk Down Wall Street by Burton G. Malkiel
If you are sure to spend these in 5 years on a UK property, one option might be to invest them in UK property funds, assuming these correlate well enough with your future property. So if home prices will rise - your investment will rise helping you with the purchase, if your investment falls - means houses are cheaper to buy. You would basically start buying your future home right now, a bit every month. This approach has drawbacks too, such as average lower return
Have you considered expat mortgage? With 1500 chf a month, in 2 years you would have saved up enough money for the deposit to buy a property in the UK. Of course the interest rates are higher, but you could opt for 'interest only' repayment model. That way you could own a property sooner and also you could earn some money by renting it out while you're still in Switzerland. Remember once you're no longer a resident in the UK, you don't get mortgage for lower rates. I was planning to buy a property in the UK 2 years ago and was denied mortgage because I didn't have a long term job contract (even though I was ready to put 50% deposit).
First thing I would do - goal is UK property in 5 years. You need GBP. No one knows how well the Swissie will do (well probably better than the GBP, but still, that's already speculation).
So you need pounds - use an app to do your FX into GBP at the lowest possible cost. Someone suggested Interactive Brokers, you need $10k minimum to open an account there, so unfortunately not a solution yet. Find the CHEAPEST way to do your FX every month, this on its own compounded will save you a fortune.
Now that you have your GBP, what do you do with it?
I see two options:
1. You want to buy in the UK, so invest in the UK - economy in the UK does poorly your investment will do poorly but the price of housing will be down as well. Economy does well, housing will do well, and so will your investment.
It's all about correlation - I would even go one step further and find a fund that invests in a variety of house builders and UK REITs. That gives you even more correlation to that market, this way you have "hedged" your risk, and your savings will follow what the UK housing market does. Here open with IG, they tend to be alright, and when you move back to the UK you can open an ISA with them and shift some of your positions that you won't use to buy your flat onto it.
2. Given your stated goal, the above is the no brainer approach. If you want to risk a tiny bit - DCA into Vanguard world. Open a Vanguard account in the UK, and invest every month in their fund and forget about it. Over 5 years you'll likely be ok. Why open an account with Vanguard? Because you don't pay brokerage fees and will pay literally the bare minimum.
For two years, bank it. But create a virtual share/bond portfolio with a notional 36000 in it and see what happens over two years. Any dividends you would receive go into buying more shares. It'll give you experience and mean you'll be better informed if you do happen to go down that route of investing.
You could try a number of different strategies.
Bear in mind that if you are not resident in the UK stamp duty is 2% higher than for residents. 2% for the first £125K, 4% above £125K, 7% above £250K. So an £850K property is going to cost an additional £47K.
How certain are you that you want to buy property in the UK? The advice to buy GBP investments might be sound if you're certain about buying there but if I had any doubt I'd be inclined to leave my money in CHF accounts. Or else hedge by putting half my savings in GBP and half in CHF.
I also think that 5 years is too short a period to consider stockmarket investments. I'd just leave the money in bank savings accounts.