Do ISA's deserve to be slated?

jamesd

former_student, read the posts here about investments for three months and you should have a fair idea how to go about it. Initially you might start with 5-10 funds at 25-50 pounds a month each on a regular investing plan with Hargreaves Lansdown or another fund supermarket.

When planning for this year, remember that from April next year you will be able to switch cash ISA money into a stocks and shares ISA, so you can shift all of the current 10,000 without it affecting your annual limit.

If you are planning to use the money for a house deposit within the next 3-5 years or less you should stick with cash ISA for the money for that. The stock market could take a fall and leave you with lower value just when you need the money, so it's not good for money you can't afford to leave invested for the recovery.

former_student

jamesd wrote: »

former_student, read the posts here about investments for three months and you should have a fair idea how to go about it. Initially you might start with 5-10 funds at 25-50 pounds a month each on a regular investing plan with Hargreaves Lansdown or another fund supermarket.

When planning for this year, remember that from April next year you will be able to switch cash ISA money into a stocks and shares ISA, so you can shift all of the current 10,000 without it affecting your annual limit.

If you are planning to use the money for a house deposit within the next 3-5 years or less you should stick with cash ISA for the money for that. The stock market could take a fall and leave you with lower value just when you need the money, so it's not good for money you can't afford to leave invested for the recovery.

Thanks for that, I want to get involved in them on some level getting started is the problem as I'm very green in this field.

Are the banks ISA with Stocks ans shares really as bad as some have indicated?

lisyloo

I simply can't see that keeping £30K in cash at 6% interest is the correct way to go unless you know you're going to need the money in the near future.

I think this depends entirely on your attitude to risk.

I don't know how old you are but you sound as though you've only had good experiences with shares.
Some of us have had bad experiences (in some cases we would literally have been better off buying cans of beer as at least we could have enjoyed the beer :-)

Some of my colleagues won't invest in shares because of bad experiences in the dot com boom.

Personally I don't think that's the right attitude but your attitude doesn't suit me personally either (no offence intended just doesn't suit my personal attitude to risk).

I think a good balance of cash, shares and property is a good idea.
I've seen long term forecasts for equities of 7%, so 6% virtually risk free with no charges seems pretty good to me.
Having a large amount in cash also saves me getting expensive (and restricitve) redundancy insurance.

Each to their own, but I don't think you can make general rules as you have attempted to do because the risk/reward thing is very personal.

macca64

I too lost in the dot com boom, trying to chase what seemed like easy money! Leason learned, however I hold other shares now, and invest in my S&S mini isa, along with my cash isa.

You just need a balance really, which you personally are happy with.

As for if ISA's are worth the hassle, of course they are, so they shouldn't be slated. If you have £30k in isa's paying 5.75% you won't have to give £345 in tax (BRT) or £690 in tax (HRT) to the government from your interest!

I have nearly all of my cash in my isa, saves me tax, so I'm happy!

cheerfulcat

lisyloo wrote: »

I've seen long term forecasts for equities of 7%, so 6% virtually risk free with no charges seems pretty good to me.

Real returns, after inflation, are quoted as 6.6% pa for equities and 2% for cash over 50 years...you are comparing the real return of equities with the gross return from cash.

Edited to remove mistaken reference to tax

lisyloo

Real returns, after tax and inflation, are quoted as 6.6% pa for equities and 2% for cash over 50 years...you are comparing the real return of equities with the gross return from cash.

Thanks that sounds much more like it.

I still think it's down to personally circumstances and attitiude to risk.
I use my cash ISAs for emergency money (e.g. if made redundant) so I could need it at ANY time, therefore it's not suitable for equity investments.
Others may be able to tie up their money for longer.

I agree that a balance is very important.

baby_boomer

cheerfulcat wrote: »

Real returns, after tax and inflation, are quoted as 6.6% pa for equities and 2% for cash over 50 years.

A bit of long term context.

Anyone investing in 1957 would still have the relatively recent memory of two world wars and the Great Depression to discourage share investment.

Pensions were usually invested in gilts at this stage - before Ross Goobey started the switch into equities.

cheerfulcat

baby_boomer wrote: »

A bit of long term context.

Er, yes, because long term was what we were discussing...

EdInvestor

cheerfulcat wrote: »

Real returns, after tax and inflation, are quoted as 6.6% pa for equities and 2% for cash over 50 years....

Do you have a source for that, CC? Don't believe I've seen a figure net of tax before. Is the figure net of charges as well?

cheerfulcat

Ahhh, beg pardon Ed, that was not net of tax, only inflation - have corrected my post. Source is the Barcap Equity Gilt Study 2006.