At 28, Anish Hemachandran is saving for a deposit towards his first home. He is a software engineer working for a medical devices company, but says property prices rises in the South East have made it difficult to buy in his local area, Aylesbury.
In recent years he has tried to put aside any surplus cash towards his goal.
“I mainly looked at cash savings accounts to start with, but the returns are not that attractive, so I’ve looked at other ways to boost my money,” he says.
Hemachandran opened a regular savings account with Nationwide, a Help to Buy ISA with Halifax and has made the most of the higher-interest current accounts that are available that pay up to 5% interest.
He has also started to put small amounts of money into equity investments.
“I usually only invest a limited amount to start with to see how it works. I don’t want to risk a lot,” he said. “It’s a learning curve, but if the returns are good I will hopefully invest more in future.”
Dabbling in Tech Stocks
Hemachandran has traded a few equity investments, mainly on US markets, with mixed results. He explains: “I’ve tended to invest more in technology stocks, and brands I’ve heard of.” He has recently had holdings in both Netflix (NFLX) and Alphabet Inc (GOOGL), whose main subsidiary is Google.
Both have been good investments in recent years. Google, and its Alphabet parent company, has a three-star rating from Morningstar meaning analysts consider the stock fairly valued.
Its share price has risen 34% over one year and 23% over five years, although it’s worth pointing out that as a NASDAQ listed stock these gains are in dollars, and UK investors will have to factor in currency fluctuations.
Morningstar analysts say that Google’s dominance in the digital ad market should remain intact.
“Alphabet dominates the online search market via Google’s global market share of more than 80%, through which it generates strong online advertising revenue growth and cash flow,” they explain.
“We expect the Google ecosystem to continue strengthening as its products are adopted by more and more users, increasing the attractiveness of Google’s online advertising services to advertisers and publishers.
“We anticipate that Google will continue to benefit from the significant shift of digital advertising onto mobile platforms as its Android mobile operating system gains market share. In our view, this will help Google drive revenue growth and maintain leadership in the sector.”
Netflix has also been a good growth stock and has a two-star rating from Morningstar, meaning analysts currently consider it slightly overvalued. Another NASDAQ-listed stock, its share price has risen 13% over three years but has slipped 2% over the last 12 months.
But Morningstar analysts remain broadly positive about its outlook, pointing out Netflix’s subscriber base has continued to grow, with a much stronger start to 2016 than expected.
It now has more than 77.7 million global paid subscribers to its online streaming service. But despite this growth it has recently issued lower-than-expected international subscriber guidance for the second quarter. Morningstar analysts point out of the limited appeal of its launch into newer countries, where it is largely offering just English-language programming. Morningstar says: “This package will only appeal to a thin slice of consumers in many of these new markets, primarily English-speakers with the disposable income to pay $7.50 to $8.00 per month and access to an international credit card.
“This narrow appeal may limit the international expansion until the company rolls out more country-specific content.”
Long-term Saving through a Workplace Pension
Aside from dabbling in a couple of stock market investments, Hemachandran also invests in a pension through his work. He says: “My money is invested through Aegon. This allows me to invest in market across the globe and gives me a greater diversification of stocks.”
He says he considers his pension as very long-term investing. “I don’t really keep an eye on what its’ doing day to day or what stocks are in the portfolio.”
Alternative Investments for Income
Hemachandran has also invested money with a couple of peer-to-peer lenders. This industry has been regulated since 2014 by the Financial Conduct Authority but is still a high risk area, where investors risk capital loss.
Hemachandran has invested money in Ratesetter and Lendinvest, which provides finance for property investors.
He said: “I invested in Ratesetter initially. I liked the fact that this particular peer-to-peer lender had a fund to cover bad debts. This made me feel more confident that I would get the returns promised.”
Lendinvest offers a similar peer-to-peer operation but this time the money provided is used to finance property purchases. Hemachandran said: “This is obviously a little more risky but hopefully will give me a return on my money more in line with any rise in property prices. I’ve only invested a little to start with to see how this goes.”
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