Fund or savings account?

guitarman001

Hi all,

So I'm all set for regular £100 payments into a Vanguard fund (£2 charge each deal, once a month, and roughly 0.3% AMC). I was planning on doing this for maybe 3-4 years and hope that whatever I'd get back would be greater than that from a savings account. Seeing as it's a shorter time-frame (3-4 years) I was looking at the 40% equity Lifestyle fund (rather risk averse right now having lost a LOAD on AIM shares). However seeing as the returns from this are 'low' due to the risk level, I'm wondering if after fees this would even be worth it. Would I be better off just putting it in the Santander 3.2% saver? The fund would need returns of roughly 5%+ to beat that.

This £100 is what I used to overpay my student loan with each month. So I was hoping for a return greater than the current interest rate of 1.5%.

Personal opinion - fund or savings account?

pqrdef

Have you got nerves of steel? Can you be in the markets for that length of time, sleep at nights, go on holiday, without at some point having the urge to sell the lot and get out?

What's your strategy if the markets start falling? What if they keep on falling?

What if the markets go up? Do you take your profits and run, or sit tight and wait for them to go down again?

Psychologically it's easier for those who were raised on the long bull run, back before the dotcom crash, because in their heads that's the norm, and what we're in now is just a temporary aberration to be sat out.

fimonkey

re: the £2 charge every time you invest, some other 'platforms' have a £1.50 regular investment dealing charge.- Difference of £24 over 4 years - so might be worth checking that out.

With some providers if you go direct to them to buy their products they don't charge at all! Check whether this is the case with Vanguard. ie with HSBC no charge for its FTSE all share tracker, min investment at a time is £500 though so you'd have to save for 5 months at a time and then invest.

PS are your cash ISA's full? If not and your locking away for a period of time, check out the rates there, think halifax have got a 4.25% for 5 years.