Investing in your 30s - the married couple
If you want to ensure you can meet your shorter-term financial goals and enjoy a decent standard of living in later life, it's crucial to put the right financial foundations in place now. So how much do you need to stash away each month and where should you invest it?
In the first of a three-part series, we take a look at the options for people in their thirties. Each of our three case studies is relatively new to investing, but although they have different priorities, all share relatively long investment time horizons - due to their age.
Case study: Hugh and Fiona, a married couple in their mid-thirties
Financial arrangements are still relatively free and easy for Hugh and Fiona Bolton. Although they've just bought a house, they're on a combined income of £75,000, so still have a decent amount of disposable income and enjoy an active social life.
The couple don't plan on having any children, but they do recognise the importance of putting money away to safeguard their financial future, as neither has any desire to be working into their seventies and eighties.
Hugh already pays £200 a month into a pension from his employer, although Fiona has not yet done anything about a pension.
Hugh and Fiona's objectives
While cash is essential for their emergency fund, Hugh and Fiona are quite prepared to take on a moderate level of risk and are comfortable with a portfolio covering the full range of assets, including bonds, property and especially equities, to provide the potential for longer-term gains.
As a result, they should invest in a balanced mix of growth and income-producing funds.
They should also undertake some tax planning - including the use of ISAs and a pension plan for Fiona. If Fiona sets up a pension, contributions of around 17.5% of income are probably advisable, given her age.
Jupiter Merlin Worldwide Portfolio fund
Financial adviser Mel Kenny says: "This is a popular global fund that holds a portfolio of other investment funds rather than investing directly in shares, and it's managed with few restrictions.
"Despite the higher running costs that a fund of this type will incur, Jupiter's fund has consistently delivered decent capital growth over the medium to long term."
Threadneedle Global Select fund
"This global fund has a flexible investment remit," says Kenny, "but its team-based approach favours companies that have proven management, exercise control over pricing and have strong cash flows, so it invests primarily in large growth companies."
Blackrock UK Special Situations fund
Kenny says: "This fund establishes positions in UK companies that are undervalued due to periods of weakness that are expected to be temporary."
Our fund advice comes from financial adviser Mel Kenny, director and chartered financial planner at Radcliffe & Newlands.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).