Where to start, in order
Investing well in Britain is mostly a matter of doing a few dull things in the right order. The sequence matters considerably more than which fund you finally pick, and most of the value is in the first two steps rather than the last.
- Clear expensive debt first. Paying off a card is a certain return at the card’s own interest rate, which is higher than any portfolio can be relied on to deliver. There is no fund that beats it. The order to pay debt off in.
- Use the wrappers before you pick investments. An ISA shelters up to £20,000 a year from tax on both growth and income, for as long as you hold it. If you are under 40 and saving for a first home, a Lifetime ISA adds £1,000 free for every £4,000 you put in, though the money is then tied to a house under £450,000 or a 25% penalty on the way out. What the Lifetime ISA is actually worth, and ISA or pension first.
- Drive the costs down. Charges are the one variable you control completely, and they compound against you exactly as returns compound for you. A single percentage point sounds trivial and is not. What a 1% fee does over a working life.
- Own the whole market rather than guessing. One global index fund gives you every listed company in every developed market, which is a harder thing to beat than it sounds. Why one global fund beats the professionals.
- Then leave it alone. The hard part is not the selection, it is continuing to contribute through the years when the number goes down. Put your own figures through the compound growth calculator to see what the contributions are doing versus the returns.
None of the above requires predicting anything, which is the point. The boring plan, start to finish.