First time saving/investing lump sum.

Gumbi

Hi, I am 25 years old and am currently saving a decent chunk of cash from work. I just have a student account in BOI (soon to be standard I think) so I understand it's basically doing nothing sitting in there.

At the moment I have about 10 grand put away, and expect to have up to 15k to play with by the end of my contract in June.

What is the best course of action here? From a cursory glance, 5 or even 10 year 5-10k state savings is a nice, "safe" option, but are there other options that might also be viable? Perhaps 5k in state savings (5/10 year) and the rest elsewhere?

Is it worth research some stock shares and doing some "safe" plays there?

I'm quite untutored in this field and am open to being educated.

Thanks in advance for any help.

valoren

There are a multitude of investment approaches worth reading up on. I invest (and look to invest) in common stocks, mainly NYSE listed blue chips. I'd consider myself to be a long term investor looking for value and I never plan to sell once invested as my goal is to pass along stocks to my daughter.

My criteria is quite strict though considering I will never be selling. My last major investment was Disney during the correction a few weeks ago. I've always liked it and the only drawback was the low dividend yield. Not a deal breaker but I like to get 3% if at all possible. I picked up a few more shares in Exxon which dropped over 10% and in Starbucks and AT&T. My approach to making large investments is based on the fact that it used to cost upwards of €40 or more to buy common US stocks. With the likes of DeGiro adding in the additional share or two during a dip is affordable now.

I am currently interested (obsessed would be a fitter description ) in Altria Group as it currently looks like fair value, the dividend yield there is higher than 3% and would bulk up the low DIS dividend so to speak. I am currently reading up about Royal Bank of Canada, I need to know more about taxation of canadian stock bought on the NYSE.

For me to invest in a common stock the following criteria must be met;

1. $5,000 has been saved and available for a long term investment.
2. The stock price to earnings ratio must be below 20 at a minimum but ideally 15 or below.
3. The Beta of the stock price must be below 1.5, better if under 1.00
4. The dividend yield must be 3% or higher.
5. The expected 5yr PEG Ratio must to be less than 2.00
6. The Dividend Adjusted price to earnings growth ratio is below 2.
7. Complete steps 2-6 for the list of companies in Appendix.
8. Select the best valued stock per steps 2-6 preferably near to 52 week low.
9. Add stock to Portfolio and save up another $5,000 to repeat the above once available to invest.
10. Monitor the portfolio and where market dips occur, add additional shares so long as steps 2-6 continue to be met i.e. that the stock is not overvalued and once cash is available.
11. Reinvest the dividend only if steps 2-6 remain satisfied, if overvalued then pool the received dividend together to invest in another stock when a total of $5,000 has been saved.
12. Never touch the principal i.e never sell to allow compounding to happen. Increase holdings in the stock during market corrections until gross annual income from the dividend alone from each stock reaches a minimum of $1,000.

Long term goal is to have a minimum of 20 companies paying $1,000 each annually.

Dividend Adjusted Price to Earnings Growth Ratio = (Stock Price / Earnings per share) divided by (1 year Earnings per share growth + Dividend Yield.)

The 1 year EPS growth rate can be retrieved from finviz.com
The 5 year PEG ratio can be retrieved from Yahoo Finance.

Appendix
3M
McDonalds
Abbot Laboratories
Microsoft
Abbvie
Nike
Aflac
Pepsi
Altria
Pfizer
Apple
Philip Morris International
AT&T
Procter & Gamble
Boeing
BP
Royal Dutch Shell
Brown Forman
Sherwin Williams
Chevron
Starbucks
Clorox
United Technologies
Coca Cola
Visa
Colgate Palmolive
Walmart
Emerson Electric
Walt Disney
Exxon Mobil
Wells Fargo
General Mills
Gilead Sciences
Hershey
Home Depot
Johnson & Johnson
JP Morgan
Kimberley Clark
Mastercard
McDonalds

Needless to say, I'll probably never own most of those above in my lifetime but for me the above companies are the best of the best. When I retire these companies will still be doing business, increasing their earnings and paying rising inflation busting dividends like clockwork. When my daughter retires I am pretty confident she will still be getting Disney dividends in whatever guise that company will have in 2068. Any time I get a 2 euro coin or a 10 euro note, I put them aside and save them up to invest in these companies, this year for example I have saved €800 already doing this, I save a portion of salary as is, but looking at saved cash makes it tangible for me. Like yourself I have a sum of cash ready to invest in a bargain and I continue to save to repeat that in future.

If such companies can be gotten for a bargain price and a solid yield then I can invest and sleep soundly at night and the likes of the 30 to 50 % market corrections like in 2002 and 2008 wouldn't scare me at all as it would simply represent a buying opportunity to increase the (rising) dividend income stream from the best companies on the planet at ridiculously cheap asking prices.

Gumbi

Any advice regarding state savings, prize bonds or savings accounts? I might delve into stocks a bit but not with all my money right now.

valoren

Gumbi wrote: »

Any advice regarding state savings, prize bonds or savings accounts? I might delve into stocks a bit but not with all my money right now.

Hi,
See below posts in Ask About Money.
https://www.askaboutmoney.com/threads/savings-best-buys.90481/

They update the for the best deposit accounts where and when they become available.

topper_harley2

At 25 years old, I'd be thinking 1) paying any existing debts 2) building and holding 6 months emergency fund of expenses 3) house deposit building, in a regular saver/state savings (depending on how active you are or are not in house buying.)

Gumbi

topper_harley2 wrote: »

At 25 years old, I'd be thinking 1) paying any existing debts 2) building and holding 6 months emergency fund of expenses 3) house deposit building, in a regular saver/state savings (depending on how active you are or are not in house buying.)

I don't have any debts. I have a few grand put aside for an emergency. I don't think I'll be buying a house any time soon.

I think a long term state savings might be the way to go for at least a chunk of my cash?

I will definitely look into stocks and the like, but I'd rather start slowly and get educated there before putting big money into it.

Thanks for your help! Anyone else, feel free to chip in with further input.

Mickiemcfist

valoren wrote: »

There are a multitude of investment approaches worth reading up on. I invest (and look to invest) in common stocks, mainly NYSE listed blue chips. I'd consider myself to be a long term investor looking for value and I never plan to sell once invested as my goal is to pass along stocks to my daughter.

My criteria is quite strict though considering I will never be selling. My last major investment was Disney during the correction a few weeks ago. I've always liked it and the only drawback was the low dividend yield. Not a deal breaker but I like to get 3% if at all possible. I picked up a few more shares in Exxon which dropped over 10% and in Starbucks and AT&T. I am currently interested (obsessed would be a fitter description ) in Altria Group as it currently looks like fair value, the dividend yield there is higher than 3% and would bulk up the low DIS dividend so to speak. I am currently reading up about Royal Bank of Canada, I need to know more about taxation of canadian stock bought on the NYSE.

For me to invest in a common stock the following criteria must be met;

1. $5,000 has been saved and available for a long term investment.
2. The stock price to earnings ratio must be below 20 at a minimum but ideally 15 or below.
3. The Beta of the stock price must be below 1.5, better if under 1.00
4. The dividend yield must be 3% or higher.
5. The expected 5yr PEG Ratio must to be less than 2.00
6. The Dividend Adjusted price to earnings growth ratio is below 2.
7. Complete steps 2-6 for the list of companies in Appendix.
8. Select the best valued stock per steps 2-6 preferably near to 52 week low.
9. Add stock to Portfolio and save up another $5,000 to repeat the above once available to invest.
10. Monitor the portfolio and where market dips occur, add additional shares so long as steps 2-6 continue to be met i.e. that the stock is not overvalued and once cash is available.
11. Reinvest the dividend only if steps 2-6 remain satisfied, if overvalued then pool the received dividend together to invest in another stock when a total of $5,000 has been saved.
12. Never touch the principal i.e never sell to allow compounding to happen. Increase holdings in the stock during market corrections until gross annual income from the dividend alone reaches a minimum of $1,000.

Dividend Adjusted Price to Earnings Growth Ratio = (Stock Price / Earnings per share) divided by (1 year Earnings per share growth + Dividend Yield.)

The 1 year EPS growth rate can be retrieved from finviz.com
The 5 year PEG ratio can be retrieved from Yahoo Finance.

Appendix
3M
McDonalds
Abbot Laboratories
Microsoft
Abbvie
Nike
Aflac
Pepsi
Altria
Pfizer
Apple
Philip Morris International
AT&T
Procter & Gamble
Boeing
BP
Royal Dutch Shell
Brown Forman
Sherwin Williams
Chevron
Starbucks
Clorox
United Technologies
Coca Cola
Visa
Colgate Palmolive
Walmart
Emerson Electric
Walt Disney
Exxon Mobil
Wells Fargo
General Mills
Gilead Sciences
Hershey
Home Depot
Johnson & Johnson
JP Morgan
Kimberley Clark
Mastercard
McDonalds

Needless to say, I'll probably never own most of those above in my lifetime but for me the above companies are the best of the best. When I retire these companies will still be doing business, increasing their earnings and paying rising inflation busting dividends like clockwork. When my daughter retires I am pretty confident she will still be getting Disney dividends in whatever guise that company will have in 2068. Any time I get a 2 euro coin or a 10 euro note, I put them aside and save them up to invest in these companies, this year for example I have saved €800 already doing this, I save a portion of salary as is, but looking at saved cash makes it tangible for me. Like yourself I have a sum of cash ready to invest in a bargain and I continue to save to repeat that in future.

If such companies can be gotten for a bargain price and a solid yield then I can invest and sleep soundly at night and the likes of the 30 to 50 % market corrections like in 2002 and 2008 wouldn't scare me at all as it would simply represent a buying opportunity to increase the (rising) dividend income stream from the best companies on the planet at ridiculously cheap asking prices.

Out of interest, if you've no short term need for return (giving stocks to daughter is the aim) why do you focus on dividends? I.e. a 3% dividend typically wipes 3% off the value of the stock on the ex date. Genuinely interested as you've clearly put a lot of thought into the plan.

valoren

Mickiemcfist wrote: »

Out of interest, if you've no short term need for return (giving stocks to daughter is the aim) why do you focus on dividends? I.e. a 3% dividend typically wipes 3% off the value of the stock on the ex date. Genuinely interested as you've clearly put a lot of thought into the plan.

My focus is income I suppose so dividend growth fits into that. I guess for me the best indicator of quality is a company that can pay a dividend but more importantly a rising one annually particularly during bear markets. I try to make a bulk investment to ensure that the dividend received can potentially buy an additional share so long as the price is fair value other wise I will pool it with cash savings until ready to invest again. I don't automatically drip so to speak. Over the past few years there haven't been many true bargains to be had. Investing in Disney was out of nothing more than impatience for me.

Mickiemcfist

valoren wrote: »

My focus is income I suppose so dividend growth fits into that. I guess for me the best indicator of quality is a company that can pay a dividend but more importantly a rising one annually particularly during bear markets. I try to make a bulk investment to ensure that the dividend received can potentially buy an additional share so long as the price is fair value other wise I will pool it with cash savings until ready to invest again. I don't automatically drip so to speak. Over the past few years there haven't been many true bargains to be had. Investing in Disney was out of nothing more than impatience for me.

Ah ok interesting. I'm fairly different in outlook, I invest for the long term but hate dividends, they just devalue the business & if you want to reinvest in the same business with that dividend payout you lose money due to fees. I prefer businesses to focus on value & reusing their own funds to reinvest in their own business, i.e. Berkshire.

That's just my outlook in investing, I also do invest in dividend paying companies but I'd rather they didn't!

Azza89

Gumbi, another alternative for you would be ETFs, generally low cost option that can cover a whole market (e.g. S&p 500) thus giving good diversification.

Alkers

You mention your contract being up in June, what happens then?
You could look at getting into some P2P lending through mintos or linkedfinance?