Where to invest £7k for 3 years

natsand

Hi all, some advice needed please.

I get a £7k interest free loan with my new job and was thinking of taking it to invest over the next 3 years.

I don't want to do anything too risky but was hoping for a 5% return. I don't need to have access to the money for the next 3 years.

I currently have a cash ISA which i have some allowance left on this year. If an ISA is the best thing for me, can this cash isa be transferred to a cash and investment isa?

If anyone has any advice, that would be great.

Thanks

DiggerUK

natsand wrote: »

I get a £7k interest free loan with my new job and was thinking of taking it to invest over the next 3 years. I don't want to do anything too risky but was hoping for a 5% return........

You can stooze it in a 3 year fixed rate Cash ISA at about 4?%

grumpycrab

I GUESS you should be able to lend that lot with Zopa for 36months for a return over 4%. But needs some effort setting up and managing.

dunstonh

Timescale is too short to consider investments, unless you have investment experience and accept the higher risk.. Probably best to stick to savings.

Primrose

I wouldn't invest in the stock market for a short term period of only three years. The market could dive just as the three year term finished and you have to repay the loan. Mor sensible to stick to a cash ISA or a 3 year fixed term bond.

Sceptic001

grumpycrab wrote: »

I GUESS you should be able to lend that lot with Zopa for 36months for a return over 4%. But needs some effort setting up and managing.

Zopa is not really suitable for a one-off lump sum investment as the repayments have to be ploughed back to get a decent return. Maxing out your cash ISA allowance with the rest in a 3-year fixed rate bond at around 4% (eg. AA at 4.10%) would seem to be the best option. Don't forget to ensure that any fixed term account matures before you are due to repay the loan!

Loughton_Monkey

natsand wrote: »

If an ISA is the best thing for me, can this cash isa be transferred to a cash and investment isa?

Just noticed nobody answered this. There are two distinct ISA types. Cash and Stocks & Shares. You can have either or both. Yes, you can transfer any money in a Cash ISA into a S&S ISA, but it's one way traffic. You cannot transfer them back.

However, I endorse all others' points about the risk. Had you done this October 2007, your £7K invested would be worth in the order of £5,615 (based on FTSE100 'growth').

A 3-year ISA doesn't really work either. You have (I think) made contributions this year, and so couldn't bung new money into a 3-year deal until April. To late to repay your loan.

One option is to consider AA's 3 year fixed rate bond (4.1%). Invest exactly £6,349.27 into it. When it matures, it will pay exactly £7K after basic rate tax. The other £650.73 is your "bunce". Bung that into your Cash ISA.

Job done. Now all you have to do is hope that over the next 3 years, you don't... er... need a loan of about £7K!