Vanguard Life Strategy

black_taxi_2

takeyourchances

vanguard do a Global Small-Cap Index


http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-global-small-cap-index-accumulation

black_taxi_2

standard life global smaller companies very high fees?

trickydicky14

Starting a S&S NISA

Lacking some knowledge can you help.
I have a cash nisa for 2014 – 2015 but now with the extra allowance I want to start my first S&S nisa as well for this tax year (VLS 60% with HL) I only have about £5,000 to invest at the current time so I was thinking of say £3,800 lump sum and drip feed £200 x 6 which would take me up to the new tax year.

Point 1. Does this sound reasonable / logical.

Point 2. Do I have to set up a standing order to do the £200 drip feed and come next April is it down to me to stop the SO or allow the drip feed to continue and, could I also drop a new lump sum in to the same account when the new NISA year starts.

Point 3. I also have some old fixed rate cash isas due to mature in the next six months, can I get them transferred over to the same S&S account.

Hope you can understand this if not I am sure you will tell me.
Thanks.

masonic

trickydicky14 wrote: »

Point 1. Does this sound reasonable / logical.

It would probably be more sensible to drip feed the money evenly over the remainder of the tax year if you want to avoid the possibility of buying at a market peak.

Point 2. Do I have to set up a standing order to do the £200 drip feed and come next April is it down to me to stop the SO or allow the drip feed to continue and, could I also drop a new lump sum in to the same account when the new NISA year starts.

HL will set up a direct debit to collect money that you've told them to regularly invest and will keep doing so until you tell them to make a change. The same account will be used for money invested in future tax years.

Point 3. I also have some old fixed rate cash isas due to mature in the next six months, can I get them transferred over to the same S&S account.

Yes, you can transfer in those cash ISAs.

badger09

trickydicky14 wrote: »

I have a cash nisa for 2014 – 2015 but now with the extra allowance I want to start my first S&S nisa as well for this tax year (VLS 60% with HL) I only have about £5,000 to invest at the current time so I was thinking of say £3,800 lump sum and drip feed £200 x 6 which would take me up to the new tax year.

How much have you paid into your cash ISA since 6 April 2014?

trickydicky14 wrote: »

Point 2. Do I have to set up a standing order to do the £200 drip feed and come next April is it down to me to stop the SO or allow the drip feed to continue and, could I also drop a new lump sum in to the same account when the new NISA year starts.

Unlike cash ISAs where the rate often plummets after 12 months, there is no need to move your S&S ISA each year, or to start a new one with a different provider. Assuming the the provider you choose offers everything you want to invest in, and has a charging structure which suits the size and pattern of your investment, there is no need to move or change each year. Which is fortunate as transferring can be a prolonged and painful :(process as you'll see if you read around the forum

hennerz

So far I've only used the VLS fund within my ISA. However I have cash that is just sitting doing nothing (1.4% in bank) for the next 6-18 months and was wondering how to calculate if it is worth putting it into a S&S account for a potentially short period. The taxable income from said money is my only taxable income.

masonic

hennerz wrote: »

I have cash that is just sitting doing nothing (1.4% in bank) for the next 6-18 months and was wondering how to calculate if it is worth putting it into a S&S account for a potentially short period. The taxable income from said money is my only taxable income.

Over a short period like 6-18 months, you're almost as likely to lose money as you are to generate a cash-beating return.

How much money is it? I'm sure you can find a rate better than 1.4%.

bowlhead99

hennerz wrote: »

So far I've only used the VLS fund within my ISA. However I have cash that is just sitting doing nothing (1.4% in bank) for the next 6-18 months and was wondering how to calculate if it is worth putting it into a S&S account for a potentially short period. The taxable income from said money is my only taxable income.

Unless you're a high rate taxpayer it is not a big deal to have stocks and shares / funds outside an ISA. As a no- or low-rate taxpayer there is no further tax to pay on dividends when received until the dividends in a tax year take you up into the higher rate tax bracket, which would only happen if you had lots invested (high hundreds of thousands). Also, if the gains you cash in (i.e. sale proceeds less purchase cost) during any one tax year are below £11,000, there is no capital gains tax to pay.

It's quite normal for people who have filled up their ISA allowance to invest in an 'unwrapped' stocks & shares account and then when they get to a new tax year, sell (say) £15000 of funds, move the cash proceeds to the ISA and purchase £15000 of the same funds the same week.

So, if you're talking about having a big lump of cash that you want to invest for the long term but have run out of ISA space, I'd say go ahead and invest it unwrapped and then in just over 7 months you can put more of it in your ISA with the new allowance and in just over 19 months you can put more of it in your ISA and so on. The returns in that period using long term averages might be 4%-9% depending on the type of fund which of course is much better than 1.4% from your cash, and tax should be nil or minimal.

HOWEVER - if you're not talking of investing the money for 6-18 months as part of a long term plan to acquire stockmarket- based investments, but just as something to do with your cash before you need to spend it in 6-18 months, then it is a totally different question.

Obviously the answer about tax rates is the same no matter what you plan to do with the proceeds in 6-18 months. But you can't "calculate if it is worth putting it into a S&S account for a potentially short period". You don't know what the returns of stocks and shares will be over that short period, to compare with the known cash return.

So for example your £10,000 cash in a 1.4% bank account for a year would definitely turn into £10,140 before tax after a year (this is not the thread to point out that you can get much higher than 1.4% from banks unless we're talking much bigger numbers than £10,000 ). But whatever rate you get from your bank, your cash gives a fixed known return at the end of the year. If you instead put £10,000 into an S&S account for a year it might turn into £12,000, or it might turn into £7,000 or worse. See graph in #1291

If you look to the longer term, as part of a 25 year investment and take an average return of 4-9% depending on the type of fund, then it would hopefully turn into £10,400- £10,900, but that's an average rate of returns over a period which has lots of up years and down years. It is not the result you expect in any one year. In any one year, you would likely do better or worse than that average, rather than hitting the average.

So if I'm investing for 25 years and the first year is outside an ISA and the last 24 years are inside an ISA I don't really worry about whether the return in year one is +20% or -20% it is all just part of the ups and downs of the 25 year rollercoaster. However, if you are saving up to buy a car in 6-18 months it would make a significant difference to you if you got +20% versus -20%. But as you don't know which one you'll get, you can't compare it with 1.4%.

Also if you don't have ISA capacity there is no point wondering how much better or worse you would be investing unwrapped versus ISA. If you think the markets are going up this year there is no point waiting for a year to get the ISA allowance and then investing after the boat has already sailed.

hennerz

Thank you for the replies! My plan is to max our my ISA allowance for the next 5 years at least, and buy a property to live in within 18months. Right now I have around £150k I guess.

Part of my question (I forgot to mention) was if the fees (I currently use iWeb), for purchase/sale within 18 months would generally make it a bad move?

The point you make about if I am planning on maxing out the ISA for the next few years means that even if the funds are unwrapped at the moment then I am still investing for the long run, but with a change of wrapper along the way!

masonic

Maybe I am still misunderstanding your post, but it seems to me like you are intending to invest money that you will to use to buy a house in the near future. If that's the case, you'll kick yourself if markets crash in the next few months and you are forced to sell up before they recover.

It would be perfectly sensible to invest any money you don't need for the house purchase, however, and the charges for buying and then later moving into your ISA would not make this significantly less attractive.