One of the ways I hope to make a passive income is through investing. It can be a hands-off way of earning money but it does have its risks. I am going to cover:
- Why A Cash ISA Won’t Make You Rich
- The Advantages & Disadvantages of Investing in a Stocks and Shares ISA
- The Vanguard Investment Company
- My Current Investment Balance
Why A Cash ISA Wont’t Make You Rich
A few year ago I opened a cash ISA. This is a tax free account, where you can save up to £20,000 per year, earn interest and not pay any tax.
I thought I was doing really well because I had set up a savings account and was saving consistently. The rates were better than you could get with the banks.
However, looking at the interest rates, I wasn’t doing too great. In the last year the interest rate went down to 0.10% which means that earnings on the account was next to nothing.
It was then that I decided to venture into the world of Stocks and Shares ISAs. This has its great advantages and also disadvantages.
The Advantages & Disadvantages of Investing in a Stocks and Shares ISA
The advantages are that you can earn a fantastic amount in interest when the price of stocks and shares rise. The disadvantage is that you can lose money if stock prices drop.
This was one of the reasons why I didn’t think about doing this. I had no idea about stocks and shares and I didn’t even know who I could talk to about it. I thought it was something just for rich people.
Over the last couple of years there has been a lot more information available. Lots of youtubers have helped to explain what Stocks and Shares ISAs are and how you can start investing with a measured amount of risk.
Companies have also made their businesses more people-friendly so it is more accessible. After watching several videos and visiting a few websites, I decided to open an account with Vanguard Investment.
The Vanguard Investment Company
This company has been around for over 45 years. The reason I chose this one is because their commission rates and fees were low and it offers a Stocks and Shares fund called LifeStrategy Funds.
Highly educated moneymen and women have collected a variety of companies that are trading on the stock market and bundled them together. You can then choose to invest in that bundle.
These bundles are made up of companies from different industries and different countries. The selection has been balanced so that if there is a problem in one country, your overall losses are balanced out with how good another country or industry is doing.
The bundles are made up of a mixture of shares and bonds. Shares are risker and bonds have a really low risk of losing their value.
There are 5 different LifeStrategy bundles that you can choose from. This will be based on how high or low your risk level is.
- LifeStrategy -20
- LifeStrategy -40
- LifeStrategy -60
- LifeStrategy -80
- LifeStrategy -100
LifeStrategy – 20 is the lowest risk with the lowest returns. The number refers to the percentage that is in shares.
LifeStrategy-100 is the highest risk with the highest returns. So 100% of this bundle is made up of shares. I opted for the LifeStrategy-80
My Current Investment Balance
I opened a Vanguard Investment account in January 2021. Checking my balance today, I have made £276.74 = 2.35% rate of return. This is great. However the number can go up and it can go down. For example, when I checked my account two weeks ago, my investment had made a loss and I was about £300 in the red. That was a bit scary.
It is recommended that you do not check your account everyday but as this is new to me, I can’t help looking to see whether the figure is higher or lower.
This is a long-term investment plan. I intend to keep the money invested for at least 10 years. Then we shall see where we are. I am aiming to invest at least £500 per month, if possible, but hope to be able to invest more. We shall see.
It is always a good idea to do your own research but if you can invest even a little bit of money each money, a Stocks and Shares ISA account is a great option.
Have Your Say: Have you opened a Stocks & ISA account?