How to start investing (not saving)

This is for all of you who are nervous or don't know how to invest.

Basically a passive portfolio works - don't be fooled into thinking an active portfolio or fund would be better. You pay more for any active fund or tracker for no benefit. And don't think a small differecne in costs won't matter, it will. A 1% differecne in costs can ad up to many tens of thousands of pound difference over time.

So thats the style of investing decided, passive, next is how to diversify so you don't get hit with a massive loss when things start heading south. 

To do that you need to have some equities (i.e. shares or stocks) and some bonds.

And to just diversify a bit more add a bit of cash and some property.

So thats it four items in your passive portfolio.

So how do you do this.

Well I use TD Direct Investing and I only invest in ETF's, very cheap and no fees from TD.

And which ETFs should you pick. This is picked straight from Monevator

http://monevator.com/9-lazy-portfolios-for-uk-passive-investors-2010/

3. Rick Ferri’s Core Four Portfolio

Asset class	Asset allocation	Fund name	OCF
Domestic equity	36%	Vanguard FTSE UK Equity Index	0.15%5
Developed world	18%	Vanguard FTSE Dev World ex-UK Equity Index	0.3%
Property	6%	BlackRock Global Property Securities Equity Tracker D	0.28%
Government bonds (Gilts)	40%	Vanguard UK Government Bond Index	0.15%

Ferri’s 60:40 split between equities and bonds is another common convention, broadly indicating a portfolio set for moderate growth and volatility.

I've gone for different mix and I've gone down a 60% Global Equity SWDA, 20% Bonds split 10% short term and 20% Index linked, and then 20% in property, 15% global property and 5% UK property.

And thats all there is to it.

Rebalance each year when you top up your ISA, you're allowed £20k per person per year, so a couple can shelter £40k from any tax each year.

There is an even simpler way, and that would be to buy Vanguards Lifestrategy fund, they vary in their mix of Equities to bonds, the Lifestrategy 60 fund is 60% equity and 40% bonds. You can see the mix when you check out it's portfolio.

This is an ultra cheap way of setting up your portfolio and I think works just as well as building one yourself, but there is certain amount of satisfaction in the DIY method, probably totally un-justified.

So don't hang about, just get on with it.