Can a stocks and shares ISA produce an income?

NewKidOnTheBlock_2

I have a few grand saved up and I really want to take the first step into trying to make my money do something and I've been looking a bit online about a stocks and shares ISA. From what I've read you should typically be investing for 5+ years and I wanted to ask if a stocks and shares ISA has the ability to produce an income rather than just a bit of extra cash after 5 years.

5 years is quite a long time and I'm looking more for something where I can invest for a few months and then sell when the price is a bit higher than I paid making a quick little profit.

I see videos online of people trading live and they're basically buying shares at a certain price and then 15 minutes later selling them for a slightly higher price and making a few hundred pound profit in a matter of minutes... What type of stocks and shares is this?

I don't feel comfortable committing my money for a long period of time like 5 years. As you can probably tell I need to do a lot more research and I will before committing any more but the idea of buying, waiting for the price to change and then selling appeals to me more than investing your money, waiting 5 years and hope you make a profit isn't enough to be considered a salary.

kidmugsy

Completely the wrong thing for you. Keep your cash in high-interest current accounts. If you want a flutter buy some premium bonds, or lottery tickets in the weeks that there's a big roll-up.

That's assuming that your post isn't a tease, which I suspect it is.

NewKidOnTheBlock_2

kidmugsy wrote: »

Completely the wrong thing for you. Keep your cash in high-interest current accounts. If you want a flutter buy some premium bonds, or lottery tickets in the weeks that there's a big roll-up.

That's assuming that your post isn't a tease, which I suspect it is.

I'm sorry I wasn't aware my post would seem stupid. I thought it was a reasonable question. I have a few grand sitting doing absolutely nothing with no plans for the immediate future so thought about trying to make my money do something for me... What is so stupid about that?

Don't bother replying if all you have is useless sarcasm

bowlhead99

If you buy a share and sell it after 15 minutes it might be more or less than you paid for it. Like if you go to the casino and play a hand of blackjack the perfect way - you might beat the dealer or you might not, it depends what cards you are dealt. If you want to be able to make a few hundred pounds in a matter of minutes you have to be prepared to lose a few hundred pounds in a matter of minutes, and it's out of your control. Your few thousand pounds can be gone within a day, just like if you took that few thousand pounds to the casino.

So sure, you can "buy, wait for the price to change and sell". But what do you do when the price only goes down and not up. Do you sell when you have a big loss? Or do you buy more when you have a big loss and end up risking a bigger one?

If you buy shares and hold for 10 years it's the opposite of a casino. At the casino in a one-day visit, the house usually wins but sometimes the player does. Over the long term, the house wins. If you invest in buying shares in the casino, you will usually win over time instead. But you have to be willing to hold 5,10,20 years for it all to average out in your favour. Because in a shorter timescale you could lose half or all of your money.

Yes, a S&S ISA can pay an income. Companies pay dividends worth 1-5% of the share price, every year. So if you have £1000 invested you might get £20-30 of income every year while the shares change in value in a range of £600 to £1400 (or even wider). So in the short term the income is not very much compared to the change in value. Of course if you only have £1000 to invest, the £30 per year is not enough to be considered a salary. But if you have £1,000,000 invested in your retirement fund, then you can stop working and get a £30,000 income without needing to work again.

Of course, getting the £1,000,000 takes time so you need to either invest a good proportion of your annual salary from a real job each year and be patient, or follow your preferred route of embarking upon a crazy gambling spree and hope you hit the jackpot, with the risk of losing everything.

If you don't feel comfortable committing for the long term to get normal returns, then sure, you can commit for small amounts of time and hope to get abnormal returns. If it were easy and the abnormal returns were always positive, we would all do that. However, we realise that if the 'normal' long term return is +5% a year, we don't want to give that up to get an random abnormal one between +95% and -95%. Because the latter would wipe us out and we would have to start from scratch all over again.

Gram_Parsons

Five years isn't a long time. (I feel a David Bowie song coming on here!). If you can't commit for five years how are you going to build up a decent pension? You could retire at 67 and live another 20-30 years with nothing other than the state pension. That really will seem like a long time.

bowlhead99

NewKidOnTheBlock wrote: »

I have a few grand sitting doing absolutely nothing with no plans for the immediate future so thought about trying to make my money do something for me...

Based on your other thread, you should keep it back for once you've worked out what education or training or re-training courses, books etc would help you get ahead in your career.

People often have cash with no immediate plans but that doesn't make it 'spare' cash. At some point in the next 10-20 years you might need it for a car, holiday, wedding, house, first month's rent after moving somewhere etc etc. So, best not to gamble it at a rate of £200 every quarter of an hour. It is more important that you keep it safe and grow it slowly. If you can't commit to an investment of 5-10 years plus, because of all those things you might want to do with it in the next 10 years, then you should keep it as cash in the highest-interest-paying bank account you can find.

Also, as a side note, and this is not intended as an insult - from that other thread if you dislike any structured technical learning and didn't pass maths GCSE then you might not be suited to technical analysis and investment theory, which can be complex.

Most people who attempt real-time share trading, fail. The ones that get lucky or really have the skill and discipline to do it well, are a tiny tiny fraction of those who try. And every so often they still get wiped out and have to start again, but they have started with enough capital to be able to get back into it (like tens and hundreds of thousands in the bank). They generally end up working for someone else using someone else's money not their own, Or they post videos on youtube and get paid per click, or write books and 'trading systems', which end up being the most reliable part of their income.

Biggles

NewKidOnTheBlock wrote: »

I see videos online of people trading live and they're basically buying shares at a certain price and then 15 minutes later selling them for a slightly higher price and making a few hundred pound profit in a matter of minutes.

That's because they don't upload the majority of their videos, which show them buying shares, then selling them 15 minutes later at a lower price.

You need years of experience and research and even then you'll make more losing trades than winning.

If you really get interested in shares, buy some solid shares, hold them for five years, then be grateful if you can sell them for a reasonable profit.

enthusiasticsaver

The short answer is no you cannot get an income from trading shares in the way you suggest which is effectively gambling. You can invest in funds which will pay out income such as dividends or interest on fixed term deposits but this is a long term investment. If you only have a few thousand to save and think 5 years is long term then put it into a high interest current account.

dunstonh

5 years is quite a long time

5 years is short term. not long term.

I'm looking more for something where I can invest for a few months and then sell when the price is a bit higher than I paid making a quick little profit.

That isnt investing. That is trading. Do you have any knowledge of trading?

I see videos online of people trading live and they're basically buying shares at a certain price and then 15 minutes later selling them for a slightly higher price and making a few hundred pound profit in a matter of minutes... What type of stocks and shares is this?

Traders do that but its not something that investors do. They can lose a few hundres pounds in a matter of minutes too. its high risk, high potential for losses and gains. its also expensive and needs to be done with large amounts even if you do know what you are doing.

don't feel comfortable committing my money for a long period of time like 5 years.

Stick to savings accounts then. However, if the money is going to end up being there longer than 5 years then its daft not to consider investments.

waiting 5 years and hope you make a profit isn't enough to be considered a salary.

waiting 15 minutes and hoping you make a profit isnt good enough either.

jimjames

Based on the subject line question the answer is yes.

You can get 3-4% income from S&S ISA that will be tax free. Obviously to replace a salary you'd need hundreds of thousands invested but some do have that.

Investment is get rich slowly scheme with the power of compounding. Yes it is long term but ultimately it's the way that works.

NewKidOnTheBlock_2

Thanks for your constructive and helpful comments. I know there's no such thing as a get rich quick method or else everyone would be doing it but I used an S&S ISA calculator and obviously it was only a rough estimate but here is what I think is possible.

I deposit a lump sum of £5000
I pay £700 a month into the S&S ISA
Over 5 years an estimate of 7% return

So after 5 years I've made a mere £9,849 and that's assuming everything goes well. I mean sure it's a nice chunk of money but not enough to live on by any means.

I'm interested in asking though, with an S&S ISA can you have more in it than £15000? Because say I deposit £15,000 in a single tax year and make £2000 interest, I'm going to have £17,000 in it, does this mean it's no longer safe from the tax man?

I guess you could make it work if you just kept on reinvesting your returns and the £15,000 allowance each year and in 20 years you might have made more than decent profit.

I just wanted to be clear I'm not going to chuck my money into this without learning about it so if I seem a bit ignorant about investing then that's because I've only had this idea for 1 day and just wanted to ask basic questions.