1 Month
Ask Rachel
Working in the financial industry for over 30 years, Rachel Thrussell is the leading independent expert on UK savings products. Her views are constantly in demand from both the industry and the press.
My parents have given me a few thousand pounds that I think I am going to use to help buy a house sometime in the next couple of years. What type of account should I put the money into in the meantime?
If you are definitely going to buy a house with the money, then you could open a Lifetime ISA. This is a Government scheme that offers generous bonuses to savers, although there are a number of things that you’ll need to consider first – our guide on Liftime ISAs should help you decide. However, if there is a chance that you will use the money for something else, then a straightforward savings account may be more appropriate. An easy access account (or ISA) may be best if you don’t know when you’ll need the funds, while a fixed rate bond (or ISA) could be an option if you’re confident you won’t need the funds for a certain period of time.
This week's
average rates
| No Notice | 0.16% |
| Notice | 0.36% |
| Cash ISA | 0.39% |
| 1 Year Fixed Rate Bond | 0.44% |
| 2 Year Fixed Rate Bond | 0.51% |
| 3 Year Fixed Rate Bond | 0.67% |
| 4 Year Fixed Rate Bond | 0.72% |
| 5 Year Fixed Rate Bond | 0.90% |
| 5 May 2021 | |
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Alternative sources of income
Are ETFs a good investment option for DIY investors?
If you boost your income through investing, you may have heard of exchange-traded funds (ETFs) but might be unfamiliar with what these are or whether they are a good investment option for DIY investors.
To help you decide if this type of investment is a good option, we’ve outlined what makes ETFs different to other types of investments and the pros and cons of these investments.
What are ETFs?
An ETF allows investors to buy and sell a basket of assets without having to buy all the components individually, but unlike a mutual fund, an ETF can be bought and sold throughout the trading day.
Laith Khalaf, financial analyst at AJ Bell described ETFs as very similar to a tracker fund. Khalaf explained: “Plain vanilla ETFs are very similar to tracker funds, in that they follow the performance of a broad market index, and do so at extremely low cost. They can also be held in ISAs and SIPPs just like traditional funds, and so have their gains and income sheltered from tax. Probably the most attractive edge that ETFs offer is they can be traded throughout the day, giving investors greater scope to buy on dips. By contrast, tracker funds work on a forward pricing basis, so you never know exactly what price you will pay. Over the long term, this isn’t likely to make a big difference, but some investors like to invest part of their portfolio more tactically, and some simply want to know they can buy and sell immediately, as they can with listed shares.”
The benefit of ETFs allowing investors to buy and sell throughout the trading day, combined with the benefits of a fund makes ETF potentially a good investment choice for some investors, but it is important to remember that all investments carry a risk. Khalaf added: “While there are definitely some weird and wacky options in the ETF space, the most popular options with DIY investors show they are predominantly using ETFs to gain exposure to major markets, just as they would an index tracker fund. As ETFs rise in profile, more investors will likely join the growing throng of converts.”
Although investing in an ETF can be a good way for experienced DIY investors to benefit from investing in major markets, this type of investment is not for everyone. Possible risks include the costs involved, fluctuations in price and a potential lack of liquidity when an investor wants to sell. All of these could result in a loss of capital. As such, investors should carefully consider all options and, ideally, get advice from an independent financial adviser before making investments.
If you are interested in investing in ETFs, one of the easiest ways to invest is through investment platforms. Our guide on investment platforms provides more information about investing this way, as well as how to get started.
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