Is anyone bothering with a cash ISA in 13/14?

innovate

brasso wrote: »

But I'm genuinely puzzled about the aversion to stocks & shares ISAs. It's not that they have no risk, obviously. But a cash ISA seems only to keep abreast of inflation (if you're lucky) which isn't good enough for me. If you start with a large cash sum and want to be certain that you will retain your capital, I can understand these 3% or 4% deals. But I need to make my money grow.

You are right, people should be at lot less scared about S&S ISAs. However, there is very little information about how to go about an S&S ISA, or an investment outside an ISA wrapper. There are literally tens of thousands of funds, shares and trusts to choose from, so it isn't very surprising people don't know where to start. The amount of research people have to do seems bewildering. Those never venturing outside MSE will definitely find it hard / impossible to decide on a good investment (other than by sheer coincidence).

However, there are a lot of genuinely good reasons why you would prefer a cash ISA to an S&S one. For example, if all you have to put aside is money for a rainy day (say, 6-12 months living expenses), a cash ISA looks emminently more sensible than a S&S one. Or if you are too old to fancy playing the investment game any longer. Or of you know you need your cash within the next couple of years for a large expenditure like a mortgage.

brasso wrote: »

If you'd bought into the stock market in 2003 / 2004 you would have done extremely well over the following 4 years, and then seen your investments drop significantly in years 5 and 6. So much for the 5 year timescale.

In your example, if you had bought in year 4, your investment would have tanked almost immediately.

Thrugelmir

Desperate_Housewife wrote: »

I think the government doesnt want people to save up, they want us to stimulate the economy by spending. trouble is I like to have some money put by for a rainy day and deplore debt. I also have a 5 year plan going as OH wants to retire so going into year 3 and will have 2 full isas for both of us by the end of next month. Its just that I want us to have a safety buffer of cash to fall back on when we retire as well as the pension.

I realise that the value is going down and doeant keep up with inflation due to poor interest rates. What can we do? I'm an old fashioned girl who feels safe with a bit of money put by. I think I will carry on in view of the short time span we have in our plan.Also got 2 teenagers who need help getting through uni so cash is handy.

You can invest into "cash" within a pension. At least then you benefit from the tax relief.

brasso

innovate wrote: »

In your example, if you had bought in year 4, your investment would have tanked almost immediately.

Yes, and then recovered strongly again a couple of years later.

My point is: why 5 years? Seems like an arbitrary figure. Of course, if you have cash savings that you know will need in 12 months then equity investment is a bad idea. I accept that general principle.

But people shouldn't take this 5 year thing literally. Not just because you might be missing out on big gains if you have a shorter horizon, but because you might make the other mistake -- thinking that as long as you have 5 years to invest, you are going to make loads of money.

michaels

I invest in cash isas because they are effectively the repayments on my offset mortgage and as this is fixed in cash terms a cash product seems the best vehicle to match the borrowings. If the rate gets to be lower than the mortgage then I can always dump the money there instead but it is a bit of a jam tomorrow thing, if you don't use the ISA allowance then you won't have it in future when higher inflation and hence high interest rates may make avoiding being taxed on inflation much more valuable.

Is it not also the case that a cash isa can become an S&S Isa but not vice-versa?

Gordon_the_Moron

michaels wrote: »

Is it not also the case that a cash isa can become an S&S Isa but not vice-versa?

A cash ISA can be transferred to stocks and shares but a stocks and shares ISA cannot be transferred to cash, correct. Junior ISAs are an exception though, they can go both ways.

Sanchsoot49

Is it possible to "top up" a stocks and shares ISA from a cash ISA if they are with the same provider, that is transfer a proportion of it but not the whole thing?

Martinslovechild

innovate wrote: »

There is very little information about how to go about an S&S ISA, or an investment outside an ISA wrapper. There are literally tens of thousands of funds, shares and trusts to choose from, so it isn't very surprising people don't know where to start. The amount of research people have to do seems bewildering. Those never venturing outside MSE will definitely find it hard / impossible to decide on a good investment (other than by sheer coincidence).

I would like to add some truths to these opinions for the benefit of people reading this thread and jumping to the conclusion that "Cash ISAs are good, Stocks & Shares ISAs are bad!".

I originally started investing in stocks & shares around 2001. I will admit that I knew absolutely nothing at the time about investing and was bamboozled by the sheer amount of information available - however I decided that there would likely be plenty of others in the same boat - many of them close friends - so I decided to set up a share club. I asked friends & family if any of them were interested in coming along to an exploratory meeting and the turnout was staggering.

This led me to purchasing the Motley Fool guide to setting up an Investment Club, which in turn led me to discovering the Proshare website. The share club was successful and despite us going through the dotcom crash we made a healthy profit. The experience taught me a lot and as soon as I could afford to invest in an ISA, I did so. Is it difficult? No. Is there a lack of information? No. In fact, there are plenty of websites / magazines to choose from and there are plenty of people on the web who will help you.

It really isn't difficult. In fact, it's arguably easier than investing in a cash ISA. With a cash ISA, you can compare rates today - but unless you opt to open an account offering a fixed rate, the rate can vary over the course of the year. Additionally, many accounts offer front-loaded incentives, i.e. a bonus which expires in 12 months or less.

Think about this - some people might be considering opening a fictional cash ISA offering a 3% rate where you have to tie money away for 12 months INCLUDING a 2% bonus!! That's really got to be the offer of the century - NOT!! Why would anybody tie money up for 12 months just for it to be worth LESS in real-terms than it is today?

Stocks & Shares have proven time & time again that they beat every single other asset class - including property, gold etc. If you don't believe me, there's an enormous amount of evidence on the internet.

If you're not sure where to start looking, which funds to purchase, which ISA provider to go with then simply ask!! Plenty of people will help you on Motley Fool, ADVFN etc. You learned how to shop around for cash ISAs - why is it so different with S&S ISAs??

When anybody asks me which ISA they should go for, I ALWAYS answer "a stocks & shares one, unless you want to LOSE money in real-terms in a cash ISA".

innovate wrote: »

There are a lot of genuinely good reasons why you would prefer a cash ISA to an S&S one. For example, if all you have to put aside is money for a rainy day (say, 6-12 months living expenses), a cash ISA looks eminently more sensible than a S&S one. Or if you are too old to fancy playing the investment game any longer. Or of you know you need your cash within the next couple of years for a large expenditure like a mortgage.

There are cash funds in a stocks & shares ISA too - and with your money invested in a stocks & shares ISA, you're also able to deposit double the amount of a Cash ISA.

innovate wrote: »

...If you are too old to fancy playing the investment game any longer. Or of you know you need your cash within the next couple of years for a large expenditure like a mortgage.

Investing is not a "game". It's not gambling - with gambling, you know nothing about the next ball spinning around the roulette wheel, but with investing you have an awful lot of history about what the company makes, what their profits have looked like for the past X years, how their competitors are performing etc, in other words there's much more of a known quantity to go on. If you're still unsure, buy a fund instead (a basket of stocks & shares managed by a fund manager) - a fund can invest across geographical regions (e.g. South-East Asia, UK, Latin America etc) or functions (Technology, Biochemistry, Retail etc). Split your money across several different funds. Not sure which funds to invest in? Check out morningstar.co.uk for rating details and fund manager profiles.

innovate wrote: »

In your example, if you had bought in year 4, your investment would have tanked almost immediately.

You can't worry about what might or might not come to pass. I worry more about what would have happened had I chosen to invest in cash ISAs - I would be much worse off!! (and that's after factoring in the dotcom crash and the 2007-09 credit crunch!). Historically, 8 out of every 10 years are positive leaving only two which are negative. Keep your eyes peeled in online investment websites such as marketoracle.co.uk and you'll also have a good idea of where the market might be heading so that you can choose to sell your funds (but retain the money in an ISA) or even go 'short' (i.e. profit as the market goes negative).

Don't be put off. If I knew at the age of 18 what I know now, I would have grabbed stocks & share ISAs with both hands and invested the full amount annually...

BLB53

I would like to add some truths to these opinions for the benefit of people reading this thread and jumping to the conclusion that "Cash ISAs are good, Stocks & Shares ISAs are bad!".

I originally started investing in stocks & shares around 2001. I will admit that I knew absolutely nothing at the time about investing and was bamboozled by the sheer amount of information available - however I decided that there would likely be plenty of others in the same boat - many of them close friends - so I decided to set up a share club. I asked friends & family if any of them were interested in coming along to an exploratory meeting and the turnout was staggering.

This led me to purchasing the Motley Fool guide to setting up an Investment Club, which in turn led me to discovering the Proshare website. The share club was successful and despite us going through the dotcom crash we made a healthy profit. The experience taught me a lot and as soon as I could afford to invest in an ISA, I did so. Is it difficult? No. Is there a lack of information? No. In fact, there are plenty of websites / magazines to choose from and there are plenty of people on the web who will help you.

It really isn't difficult. In fact, it's arguably easier than investing in a cash ISA. With a cash ISA, you can compare rates today - but unless you opt to open an account offering a fixed rate, the rate can vary over the course of the year. Additionally, many accounts offer front-loaded incentives, i.e. a bonus which expires in 12 months or less.

Think about this - some people might be considering opening a fictional cash ISA offering a 3% rate where you have to tie money away for 12 months INCLUDING a 2% bonus!! That's really got to be the offer of the century - NOT!! Why would anybody tie money up for 12 months just for it to be worth LESS in real-terms than it is today?

Stocks & Shares have proven time & time again that they beat every single other asset class - including property, gold etc. If you don't believe me, there's an enormous amount of evidence on the internet.

If you're not sure where to start looking, which funds to purchase, which ISA provider to go with then simply ask!! Plenty of people will help you on Motley Fool, ADVFN etc. You learned how to shop around for cash ISAs - why is it so different with S&S ISAs??

When anybody asks me which ISA they should go for, I ALWAYS answer "a stocks & shares one, unless you want to LOSE money in real-terms in a cash ISA".


Quote:
Originally Posted by innovate
There are a lot of genuinely good reasons why you would prefer a cash ISA to an S&S one. For example, if all you have to put aside is money for a rainy day (say, 6-12 months living expenses), a cash ISA looks eminently more sensible than a S&S one. Or if you are too old to fancy playing the investment game any longer. Or of you know you need your cash within the next couple of years for a large expenditure like a mortgage.

There are cash funds in a stocks & shares ISA too - and with your money invested in a stocks & shares ISA, you're also able to deposit double the amount of a Cash ISA.


Quote:
Originally Posted by innovate
...If you are too old to fancy playing the investment game any longer. Or of you know you need your cash within the next couple of years for a large expenditure like a mortgage.

Investing is not a "game". It's not gambling - with gambling, you know nothing about the next ball spinning around the roulette wheel, but with investing you have an awful lot of history about what the company makes, what their profits have looked like for the past X years, how their competitors are performing etc, in other words there's much more of a known quantity to go on. If you're still unsure, buy a fund instead (a basket of stocks & shares managed by a fund manager) - a fund can invest across geographical regions (e.g. South-East Asia, UK, Latin America etc) or functions (Technology, Biochemistry, Retail etc). Split your money across several different funds. Not sure which funds to invest in? Check out morningstar.co.uk for rating details and fund manager profiles.


Quote:
Originally Posted by innovate
In your example, if you had bought in year 4, your investment would have tanked almost immediately.

You can't worry about what might or might not come to pass. I worry more about what would have happened had I chosen to invest in cash ISAs - I would be much worse off!! (and that's after factoring in the dotcom crash and the 2007-09 credit crunch!). Historically, 8 out of every 10 years are positive leaving only two which are negative. Keep your eyes peeled in online investment websites such as marketoracle.co.uk and you'll also have a good idea of where the market might be heading so that you can choose to sell your funds (but retain the money in an ISA) or even go 'short' (i.e. profit as the market goes negative).

Don't be put off. If I knew at the age of 18 what I know now, I would have grabbed stocks & share ISAs with both hands and invested the full amount annually...

I take it you don't use Twitter ;-)

Martinslovechild

BLB53 wrote: »

I take it you don't use Twitter ;-)

Hahaha yes it's a lengthy post!! Strangely enough I use Twitter pretty much all the time, though I tend to talk about music on there and finance on here!!

Mr_K

Probably not this year and am going to go wholly for a S+S ISA.

When they first came out I just went for cash, in the last few years its been split with S+S. This year its probably all going to be S+S. The shares have grown nicely at about 8% per annum over the last 5 years, but there's always a risk.

Depends on what cash deposts you've got saved already. Its true you may lose with a shares, but you're certainly going to lose with a cash isa with rates less than inflation.

Just need to decide whether to move any of my existing cash isa pot to S+S - don't think I'm quite brave enough to do that. Best to have a balanced portfolio etc.