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  • FIRST POST
    • rathernot
    • By rathernot 11th Feb 18, 8:52 AM
    • 159Posts
    • 19Thanks
    rathernot
    Using ISA allowance in current climate?
    • #1
    • 11th Feb 18, 8:52 AM
    Using ISA allowance in current climate? 11th Feb 18 at 8:52 AM
    I've just opened my ISA and would like to use my allowance by April.

    The current conditions might mean it's a good time to buy, or it could get worse who knows?

    My question is if you were in my position how would you approach it so far as dropping in £20k tomorrow v £5k tomorrow and £5k the week/fortnight/month after?

    The ISA is for the long term and will continue in April with the new allowance.
Page 1
    • bowlhead99
    • By bowlhead99 11th Feb 18, 9:14 AM
    • 7,288 Posts
    • 13,307 Thanks
    bowlhead99
    • #2
    • 11th Feb 18, 9:14 AM
    • #2
    • 11th Feb 18, 9:14 AM
    The current conditions might mean it's a good time to buy, or it could get worse who knows?
    Originally posted by rathernot
    As is always the case

    My question is if you were in my position how would you approach it so far as dropping in £20k tomorrow v £5k tomorrow and £5k the week/fortnight/month after?

    The ISA is for the long term and will continue in April with the new allowance.
    Will it continue with £20k available in April or if you use your full allowance this tax year will you be limited in how much you can afford to put in during April and in the rest of 2018/19 tax year?

    If you have £20k a year or £1500+ available each month then there is not a great deal of point feeding your current £20k in dribs and drabs - because you will have a natural 'drip feed' over the course of the coming decades with new money arriving each month or each year and giving you a rough average purchase price of all the prices that exist across those decades.

    If this £20k is quite a material chunk of money in the context of the amount you can afford to put in over the coming years and you feel that the markets are particularly choppy right now (high VIX etc) then maybe you would prefer to spread your £20k out until the end of the tax year so you only invest £1-2 k a week over the next two or three months (bearing in mind you don't need to actually invest the cash into assets on the same day you put the money into the ISA). Two to three months isn't a huge delay to get your money deployed (when you look back at it with hindsight from ten years in the future) and it might cure your nervousness about whether to invest now, later, or somewhere in between.

    Of course, you could easily deploy your money on a slow weekly drip feed over the next three months as markets rise and each contribution buys you fewer and fewer shares for your money, and then in precisely 'three months and one day' there will be a downturn which lasts for the next three years and wipes 50% of the on-paper value of your equities, and takes another five years to recover. So spreading out your money over the next several weeks is no guarantee of safety but it would at least mean you won't be taking just Monday's price but a blend of all the other Mondays over the rest of the tax year.

    The bottom line is that nobody knows what market movements we'll get next or how you personally will take them. Do you have a greater 'fear of missing out' or 'fear of losing money in a crash'? Both can be rational. Just remember that 'buy high, watch crash, get scared, sell low' is a bad outcome. If you have some innate nervousness about buying investment funds now because you saw the markets were volatile, maybe consider whether you should invest in lower risk funds instead of higher risk funds.
    • Linton
    • By Linton 11th Feb 18, 9:19 AM
    • 9,032 Posts
    • 9,120 Thanks
    Linton
    • #3
    • 11th Feb 18, 9:19 AM
    • #3
    • 11th Feb 18, 9:19 AM
    On average the amount you lose by being out of the market exceeds the amount you gain by delaying in the hope of lower prices in the future. Three reasons...

    1) There is an underlying trend upwards - if you dont believe this you would be foolish to invest at all.
    2) If you are out of the market you miss out on dividends. Reinvestment of dividends is a very important factor for investment growth.
    3) You dont know, and neither does anyone else, that prices will be lower at any particular time in the future.
    • rathernot
    • By rathernot 11th Feb 18, 9:40 AM
    • 159 Posts
    • 19 Thanks
    rathernot
    • #4
    • 11th Feb 18, 9:40 AM
    • #4
    • 11th Feb 18, 9:40 AM
    Thanks both, some very thought provoking info there.

    I actually want to jump in with an immediate £5-10k just to get up and running and as you say Linton in a few years hopefully a week or two now will be neither here nor there.

    Bowlhead99 this will be ongoing in that each April I'll be in a fortunate position to drop in the full allowance or whatever seems prudent at that point in time.

    Right now it's getting used to the psychology that you could wake up and find your £20k is £15k even though I fully get that only matters when you actually need to sell which I won't need to as this is for the long term.
    • pip895
    • By pip895 11th Feb 18, 10:14 AM
    • 530 Posts
    • 299 Thanks
    pip895
    • #5
    • 11th Feb 18, 10:14 AM
    • #5
    • 11th Feb 18, 10:14 AM
    You only know one thing for certain - now is a better time to invest than at the beginning of last week or the week before for that, for that matter.

    I would go for it now. My cash is tied up for a few more weeks unfortunately, otherwise its what I would be doing.
    • planteria
    • By planteria 11th Feb 18, 10:30 AM
    • 4,964 Posts
    • 1,098 Thanks
    planteria
    • #6
    • 11th Feb 18, 10:30 AM
    • #6
    • 11th Feb 18, 10:30 AM
    If you have £20k a year or £1500+ available each month then there is not a great deal of point feeding your current £20k in dribs and drabs - because you will have a natural 'drip feed' over the course of the coming decades with new money arriving each month or each year and giving you a rough average purchase price of all the prices that exist across those decades.
    Originally posted by bowlhead99
    agreed bowly. i see my annual contribution to my ISA as a long-term drip feed. we can obviously look to buy funds/equities at a point in the financial year that we believe represents 'good value', but it'd still be a finger in the air.
    • Glen Clark
    • By Glen Clark 11th Feb 18, 10:30 AM
    • 4,070 Posts
    • 3,097 Thanks
    Glen Clark
    • #7
    • 11th Feb 18, 10:30 AM
    • #7
    • 11th Feb 18, 10:30 AM
    Wiser heads than I only check their share prices once a year for the annual rebalance and tax return.
    Checking more frequently leads to elation and depression as prices rise and fall. Which is likely to lead to bad decisions.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • Tom99
    • By Tom99 11th Feb 18, 10:33 AM
    • 1,288 Posts
    • 819 Thanks
    Tom99
    • #8
    • 11th Feb 18, 10:33 AM
    • #8
    • 11th Feb 18, 10:33 AM
    If you want to invest the full £20k by April 5th I would go with the £5k per week. You may lose out if the market improves but you will still have made an immediate profit. On the other hand if you invest £20k on Monday and the market falls 10% by Friday you won't feel to good about it.
    • planteria
    • By planteria 11th Feb 18, 10:39 AM
    • 4,964 Posts
    • 1,098 Thanks
    planteria
    • #9
    • 11th Feb 18, 10:39 AM
    • #9
    • 11th Feb 18, 10:39 AM
    i wouldn't go that far with individual shares Glen.. funds that an investor is satisfied are 'well chosen' could be left to an annual assessment, i suppose. the trick is to be able to look at your share prices, and not panic.
    • rathernot
    • By rathernot 11th Feb 18, 12:08 PM
    • 159 Posts
    • 19 Thanks
    rathernot
    If you want to invest the full £20k by April 5th I would go with the £5k per week. You may lose out if the market improves but you will still have made an immediate profit. On the other hand if you invest £20k on Monday and the market falls 10% by Friday you won't feel to good about it.
    Originally posted by Tom99
    That's the way I'm headed at the moment.

    I'm hoping to have a couple of core funds but this way if I need to do more to diversify I can easily do so too.
    • atush
    • By atush 11th Feb 18, 12:15 PM
    • 16,542 Posts
    • 10,279 Thanks
    atush
    Thanks both, some very thought provoking info there.

    I actually want to jump in with an immediate £5-10k just to get up and running and as you say Linton in a few years hopefully a week or two now will be neither here nor there.

    Bowlhead99 this will be ongoing in that each April I'll be in a fortunate position to drop in the full allowance or whatever seems prudent at that point in time.

    Right now it's getting used to the psychology that you could wake up and find your £20k is £15k even though I fully get that only matters when you actually need to sell which I won't need to as this is for the long term.
    Originally posted by rathernot
    Why can you in future years drip feed in monthly? Look up pound cost averaging.

    And you could put int he entire 20K now, but drip feed it into investments if you like, or do 2 or 3 Lump sus now til april and take up drip feeding after
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