FTSE All-Share tracker ISA VS Index-linked Savings Certificates over next 3 years...

[Deleted User]

Hi everyone.

I know it's all guess work, and nobody really knows for sure; but I would appreciate your opinions regarding the above question.

I am trying to decide whether a good FTSE All-Share tracker ISA (Like Fidelity MoneyBuilder UK Index Fund) would perform better than the NS&I Index-linked Savings Certificates over the next 3 years.

As I'm sure many of you already know, the Index-linked Savings Certificates track Retail Prices Index (RPI) plus guaranteed interest rate of 1.35% (Therefore currently 5.85% TAX FREE); which is not to be sniffed at.

Which would YOU choose out of these two options, if you were planning to leave the money untouched for 3 years..? (Let's say £4K...)

At the moment I'm probably leaning more towards the NS&I Index-linked Savings Certificates, because I think inflation is here to stay... I'd love to hear your opinions though...

Many thanks in advance. :money:

dunstonh

I am trying to decide whether a good FTSE All-Share tracker ISA (Like Fidelity MoneyBuilder UK Index Fund) would perform better than the NS&I Index-linked Savings Certificates over the next 3 years.

A FTSE all share tracker means you are looking at just average performance so you handicapping yourself with that option. However, as to which will be best of the two? I will tell you in 3 years. You cannot predict the unpredictable.

Which would YOU choose out of these two options, if you were planning to leave the money untouched for 3 years..? (Let's say £4K...)

3 years is too short to consider equities unless you are a higher risk investor. That fact you are looking at a FTSE all share tracker suggests you have limited investment experience and really shouldnt be looking at equities for that period.

plonkee

Unlike lots of people here, I'm a fan of the average and so trackers. And I have money invested in the Fidelity Moneybuilder UK Index Fund.

But, over 3 years, I'd pick the NS&I.

Over 10 years, and I'd pick the tracker (possibly diversifying it with other trackers, say 80% FTSE, 20% overseas). Over 5-7 years, I might consider a mix, or other diversification.

EdInvestor

The IUKD exchange traded fund tracker would enable you to hedge your bets a bit.It tracks the UK high yield index of shares which pay high dividends. So after charges, it pays you a dividend of around 4% a year, plus hopefully capital growth as well.A good bet if you are willing to extend for 5 years in the event of any problems.

The "Iplan" ISA from https://www.selftrade.co.uk is a good way to invest in the IUKD, enabling you to reinvest the dividend income at no charge, paying only the annual 25 quid ISA fee.

baldbloke_2

dunstonh wrote: »

A FTSE all share tracker means you are looking at just average performance so you handicapping yourself with that option. However, as to which will be best of the two? I will tell you in 3 years. You cannot predict the unpredictable.



3 years is too short to consider equities unless you are a higher risk investor. That fact you are looking at a FTSE all share tracker suggests you have limited investment experience and really shouldnt be looking at equities for that period.

Ouch! The truth really can hurt! Dunstonh is absolutely right of course. It is essential that you identify your risk profile before moving out of 'savings' otherwise you will end up worrying yourself to death over every daily change of significance in the FTSE.

It's all about the 'kitchen' and the 'heat' and a year of dipping into and (!) out of (!) various - what I considered low to medium risk - funds has shown me that I need to be anywhere other than in the kitchen! In retrospect the returns would have been fine - good in fact - but my temperament wouldn't allow me to sit back and wait and see. I have opted for the Index-Linked Certs plus a good Cash ISA as my preferred option for accumulating reserves to be used at a later date. Even the Cash ISA has me scrambling around on the boards each month for better deals!

Know thyself ... and ... to thyself be true. I assume that goes just as much for saving or investing money as for any other massively important decision in life.

If I had a Dunstonh to advise and guide me then I should view things differently - but left to my own devices and message board wanderings I know I need to play safe and enjoy the lesser but guaranteed returns.
I realize inflation eats away at savings but at least one can react to its rise and fall without looking each day at how the speculative markets are doing.

Enough said. It's been a tough year and I'm just pleased to have kept to my plan. I still love reading all this stuff though!

baby_boomer

It seems a weird choice to me.

A short term punt on the stock market as opposed to the safest investment available to man?

You need to ask yourself more questions.

baldbloke_2

baby_boomer wrote: »

It seems a weird choice to me.

A short term punt on the stock market as opposed to the safest investment available to man?

You need to ask yourself more questions.

How come you made sense in 2 short paragraphs and I didn't manage it in 5 long ones!?

BrandNewDay

baby_boomer wrote: »

It seems a weird choice to me.

A short term punt on the stock market as opposed to the safest investment available to man?

You need to ask yourself more questions.

That's how I see it, too. They're apples and oranges.

The thing about indexed savings/bonds is that you're pretty much guaranteed not to lose. For short-term situations, it don't get much better than that!

baby_boomer

That was a very kind comment, baldbloke. I must have got out of bed on the right side this morning .

baldbloke wrote: »

Know thyself ... and ... to thyself be true.

That's very wise, too, when it comes to investment. Always ask yourself how you would feel & what you would do if your investment suddenly fell 25%.

Regarding this "choice"

Apples and oranges

has it in a nutshell - so to speak.

FWIW I think the NSI 3 year IL certificates are not a bad place to put some money at the moment, especially for higher rate taxpayers and I'd never recommend a 3 year stock market investment time-scale.

So the IL Certificates have it - if those are the only two options and three years is the only time-scale.

[Deleted User]

I am not surprised by any of the comments so far; and like I originally said, I thought that the NS&I route would be by far the most sensible.

I have never used my stocks and shares isa allowance, or ever bought index linked savings certs; so as I have a few grand "spare", I thought I'd try something new.

I'll go for NS&I savings certs, and sleep at night!

Thanks for all your comments.

Mr_Mumble

Does the money need to be withdrawn in 3 years time? If its just a wish to withdraw in 3 years rather than a necessity then I'd pick the tracker every time.

RPI is highly unlikely to stay at its current levels, in the short-term it could fall dramatically since last years energy rises will be taken out of the figures over the summer. You do get a 2% dividend from the FTSE tracker so the difference in yield is likely to be around the 3% mark. Tax being a factor on the tracker only if you pay higher rate.

So is the capital gain of the FTSE All-share going to be more or less than than 9% in the next three years? The FTSE P/E ratio is hardly in bubble territory, many of the mega-caps have underperformed and look good value, economic conditions look benign, the risk looks worth the reward to me. I'd only be worried about a UK property crash.

I found the query intriguing rather than weird btw!