Stocks & Shares ISAs

dunstonh

 I have a financial advisor who should have an overview on things, but I feel like I need to check. Thanks.

This is what the adviser is for.   

I wonder if anyone can tell me whether the fact that my (cautious) stocks and shares ISA has dropped by about 7.5% from Dec 2021 to May 2022 reflects what would be expected or whether it suggests the fund managers have taken their eye off the ball.

Cautious is down around 10% currently (depending on your definition of cautious - so allow a swing either side of that).

HMSLion1894

A cautionary tale... I'm horrified with the endless advice to buy S&S ISAs, They are a form of gambling. When I took early retirement from being a a nurse teacher, I sat on my my lump sum for a while, then asked Santander, my bank then, for a savings account. I was strongly dissuaded. They advised I see their financial advisor, who flogged me a S&S ISA with a plethora of sales-speak and brochures.

On his advice, I put in the max allowed then, £7000 p.a., for 4 years. Then the banks crashed, and my invested £28,000 immediately lost £10,000 (which was a lot in 2007), which made me very depressed. I lost all trust in banks and bankers, who I regard as self-serving crooks backed by HM Govt. and I dare not invest my savings these days.

My appeal to Santander, after many phone calls being told I had a strong case, was finally rejected on the grounds I "hadn't read the small print"!

When you survey the banks and building societies fined £millions for misrepresentation over the past couple of decades, you can only wonder they are still allowed to flog their precarious gar bageon TV with imagery that would easily lead astray the unwary. The fines do NOT get back to those scammed, like me, so where do they go? Think VERY hard before investing in these volatile products. I wish I'd put my money under the bed.

dunstonh

 They are a form of gambling

No they are not.

On his advice, I put in the max allowed then, £7000 p.a., for 4 years. Then the banks crashed, and my invested £28,000 immediately lost £10,000 (which was a lot in 2007), which made me very depressed. I lost all trust in banks and bankers, who I regard as self-serving crooks backed by HM Govt. and I dare not invest my savings these days.

Your £28k invested would have been higher at the point they crashed as there were four positive years prior to the credit crunch drop.  And like all crashes, it went on to recover and we had one of the best decades in history.

The problem wasnt your bank.  It was the lack of knowledge and understanding you have.

Below is chart if you have invested at the highest point before the credit crunch falls.  I have ignored the four positive growth years you had before the credit crunch.  If you had waited, as you should have, the recovery came and significantly beat cash savings. Or mattress rates.



And had you continued to pay in £7000 a year from your starting point in 2004:



Over that period, you would have paid £91,000  in and the value would be £145,389.  How much did your mattress do in the same period?

My appeal to Santander, after many phone calls being told I had a strong case, was finally rejected on the grounds I "hadn't read the small print"!

That is a bit of a lie isn't it.   Ok, lets be a bit fairer. Its a massive exaggeration on your part.    Santander in that era only sold investments under the advice process.   The suitability report they issued was not small print.  It was a personalised report explaining the recommendation, the level of investment risk and the risk warnings.  All in a relatively short personalised format using normal print size.

The fines do NOT get back to those scammed, like me, so where do they go? 

You were not scammed.  You took the wrong course of action and are looking to blame others for your mistakes.  Investing is for about 5+ years. Ideally, 10+ as you get the whole of the cycle.  

Think VERY hard before investing in these volatile products. I wish I'd put my money under the bed.

You are a cautionary tale to others.  This is what happens when you do something you don't understand and then make decisions on a lack of knowledge and understanding.    The answer is to get some knowledge and understanding.  Not bury your head in the sand and rant about it decades later.

marzduk

I’m looking to open my first S&S ISA and invest £18k, then will add another £20k in April. I know it’s impossible to say for sure, but with interest rates getting higher, I could get almost 5% on a cash ISA, but is a S&S likely to still be a better option long term (10+ years)?

I’ve been looking into it a lot but don’t feel like I’ve made a lot of progress. I think I’ve narrowed it down to the Vanguard LifeStrategy 40% Equity Fund or the HSBC Conservative fund. There are so many to choose form that it’s a bit overwhelming. For someone that’s new to this, looking for something on the lower end of the risk scale, are there any others that might be better suited?

Also, I’m not totally sure how this aspect of it works - If I used the Vanguard fund for example, it is described as “ISA ready” so I assume non-ISA funds can also be added. Can I just add my investment amount, specify that £18k of it can be classed as an ISA, then in April I can move the remaining £20k into an ISA wrapper, or is that not how it works?

Thanks!

eskbanker

marzduk said:

I’m looking to open my first S&S ISA and invest £18k, then will add another £20k in April. I know it’s impossible to say for sure, but with interest rates getting higher, I could get almost 5% on a cash ISA, but is a S&S likely to still be a better option long term (10+ years)?

On average, yes.

marzduk said:

I’ve been looking into it a lot but don’t feel like I’ve made a lot of progress. I think I’ve narrowed it down to the Vanguard LifeStrategy 40% Equity Fund or the HSBC Conservative fund. There are so many to choose form that it’s a bit overwhelming. For someone that’s new to this, looking for something on the lower end of the risk scale, are there any others that might be better suited?

You might wish to read the Monevator analysis of broadly comparable multi-asset funds: https://monevator.com/passive-fund-of-funds-the-rivals/

marzduk said:

Also, I’m not totally sure how this aspect of it works - If I used the Vanguard fund for example, it is described as “ISA ready” so I assume non-ISA funds can also be added. Can I just add my investment amount, specify that £18k of it can be classed as an ISA, then in April I can move the remaining £20k into an ISA wrapper, or is that not how it works?

By 'ISA ready' I believe they're just saying that it can be held within an ISA - if you have more than the £20K annual ISA allowance to subscribe and want to get cracking then you'd open two separate accounts, a S&S ISA and also a general investment account (GIA).  You'd fund them with £18K and £20K respectively and then buy whatever investments you like with that money in each one, and then once into the new tax year you can use what's known as Bed & ISA to get the investments moved from the GIA into the ISA.

marzduk

Thanks for the advice.

Would there be any reason to split money between two funds like the Vanguard LifeStrategy and the HSBC Global Strategy in the interest of diversification? Or are they diverse enough on their own? I imagine they follow similar strategies too. Just wondering if there's any reason to avoid having all of my eggs in one basket if I'm choosing a low risk option such as this. 

masonic

There isn't a good reason. There will be considerable overlap between the underlying investments, and each is designed to be sufficient as a single holding. They do have differences, and it is worth understanding these so that you can choose your preferred option.

Guapito

a complete newbie here, so go gently please!

I have 15k to invest and it’s been suggested to me that I look at S&S ISAs rather than go down the Cash ISA route. There will be no regular savings added, just a lump sum to leave in an account for approx 10 years (obviously depending on circumstances). I’m looking at companies such as HL or AJ Bell but I’m concerned about charges. Are they worth the higher cost. I spoke to someone from HL over the phone but he bombarded me with all kinds of info and frankly put me off. Am I better off talking to a FA? 

dunstonh

Would there be any reason to split money between two funds like the Vanguard LifeStrategy and the HSBC Global Strategy in the interest of diversification? 

No.     They do virtually the same thing except the following:
1) VLS is a fettered fund of funds.  HSBC GS is unfettered (although mostly uses HSBC trackers)
2) HSBC is cheaper than VLS
3) VLS has a management decision to keep a fixed equity weighting and doesn't change the underlying weightings very often.  HSBC has a target volatility range and use management decisions to adjust the weightings to remain within that target range.
4) The underlying Vanguard trackers use sampled replication.  HSBC trackers use full replication.   
5) Vanguard trackers tend to be slightly more volatile than others.  This sometimes leads to a better upside in positive periods but greater losses in negative periods.  Often if it down to different benchmarks being used compared to the majority   see chart below:



You can see the major OEIC/UT trackers in the above along with sector average.   All but one are virtually the same.   Vanguard is the teal colour line that is different to the rest.  Three of the funds benchmark to FTSE Actuaries UK Gilts All Stocks Index, one to FTSE UK Gilts All Stocks Index and Vanguard to Bloomberg U.K. Government Float Adjusted Bond Index.

Sadly, I cannot include Bloomberg U.K. Government Float Adjusted Bond Index benchmark on the chart as Bloomberg don't licence it to be used with FE.  But we know from Vanguard's data that the fund tends to just came in under that benchmark in discrete periods (as you would expect. 

You can see similarities in other sectors:  e.g. US equity:



A bit more of a difference between the trackers with US equity but again, Vanguard is away from the majority.  And like before, the benchmarks differ.

Here are the same US equity trackers over a longer period but with the sector average included:


This shows that at the end of the day, there isn't much difference between them.  So, if you had picked the best, HSBC or the worst, Vanguard, you would still have very similar outcomes and beaten sector average.

No one fund house has the best trackers in every area.    

jimjames

Guapito said:

 I’m concerned about charges. Are they worth the higher cost. I spoke to someone from HL over the phone but he bombarded me with all kinds of info and frankly put me off. Am I better off talking to a FA? 

If you want advice then consider talking to an IFA (definitely not a FA who only advises on limited products) But the charges may be more than you are looking at with HL. HL are one of the more expensive providers though, there are cheaper options out there but it really depends if you are confident to DIY or want advice.