Invest for your family's future: part 2

Published by Holly Thomas on 04 April 2014.
Last updated on 04 April 2014

April 2014 calendar

Savers' confidence in the stockmarket is growing with the British economy on a fast track to recovery. The Bank of England now expects growth this year to reach 3.6%, up from the 2.8% previously forecast. While banks are ensuring savings returns remain stubbornly low, experts maintain investing in equities for the long term is the way to maximise the potential of savings.

Of course, volatility is the very nature of stockmarket investing but a carefully crafted portfolio can absorb such shocks.

We spoke to three couples at the beginning of the year who made New Year's resolutions to revamp their savings plans and overhaul their investment portfolios. In our second meeting, we'll find out how they have been getting on.


Sophie and Adrian Blythe - Investing to pay off part of their mortgage

Sophie Blythe and her husband Adrian started a savings drive to pay off the capital part of their mortgage at the beginning of the year.The couple, who live in Chelmsford, Essex, with their children Finley, four, and Harriet, eight, have been saving what they can spare – £100 a month. But this is soon to increase after some good news.

Sophie, 39, who was working three days a week as a project manager at a charity is soon to start a new job at a university as a development manager. Crucially, it is a better-paid job which means she can put more money away.

Sophie says: "My new salary is a little higher so we can afford to save a bit more. I haven't worked out quite how much yet."

Later in the year, the couple will be able to save even more again when their childcare costs will fall. They currently pay £600 a month for Finley. "But when he goes to school full-time in September, we will free up all that cash, which we plan to save. We are looking forward to building up a substantial investment portfolio that we can spend on paying down the mortgage. We might also have a bit of work done on the house."

Sophie and Adrian, 39, a paramedic, are invested in the M&G Global Dividend fund. The manager focuses on companies that can consistently grow their dividend yield rather than those that simply pay a high yield. The fund is actually down around 5.7% over the last quarter. But Sophie's investment is up as she's a monthly saver and benefits from pound-cost averaging, which means buying more units when prices have fallen, less when prices have risen, so the investment is less volatile.

Sophie says she has made about 26% over the past few months. "It's a good return and I am happy with the way the investment is going," she says. "We invest through broker Chelsea Financial Services, which keeps us up to date on what's happening."

One factor that threatens their plans is an increase in interest rates. Sophie adds: "We are on a cheap tracker mortgage, so when rates rise we could have to reduce our savings to make up for the higher repayments."


Alex and Melissa Dudley - Saving for a deposit on a home in London

Alexander and Melissa Dudley, both 29, pledged to spend 2014 saving for a deposit for a house in London, having used a chunk of their savings to pay for their wedding last year.

Alex, a management consultant, vowed back at the start of the year to save at least £1,000 a month into an equity Isa and is a believer in the UK growth story.

He has been buying the Marlborough UK Micro Cap fund and plans to continue. Alex says: "The economy is picking up and the growth figures prove it. I think my decision to invest in Marlborough UK Micro Cap Growth, which has exposure to domestically focused companies was right. These kinds of firms do really well in this kind of environment. I also hold the Henderson UK Property fund, which has exposure to UK commercial property. Both are playing out as I had hoped and I think these sectors will continue to benefit, so I have no reason to sell yet. Small-caps are no longer cheap, so I may rotate out to find value elsewhere – but not yet."

Alex and Melissa's plans to buy their first home could be hindered by the fact house prices are rising rapidly in London.

He said: "The sharp rise in house prices came as a bit of a surprise and I'm concerned about the possibility that interest rates could go up, putting first-time buyers like us under pressure when mortgage rates start going up, too."We don't want to stretch ourselves, so we won't rush into anything but will keep our savings plan going."


David and Tui Messiter - Replenishing their depleted savings

David Messiter and his wife Tui are busy replenishing their reserves after raiding their savings to move from Essex to Norfolk last year. David, who runs his own IT company, moved with Tui who stays at home to look after their daughters Lila, five, and Amelia, two. He pays himself quarterly bonuses, which means he invests lump sums throughout the year rather than having a monthly savings plan.

In January, he put his latest bonus into equities. "I used about £2,500 to fill up my Isa for 2013/14 and the rest will go in when the new tax year starts. I am sticking with the Fidelity Moneybuilder UK Index, which plays the UK recovery well."

David, 40, also feels confident Europe offers opportunities. "As it comes out of the doldrums,

I think there is some serious growth to come. I want to buy more of the Fidelity European Opportunities fund which is mostly invested in Germany and France."

David previously worked for Vodafone and so holds shares as part of its employee package. "I am weighing up whether or not I should sell them. If I do cash them in, I will reinvest most of it. I will, however, use some to smarten up the house. We would like to extend it to add more living space."

David and Tui also save for their children. "Amelia's junior Isa is doing really well but Lila has a child trust fund that is stuck not doing very much." The government has said it will allow those with now defunct CTFs to transfer the money to a junior Isa, which is typically cheaper to run and comes with better investment choices. Yet the change is not expected to be implemented for another 12 months. "As soon as we are able to transfer out of the CTF, we will do so."

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