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Cash or equity?

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Hi,
I have a cash ISA paying 2.4%, inflation is 5%+.
Is there are ant sense in transferring to an equity ISA with a share such as an Utility returning 6%+.
I accept that there is risk of the share losing value but dividends are promised at inflation +2%.
I would not put all my eggs in one basket, but what do you think?
Jo

Comments

  • dunstonh
    dunstonh Posts: 119,687 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    If you take a risk scale of 1-10. Cash is one but you are now asking if you should jump up to risk 9 or 10 with all of the money.

    Such jumping around on the risk scale is unusual and will probably end in tears. i.e. next stockmarket crash where you lose 25-40% of your value will probably see you pull out in panic not realising that a periodic loss of that level is quite normal.

    Why are you not considering options in between as well as at both ends of the scale?

    What makes you think that dividends are guaranteed? What if the company suffers a BP?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jimjames
    jimjames Posts: 18,671 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    It may be worth investing in shares in some form but a single share is not good for risk as explained by dunstonh.

    An equity income fund would give a dividend yield of approx 4% with far more diversification than a single share although you still have the risk of the fund dropping in the short term.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    There are Cash ISAs paying a better rate you could transfer to.

    Inflation WAS over 5% (in the past 12 months), but with the headline rate forecast to fall it seems quite possible that the best cash ISA will beat inflation over the coming year. Beyond that, you can from time to time get cash ISAs paying a rate linked to RPI if inflation is your concern.

    Others have commented on the investment risk of a single share as suggested, which has probably put you off this course. But even if this was right for you, ask yourself WHY pay additional fees to hold it as an equity ISA, unless the amount is large.
  • Hi.
    I have quite a balanced portfolio, mainly UK, European and Financials.
    These are held in corprate bonds and OEICS.
    After getting fingers slightly singed with Psigma Income I went for cash ISAs for a few years.
    I now think that a bit of risk might pay off.
    The equities I had in mind were National Grid and United Utilities, both return good divis and UU reckon to pay inflation +2%.
    Both have good asset bases and NG have a lot of unregulated bits overseas.
    Anybody who bought into BP after the disaster would have doen very nicely, wonderful thing hindsight.
    Thanks for the points raised, still brooding.
    There is always a with profits bond from mt local friendly commision chap, tongue frmly in cheek.
    Cheers,
    Jo
  • donniej
    donniej Posts: 104 Forumite
    Just to add to this - you may want to consider something like a fund or an ETF to spread your risks rather than buying a single fund. This will cost you more (in management fees), but is likely to be a lot less risky than buying a single share.
  • bigfreddiel
    bigfreddiel Posts: 4,263 Forumite
    donniej wrote: »
    Just to add to this - you may want to consider something like a fund or an ETF to spread your risks rather than buying a single fund. This will cost you more (in management fees), but is likely to be a lot less risky than buying a single share.
    etfs can be very risky if you don't know what you're doing - for example do you know about synthetics, leveraging and so on?

    fj
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