the richest man in atherstone

In May 2006, I opened a Lloyds TSB Monthly Saver paying 8% gross interest for a maximum of two years. I've been diligently putting the maximum of £250 per month into it and the two-year maturity date is now approaching. By my calculations I should have around £7000 at the end of the month ready to reinvest and am now faced with the decision of what to do with it.

I've been looking around at what's available and have narrowed the choice down to the following:

Cash ISA
I think it would be prudent to put £3600 of my cash into my IceSave ISA. If I don't use my tax-free allowance this year, I lose it and IceSave are currently offering tax-free savings of 6.1% with a rate guarantee.

Fixed-Rate Bond
Still with IceSave, they also offer a 7.01% (around 5.6% after tax) fixed rate bond with maturity after a year. This would be the safe option, however I am quite tempted by other slightly riskier options.

Stocks
The recent 'Credit Crunch' has seen many people and firms removing their cash from the stock markets and putting it into safer bonds and savings accounts. This has resulted in a tumble of share prices, which to me looks very tempting at this moment in time. My personal view is that although the economic climate looks a little bleak at the moment, it is not as bad as many experts would have you believe - maybe that's why they're experts and I'm not

I don't believe it is all doom and gloom and now is an ideal time to be picking up a few equities on the cheap. Within a year (or two at most) everything will be back on track and we'll wonder what all the fuss was about - feel free to point out how wrong I was when Britain is in economic meltdown!

I haven't done extensive research but shares in the financial sector (banks) seem to have been hit hardest and two that have caught my eye are Lloyds TSB and Alliance & Leicester. Now, I'm probably biased because I use products from both of these companies and own shares in one of them but they both look tremendous value for money to me.

I've always believed that Lloyds TSB are excellently managed and although they don't always offer the best products, they do offer great customer service and have plenty of capital available to carry them through the rough periods. This is why I use Lloyds TSB for my basic personal banking. I also think their shares have been unfairly hit by the sudden exodus of shareholders and believe they will come back even stronger once the 'crisis' is over. The share price has fallen by around £1.75 over the previous 12 months.

The merits of A+L are slightly different - they tend to offer fantastic table-topping products such as their Premier Direct Current Account, which offers a whopping 8.5% in-credit interest rate. I use one of these for my business dealings. Over the last few years, I've seen A+L systematically release great products with (what seems to me) the strategy of getting their hands on loads of liquid cash which can then be used to lend or invest. This meant that when the money markets dried up (and the subsequent nationalisation of Northern Rock) A+L had plenty of money in reserve. A+L have lost around £7 per per share in value over the last 12 months.

I believe that all the good companies on the various stock exchanges will recover the share value they had around a year ago and more within five years.

Mortgage
One of my goals for this year is to reduce the outstanding capital on my mortgage to less than £60,000. Earlier in the year I had thought of using some of this cash to pay off my mortgage but a recent inheritance has helped me to complete this goal quicker than anticipated. Nevertheless, paying off more of my mortgage is still an option.

Summary
So, I will have around £7,000 to utilise and have to decide where it goes. I think I've pretty much made my mind up that £3600 will be transferred to my cash ISA meaning I have another £3400 to put into a bond, shares and/or my mortgage. I'll let you know what I decide but if you have any better ideas about where to invest a few grand, I'd love to hear them.