10K to invest, need S&S ISA advice please!

CreativeLemming

I have £10,000 that I'm looking to invest. This could stay in my flexible mortgage account and effectively earn around 3.75% so transferring this to a Cash ISA doesn't seem to make much sense at the moment (I'm not sure the flexible mortgage really makes perfect sense but I'm not too worried about it as there's 40K remaining, with 32K overpaid and expecting to close in 2-3 years max).

So as the deadline's looming I'm looking into S&S ISAs - Nothing hugely risky but I'm not completely adverse. I obviously have some questions being a newbie:

1. Is a lump-sum of 10K a good idea, or would I be better off taking out the ISA and spreading the investment throughout the year and losing this years allowance?

2. Being my first investment of this type, I think I should go for an Index fund rather than Managed and branch out in a year or two's time.

3. Should I put the whole amount into a single fund (L&G UK Index for example) or spread this around, say, 40% UK 100 Index, 30% UK Smaller Companies (does this make sense combined with the UK 100?) and 20% Pacific Index?

Any good advice or pointers would be warmly welcomed!

6022tivo

I will also track this thread, I have used my cash part up, but not the stocks.

I have had a look at previous stock investments I made in 2008 and 2009, both are the same, or less that the 4k I put in each????
At one point, one went down to 3k?? So thinking they are a waste of time, and a banks way of making money from fees etc...???

ViolaLass

6022tivo wrote: »

I have had a look at previous stock investments I made in 2008 and 2009, both are the same, or less that the 4k I put in each????
At one point, one went down to 3k?? So thinking they are a waste of time, and a banks way of making money from fees etc...???

Do you understand what stock markets are and how they work?

6022tivo

ViolaLass wrote: »

Do you understand what stock markets are and how they work?

Something to do with cubes and oxo?

Derivative

6022tivo wrote: »

I will also track this thread, I have used my cash part up, but not the stocks.

I have had a look at previous stock investments I made in 2008 and 2009, both are the same, or less that the 4k I put in each????
At one point, one went down to 3k?? So thinking they are a waste of time, and a banks way of making money from fees etc...???

If you put your money into an investment product without knowing basic details about that product, you are asking for trouble. One could blame the banks, but the situation is basically that you've trusted someone who has an active interest in profiting from you.. to not profit from you. Would you like to buy a bridge?

Disregarding that - two things.
http://www.google.co.uk/finance?q=INDEXFTSE:UKX
Look at the 10 year chart. A position taken in 2008 is not generally going to show a profit today. Stock markets are for long term investment - on a day to day, month to month, even year to year basis the value will both rise and fall.

Your hope, and the way UK markets have been since your grandmother was born, is that long term the market provides positive return, over and above that from 'safe' investments like fixed rate savings accounts or bonds. This is not guaranteed, and while it is possible you bought into a bad product with high fees, more probable to me is that you didn't "pick a winner" so to speak (think BP)

Secondly - if you did indeed buy "stocks", which to me implies you may have bought into only a few companies - then it's easy to see what's going on. Anyone who invested in the banks early 2008, with very few exceptions is holding onto a loss right now, which should be readily apparent.

In response to the OP, I don't have much to comment on here besides the fact that if you're going with Hargreaves Lansdown (an excellent service according to what I can pick up from the forum) you may be better off with HSBC's trackers as they have lower annual fees than L&G's equivalent products.

ViolaLass

wrote: »

Something to do with cubes and oxo?

I assume that's a joke, and yet you don't appear to understand that if you invest in stocks and shares, the value can go up as well as down. That doesn't mean they're worthless or a con, it just means they're more volatile than cash.

jimjames

6022tivo wrote: »

I will also track this thread, I have used my cash part up, but not the stocks.

I have had a look at previous stock investments I made in 2008 and 2009, both are the same, or less that the 4k I put in each????
At one point, one went down to 3k?? So thinking they are a waste of time, and a banks way of making money from fees etc...???

Out of interest, what funds did you invest in?

It is quite an achievement to pick funds in 2008/9 that have lost money as this was the bottom of the market. Almost all of mine have increased by at least 50%, some by more.

jimjames

CreativeLemming wrote: »

I have £10,000 that I'm looking to invest. This could stay in my flexible mortgage account and effectively earn around 3.75% so transferring this to a Cash ISA doesn't seem to make much sense at the moment (I'm not sure the flexible mortgage really makes perfect sense but I'm not too worried about it as there's 40K remaining, with 32K overpaid and expecting to close in 2-3 years max).

So as the deadline's looming I'm looking into S&S ISAs - Nothing hugely risky but I'm not completely adverse. I obviously have some questions being a newbie:

1. Is a lump-sum of 10K a good idea, or would I be better off taking out the ISA and spreading the investment throughout the year and losing this years allowance?

2. Being my first investment of this type, I think I should go for an Index fund rather than Managed and branch out in a year or two's time.

3. Should I put the whole amount into a single fund (L&G UK Index for example) or spread this around, say, 40% UK 100 Index, 30% UK Smaller Companies (does this make sense combined with the UK 100?) and 20% Pacific Index?

Any good advice or pointers would be warmly welcomed!

1 - if you invest with a company like Hargreaves Lansdown you can pay the money in now as cash and then invest it during the next 12 months

2 - index funds are a good place to start as they have low charges and you don't need to worry about picking a manager that beats the market.

3 - it depends on your attitude to risk. Overseas funds have an additional risk as currency changes can affect your investment as well as the prices moving. I have a mix of different trackers for different regions in my ISA which includes UK, USA and Pacific. I use the HSBC trackers in my ISA as they are about the lowest annual charges.

Ilya_Ilyich

If you do choose to invest in an S&S ISA you should deposit the entire lump sum in one go; keeping some as cash and investing it piecemeal will just reduce the expected return.

DavidHayton

[

Ilya_Ilyich wrote: »

If you do choose to invest in an S&S ISA you should deposit the entire lump sum in one go; keeping some as cash and investing it piecemeal will just reduce the expected return.

... as long as the stock market rises after the money is invested. If you happen to invest the lot at a stock-market high (damn-near impossible to predict without the benefit of hindsight) your return will take a hit.

Phased investment is safer because it spreads the risk. Also - if you invest the same amount in cash terms each time - you benefit from pound-cost averaging (essentially you will buy more shares at cheaper prices than expensive prices).

See http://en.wikipedia.org/wiki/Dollar_cost_averaging for more info

If you decide to go down this route, you can still utilise this year's ISA allowance: the key date is when the cash is paid into the ISA, not when the cash (within the ISA) is invested. The HMRC will allow you to hold cash within a S&S ISA pretty much indefinitely as long as your intention is to invest it eventually.

David

StevieJ

ViolaLass wrote: »

I assume that's a joke, and yet you don't appear to understand that if you invest in stocks and shares, the value can go up as well as down. That doesn't mean they're worthless or a con, it just means they're more volatile than cash.

I would be a bit hacked off if I had invested in March/April 2009 and the value had gone down, almost impossible I would have thought, and that includes BP.