Wealth Check: 'Beware of putting all your eggs in one investment basket'

Kai Winkelmann is studying for a PhD in Biology at the University of Bristol. The 28-year-old, originally from Berlin, came to the UK with the hope of one day becoming a lecturer.

He says: "Biology is my passion – it's something I hope I'll always be doing. My income is modest right now but, once I finish my PhD, hopefully I'll be earning a little more money. My dream is to have an apartment in Nice – any ideas?"

Kai has always lived within his means but now wants to know how to save for retirement. He also hopes to own a property in seven years and thinks it could pay for itself with tenants. With so many options, Kai has no idea where to start. Here to help him this week are Danny Cox from Hargreaves Lansdown, Dennis Hall from Yellowtail Financial Planning and Mark Wapshott of St Edmundsbury Financial Services.

Case notes: Kai Winkelmann, 28

Salary: Kai earns £15,000 per year, and this sum is not taxed

Savings: None

Monthly outgoings: £1,071

Debts: None

Property

It is easy to be seduced by the South of France but obtaining a mortgage abroad can be more expensive and difficult to arrange, according to Cox. He says: "If Kai plans to stay in the UK, he might be better to buy a UK property as a home. The money he is currently spending on rent would be used toward meeting mortgage costs."

If Kai were to live in the apartment himself, he would reduce investment risk and cut out capital gains tax because the flat would be classed as his private residence.

Cox warns that letting out a property is one of the least tax-efficient ways to invest. It also comes with high transaction costs, and there is no way of guaranteeing tenants. Hall agrees that buy-to-let is not a sensible option for Kai, as it is best to spread money across several different investments.

"I would be wary of putting all eggs in one basket," he says. "Concentrating on a single asset class would be a mistake as it increases risk. In the short term, steps should be taken to build up savings in a variety of asset classes."

He recommends collective investments, which allow savers to deposit small amounts of money which are then invested across a wide range of projects.

Savings and investments

Kai has a little extra to spare each month from his scholarship, and the experts agree he would be smart to start putting this aside to save for a deposit on a property.

Cox says: "Kai should think about how much the property might cost and the amount of deposit he might need. This provides him with a target to aim for. Perhaps the most important part of saving is to start, even if Kai cannot save as much as he would like. Over time, particularly when he starts to earn, he should be able to save more."

Although Kai is not liable to pay tax now, he will when he starts a job. Cox recommends a cash ISA, where he can deposit money tax-free.

Wapshott also recommends a stocks and shares ISA, and thinks using a fund supermarket like Fidelity's Fundsnetwork or Skandia Investment Solutions might help Kai to get the best deal.

He says: "The main reason for using a supermarket is the wide range of funds available from all the major investment houses, often with a discount and also the ability to access your funds on the internet.

"All the funds have a risk rating, therefore a choice is available to match Kai's attitude to investment."

In the short term, Wapshott says Kai must set up a British savings account for day-to-day expenditure, if he hasn't already done so. As a non-taxpayer, he should fill out an R85 form, which will mean he can earn interest without paying tax.

Pension

Kai loves to travel and has no idea where life will take him. Hall says it is best for him to decide where he wants to settle down before committing to a pension scheme in any particular country.

He says: "Although it is possible to make pension contributions in the UK even if not earning, is this going to be the most appropriate thing to do?

"If you are not yet completely sure of your future plans it doesn't make sense to commit to long-term plans that could turn out to be very small in value."

However, Wapshott thinks Kai could start a pension while remaining flexible. He says: "Although Kai may retire abroad, to France, any funds built up could follow and be paid in most of the world."

Kai would need to seek further advice on how to access those funds but could probably transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS), which is available to anybody who intends to retire abroad.

For a free financial check-up, write to Wealth Check, The Independent, 2 Derry Street, London W8 5HF; or email wealthcheck@independent.co.uk

To find an independent financial adviser in your area, visit www.unbiased.co.uk

Suggested Topics
PROMOTED VIDEO
Arts and Entertainment
Characters in the new series are based on real people, say its creators, unlike Arya and Clegane the Dog in ‘Game of Thrones’
tv'The Last Kingdom' is based on historical events
News
people
Arts and Entertainment
filmSir Ian McKellen will play retired detective in new film
Life and Style
tech
News
Justin Bieber performing in Paris earlier this year
people
Arts and Entertainment
Martin Freeman and Lauren O'Neil in Jamie Lloyd's Richard III
theatreReview: The monarch's malign magnetism and diabolic effrontery aren’t felt
Arts and Entertainment
'Molecular Man +1+1+1' by Jonathan Borofsky at Yorkshire Sculpture park
tv
News
Glamour magazine hosts a yoga class with Yogalosophy author Mandy Ingber on June 10, 2013 in New York City.
newsFather Padraig O'Baoill said the exercise was 'unsavoury' in a weekly parish newsletter
Extras
indybest
News
people'She is unstoppable', says Jean Paul Gaultier at Paris show
Sport
Alexis Sanchez and apparently his barber Carlos Moles in Barcelona today
football
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Financial Accountant-IFRS-Gloucester-£300/day

    £250 - £295 per day + competitive: Orgtel: Financial Accountant - IFRS - Glouc...

    SharePoint/C# Developer - Aberdeen - Circa £40K + benefits

    £30000 - £40000 per annum + excellent benefits: Deerfoot IT Resources Limited:...

    The benefits of being in Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    HR Advisor - 6 months FTC Wimbledon, SW London

    £35000 - £40000 per annum + Benefits: Ashdown Group: HR Advisor - 6 Months Fix...

    Day In a Page

    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
    Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

    Hollywood targets Asian audiences

    The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
    Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

    Grindr founder Joel Simkhai: 'I've found love on my dating app'

    Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
    Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

    Is it time to ditch autocorrect?

    Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
    10 best girls' summer dresses

    Frock chick: 10 best girls' summer dresses

    Get them ready for the holidays with these cool and pretty options 
    Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

    Westminster’s dark secret

    Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
    A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

    A History of the First World War in 100 Moments

    Dulce et decorum est: a life cut short for a poet whose work achieved immortality
    Google tells popular music website to censor album cover art in 'sexually explicit content' ban

    Naked censorship?

    The strange case of Google, the music website and the nudity take-down requests
    Howzat! 8 best cricket bats

    Howzat! 8 best cricket bats

    As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
    Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

    David Luiz falls from leader figure to symbol of national humiliation

    Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil