isa - stocks and shares

ACID

afternoon all,

i have already subscribed to this years isa, however from April im very tempted to go into a stock and shares (im aware its now new )

the rate of 3% doesnt ensure confidence for me to reach a high savings amount

im aware there is alot of risk especially if i invest in a high risk ISA but also the return woudl be good

However i appreciate your feedback, good or bad

many thanks

Loughton_Monkey

It depends what you mean by 'Risk' and you own personal attitude to it.

Most of us believe that the 'risk' is very well spread in an ISA, since you are not investing in a single company or even a single industry. Depending on your fund choice, you are investing in a very large spread of 'equity' investments.

Equity investing means that the value can rise or fall. The value can fall by as much as 30% or 40% in a year, although that's rare. Historically, though, equities have performed better than cash savings over long periods.

I suggest what you need to assess is:

1. Do you plan to leave it there for a long time (5 to 10 years minimum)? If so, then Stocks & Shares could perform quite well.

2. Will you be flexible in when you cash it in? If, for example, you specifically must have the money at a certain time, then you run the risk that the particular time co-incides with a small 'crash'. If you are more flexible, you can choose to leave it in and most of the time it will recover.

3. Will this ISA form a 'large' proportion of your savings? As you can imagine, this investment is 'volatile' - but will almost certainly grow in the longer term. Someone who put in (let's be extreme) 95% of their entire savings into a Stocks & Shares ISA would be running a massive 'risk'. Conversely, if only 10% of all your cash savings were in such an ISA, then the 'risk' to your entire net worth is extremely small.

If, on the basis of the above, you feel it is right to invest, then you can still 'fine tune' the risk by going for different categories of funds. A rather 'old fashioned' view (and one I violently disagree with personally) is that UK-based funds tend to be the 'safer' ones, while foregin or emerging markets tend to be 'risky'. This ceased to be true 10 or more years ago over the period when wealth and wealth creation ceased to apply to UK, but applies now to Asia and Emerging Markets.

But there are still 'safer' funds - as I would classify as those in a mixture of equitities, bonds, fixed interest, and maybe property, and over a very wide geography - possibly worldwide.

Then 'Medium' risk would tend to be 'simple' managed funds virtually 100% equities in, say, across Asian markets.

The 'High' Risk funds tend to be those who 'leverage' investments (borrow money hoping to get better returns) and who invest in 'derivatives', such as hedge funds etc. Or maybe those with an extremely specific focus, like Oil or a single small country.

ACID

I appreciate your feedback, it has helped alot.

Ideally if i was to go through a bank for this, they woudl provide the markets that I would invest in.

I understand this of course would differ with each different bank or building society I go with..then of course I would research in my own time which of the different market options are best for me.

I think personally a 3 year investment is possibly for me..not a 5-10year but it too early to tell yet..

pqrdef

Greek and Irish government bonds are paying high yields at present.

jimjames

ACID wrote: »

I appreciate your feedback, it has helped alot.

Ideally if i was to go through a bank for this, they woudl provide the markets that I would invest in.
..

A bank is possibly the worst place to buy a stocks & shares ISA from. In general the performance is poor and the charges high. If you are making your own decisions then a supermarket such as Hargreaves Lansdown or Best Invest/Cofunds would be worth looking at.