Which Legal & General ISA?

Fire_Fox

I am considering opening a Legal and General ISA to take advantage of the £85 cashback from Wepromiseto and to get myself in the habit of regular saving. Seems like I have to open a stocks and shares ISA (I think) but how do I know which is the safest? I only have to pay in £50 a month so it's not going to make me bankrupt if I lose the money, but obviously that is not the main intention!!

ragingbass

Nothing's safe, but I quite like the FTSE100 index tracker. Opinion's divided in terms of what will happen to the FTSE100, but you're basically betting that the top 100 companies in the UK will go up in value. The returns are lower but you're risk is spread more.

Aegis

ragingbass wrote: »

Nothing's safe, but I quite like the FTSE100 index tracker. Opinion's divided in terms of what will happen to the FTSE100, but you're basically betting that the top 100 companies in the UK will go up in value. The returns are lower but you're risk is spread more.

Your risk isn't spread as much as you might think. You get some protection from an individual company failing, but the FTSE 100 is fairly poor if you're looking for diversity, given that it's all large caps and is still largely dominated by financials. Investment theory says that spreading your risk over 30 or so distinct companies is a good way to diversify a holding, but the 30 that you choose shouldn't all be in the same general sector for that diversity to follow through.

Not to mention the fact that as dunstonh will probably mention later, the FTSE100 has been one of the worst performing indices in the world for about two decades, and although past performance is no guarantee of future performance, it's worth noting!

dunstonh

I quite like the FTSE100 index tracker

Medium/high risk. Much higher than many seem to realise.

The returns are lower but you're risk is spread more.

The FTSE 100 trackers have spent most of the last 15 years at the bottom or near bottom of its sector. That doesnt mean it will spend the next 15 years there but you do have to realise that is not safe and it is not that diverse (in terms of UK). And I'm just repeating what Aegis has already said I would

If you are going to single fund invest and match the medium/high risk profile then picking the broader FTSE all share would be better in terms of tracker choice. Although value funds and equity income are still good options.

RayWolfe

If you can't afford to lose money, don't do it!
For £75 cash-back is the worst possible reason for someone to invest in stock markets.
If you want to be "forced" to save, get a Monthly Saver from a bank or B/S.

sofa_surfer

I am thinking of 'dumping' £500 to qualify for the cashback. My reasoning is if I do it as a long term investment,that the stockmarkets (incl FTSE100 index) will go up in value. The additional £85 could make the return even more attractive.
On a slightly different note - I have already a cash ISA with Egg (<£1000). Am I entitled to open one of the Legal&general shares ISA for the 2008/2009 year as well?
If someone that has already opened L&G via quidco could share some feedback that would be great.

Muchas gracias in advance!

Baldur

sofa_surfer wrote: »

On a slightly different note - I have already a cash ISA with Egg (<£1000). Am I entitled to open one of the Legal&general shares ISA for the 2008/2009 year as well?

Yes, you can open a Cash ISA and a Stocks & Shares ISA each tax year http://www.hmrc.gov.uk/leaflets/isa-factsheet.htm

Types of ISA - Cash or Stocks and Shares

An ISA can be made up of an investment in cash, or investments like stocks and shares or insurance. Individual savers are able to invest in two separate ISAs in any one tax year: one cash ISA and one stocks and shares ISA.

Fire_Fox

RayWolfe wrote: »

If you can't afford to lose money, don't do it!
For £75 cash-back is the worst possible reason for someone to invest in stock markets.
If you want to be "forced" to save, get a Monthly Saver from a bank or B/S.

Thanks everyone for your input.

I can afford to lose the money, but clearly I'd prefer not to. If I am to save even £50 a month in a stocks and shares ISA, it seems stupid to just close my eyes and stick a pin in a chart. Hence my question as to how I know which is safest (tho I do understand that it's always a bit of a punt).

£85 cashback is effectively a very good rate of 'interest' on £50 a month for a minimum of three months - but not if I lose the entire capital!! If the capital does not grow at all, or just loses a bit and grows in a few years time then it's a good deal.

Energize

I'm also wondering the same as the OP, however almost all the funds on the legal and general website seem to have a cumulative return of ~60% over 10 years according to their simplified propsectus which seems very poor to me, might as well put it in a savings account for that!

dunstonh

seem to have a cumulative return of ~60% over 10 years according to their simplified propsectus which seems very poor to me, might as well put it in a savings account for that!

There are periods when the markets beat cash and when they dont. Over the long term (and with regular contributions that means 15 years plus) you would expect the markets to beat cash. You are also looking at stats after a 45% drop in the market. Although there has been a 20% recovery since that low point. (see what I mean about different periods). Had you done 9 years, 10 months then the L&G index fund would have beaten cash, now its just below. For a higher rate taxpayer, they would still be better off on the tracker fund. Although an equity income fund over the last 10 years at £100pm would have given you more than £5000 more than cash (despite the recent drop). So, you can see the risks of putting all your eggs in one basket.

Plus, the UK hasnt been the best place to invest since 1997. Hence why any investment should be diversified and rebalanced. Although with regular payments it can take a while to get to the value where you can do that.

Fire_Fox

Thanks again to you all. I am now looking to open an Alliance and Leicester cash ISA as this offers an acceptable rate of interest, and means I am with the same bank as my partner (useful if we merge finances later on). Also an A&L e-saver cos, again, the interest is acceptable and I prefer not to have accounts all over the place.

Plus ... the Legal and General stocks and shares ISA at just £50 a month, investing in the Japan Index which I think is pretty risky! It's only a relatively small amount of money if I lose some, and I suppose I'd find out how I feel about risk/ loss!