What would you do?

jimjames

TakeCareOfThePennies wrote: »

You're entirely missing the point.

Even in a crash ?
What if your shares become illiquid for some reason ?
What if there's a trading halt ?
What if....

Equally I think you're deliberately trying to do the same.

Yes some of those things could happen but you arrange your finances and portfolio so that not everything is illiquid.

There are risks involved but I think as long as you're aware of those and have some balance then holding more than 3 months expenses as cash isn't needed - for the majority of the population, even having 3 months would be a massive improvement.

I can't think of any scenario where I would need more than £10k available immediately and couldn't wait 5 days for settlement. Even in the bank you need to give notice to draw that amount of cash.

I hope this is an exception but this thread shows that even cash isn't immediately accessible. I can get my hands on money from investments way faster
https://forums.moneysavingexpert.com/discussion/4938603

jimjames

KGriff wrote: »

So that would leave me with £9,760 which I would invest in the stock market. I would open up my own TDWaterhouse trading account (or similar broker account) and begin to invest in stocks and shares and managed funds ... Initially outside an ISA wrapper, but then as my funds grew, over future financial years, I would open up their trading ISA account and do the same type of trading inside an ISA wrapper. Such brokers have advice documents and people at the end of a telephone to advise, but the decisions are left to yourself.

To me it doesn't make sense to have investments outside an ISA wrapper but cash inside it as investments are the long term holding and cash is for emergency.

Surely the long term investments would be best inside an ISA so you have protection from CGT and income tax at the earliest opportunity.

So personally if I had £50k arrive unexpectedly and had no savings at all I would probably keep £10k as cash and then split the remaining £40k between pension and S&S ISA. Depending on OP's age and circumstances would affect what proportions are suitable for them. By April 2016 you'd be able to get £30k into S&S ISA and remaining £10k into pension if that was required.

guitarman001 wrote: »

I just do not see where you can put £40-50k and get a good return, but being able to keep it in cash. No way I'd risk mine all in shares. 20% is in shares, that's it.

It's getting down to the bone now... In 10 days I'll be sitting on a similar amount but have no idea where to put it (123 account is full, I have the 3 BoS accounts etc).

If you have £40-50k then won't that fit into all the current account options giving you 3-5%?

It depends on your age but I have 95% of my money invested and have done for the last 10 years but I'm happy to take that risk.

TakeCareOfThePennies_2

jimjames wrote: »

Even in the bank you need to give notice to draw that amount of cash.

Depends whether you need it in physical cash.

If you just need electronic access (i.e. to make a bank transfer or have access to it on your debit card), then any bank should offer you immediate access. If they don't then change bank.

jimjames

TakeCareOfThePennies wrote: »

Depends whether you need it in physical cash.

If you just need electronic access (i.e. to make a bank transfer or have access to it on your debit card), then any bank should offer you immediate access. If they don't then change bank.

Which comes back to a previous point. If I need immediate access and can use a credit card then I will do - accessing credit as short term emergency is perfectly feasible and sensible if it can tide over a period of 5 days waiting for investment to be settled.

Either way it means I don't need to hold more than £10k cash as emergency funds.

TakeCareOfThePennies_2

Goes without saying that I disagree jimjames, and probably best if we agree to disagree as I don't think there's much point on this debate going round in circles.

KGriff

jimjames wrote: »

To me it doesn't make sense to have investments outside an ISA wrapper but cash inside it as investments are the long term holding and cash is for emergency.

Surely the long term investments would be best inside an ISA so you have protection from CGT and income tax at the earliest opportunity.

So personally if I had £50k arrive unexpectedly and had no savings at all I would probably keep £10k as cash and then split the remaining £40k between pension and S&S ISA. Depending on OP's age and circumstances would affect what proportions are suitable for them. By April 2016 you'd be able to get £30k into S&S ISA and remaining £10k into pension if that was required.



If you have £40-50k then won't that fit into all the current account options giving you 3-5%?

It depends on your age but I have 95% of my money invested and have done for the last 10 years but I'm happy to take that risk.

Jimjames, that's ok I suspect you are younger than me and have different circumstances.

All I can say is I am not as much a risk taker as some people, but I did sacrifice a lot and invest hard when I was younger and I still managed to pay off my mortgage on my 3 bedroom house by the time I was 40 and retire from work at 49 with a final salary pension.

That meant no expensive holidays or trips abroad for 22 years and one day off sick from work in 15 years and only 4 separate second hand cars in my entire lifetime (often shared with the wife). Not smoking and not drinking very much alcohol (special occasions excluded).

..and I have a secure regular income from savings that doubles my monthly pension income.

So I have an income and savings that should certainly see me and the wife out to the end of our days and whilst the stock market played a part in all that, it was not the be-all and end-all of my first or early investment strategy.

The investment strategy I mentioned here earlier in this thread was realistic, in so much it relates to a person with £45000 of savings, looking where to start out to invest that money. From my perspective (taking my children's own situation into account) I see that as someone in their late 30’s or possibly 40’s (maybe older) with little knowledge of where to go next with their money.

Jumping heavily into stocks and shares seems a little harsh to me to start with and when you invest in financial instruments that may go down as well as up, you really need to know that you have the security of cash to fall back on.. The older you get the less risk you should be taking, but you also need not jump in two feet first.

Not many people start out on the financial road by throwing everything they have into stocks and shares. What I was describing was a balanced beginning, not a full on aggressive strategy. People have to dip their toe in the water first and get the 'bug' to save and the understanding and knowledge of where to go next in their developing strategy.

I was simply giving what I think was a reasonable starting point from which to launch their savings and investments. The investor will find their own levels as they move forward, year on year.

Things depend of course on the investors age, their current mortgage and debt position, even their relationship with their spouse and partner. A lot of people seem to leave saving and investing too late and it becomes more difficult the older you get to build the nest egg.

My chosen course of savings and investment will be different to yours and everyone else's and clearly this investor is seeking the different viewpoints before making their 'informed' decision.

I am reaching the end of my time to save and invest and turning to the point where I can begin to spend it and enjoy it.

My wife and I are 56, our two children are married and buying their own homes so the weddings are all paid for etc. we have no debts, a newish car and motorhome and the only thing stopping me now is the wife, who wants to achieve a 35 year company pension under her belt (18 months to go).

The stock market investments played a part in it for me too, but it was probably a more balanced approach, sliding from A to B to C (Aggressive, Balanced, Cautious), in my investment strategy, that got me and the wife to the finish line.

Linton

The reason for an emergency fund in cash is to protect the investments. You never want to be a forced seller of investments as you could crystallise a large loss should the emergency happen after a major fall in prices. So you need enough as cash to ensure that you can survive an emergency without selling.

How much? 6 months living expenses, not income, makes sense to me as it covers you and, if relevant, your family for a reasonable time should you lose your job. I cant see a credit card working very well in those circumstances.

When your investments become reasonably large having say £15K in an emergency fund in a small return account is a small price to pay for being able to invest many times that in good long term investments without having sleepless nights every time the FTSE twitches.

KGriff

jimjames wrote: »

To me it doesn't make sense to have investments outside an ISA wrapper but cash inside it as investments are the long term holding and cash is for emergency.

No I'm with TakeCareOfThePennies on this, if you are new to saving and investing and have £45000 from your hard work or inheritance etc. then I would start by holding secure cash in accounts like Santander 123 and their 'miserly' 2% fixed term cash ISA.

The remainder then becomes aggressively invested. Investing £40000 in a risk area is a big ask for a new person wanting to invest.

Let them dip their toe in the water first. Investing in a self select ISA and buying/selling the individual funds themselves, will also teach them a thing or two.

If the invester thinks it's more cash being held than they need, then by all means set a proportion of the £15240 for cash and a proportion for a S&S ISA, but the level in each will be down to what the investor is prepared to take risk with and what makes them feel comfortable.

I suspect their knowledge here is limited in this investors case, hence I would opt to start with cash up to the full annual allowance of £15240...just for the strong investment base and security. Besides there's always the next financial year, to broaden the strategy.

TakeCareOfThePennies_2

KGriff wrote: »

No I'm with TakeCareOfThePennies on this

Thank you KGriff !

I thought I was going crazy. Its tough work delivering the contrarian view point round these parts !

jimjames

KGriff wrote: »

I suspect their knowledge here is limited in this investors case, hence I would opt to start with cash up to the full annual allowance of £15240...just for the strong investment base and security. Besides there's always the next financial year, to broaden the strategy.

I don't disagree on proportions, it's entirely down to each person what they are comfortable with having in each element.

I'm not much younger and don't foresee changing the amount I have invested as I get older, or at least not by much. If income is the priority then it's irrelevant what the value is on a certain day or if the fund has dropped 10% if the income continues to be paid and increases year on year. There are some investment trusts that have increased the dividends paid every year for over 40 years, that's through multiple crashes and market turmoil. Surely that it what matters if you want long term income.

The part that I don't think makes sense is to keep investments unwrapped as a starting point. It just seems far more logical to me to have investments inside the ISA as soon as possible rather than cash. You're then protected from both CGT and income tax over the long term. With cash you have no worries on CGT so you only get the income tax benefit which will soon be marginal for most people.