How many ISAs?

Imelda

Hi all

I currently have £80k in a cash ISA (I know, I know...) paying 0.5%. I have not used this year's allowance.

I want to transfer this sum to another bank to obtain a better rate but I do not want to add to it as I do not want to go over the £85,000 protection limit.

Can I therefore open two ISAs? One to transfer and another for new money?

I am also opening a s&s ISA with Vanguard and a LISA with HL but I don't want to dump a lot of money into the stock market in one go. I would potentially put £4k into each. Or should I just use this year's allowance of £20k across the LISA and S&S ISA? These ISAs are intended to be part of my pension (I am already a homeowner and I have maximised my pension contributions for this year). I don't know why I am so nervous about putting money into the stock market when I am currently losing money anyway!!!

I may wish to (in the future) transfer some of the cash ISA into S&S ISA - is this easy to do?

Thank you

DennisTenus

Yes you can do this... this is kind of similar to what i'm doing.

For interest why wouldn't you dump a lot of money into the S&S ISA in one go? Is this so you effectively buy shares/stocks/funds at different levels to smooth out the drops and rises?

DennisTenus

Also why are you losing money anyway???!

ffacoffipawb

DennisTenus wrote: »

Also why are you losing money anyway???!

Probably in real terms as inflation is well in excess of the interest rate on any cash ISA.

DennisTenus

ffacoffipawb wrote: »

Probably in real terms as inflation is well in excess of the interest rate on any cash ISA.

Ah yes good point

Imelda

Yes, as above - in real terms I am losing money.

I don't know why I am so reluctant to put a lump sum in when it has 20 + years to smooth out any bumps!

Thank you for your help..

DennisTenus

Yeah I want to but slightly concerned about switching my large cash isa to a s&s one....

Alexland

Hi

Personally with an £80k cash buffer, a long investment time period and having maxed your pension contributions I would definitely put £4k in the LISA (Nutmeg for Robo or AJ Bell for DIY) and £16k in a globally diversified S&S ISA with a bit extra UK exposure to balance the currency risk (Vanguard Investor direct LifeStrategy 60 fund?)

I would take advantage of 5% regular saver accounts from Nationwide (Inc the 5% Flex Direct current account), HSBC and maybe Santander. This interest will probably be tax free anyway due to the personal savings allowance.

Then after some period of experiencing investment and considering your tollerence to routine and exceptional market volatility consider moving more of your cash into the S&S ISA wrapper?

Market crashes are only a problem during the accumulation phase if you bottle out and sell low. If you have confidence in the earning potential of the underlying assets and just sit tight markets have always recovered. It just a question of how long it will take and the remote possibility that next time will be different. However if the whole global economy collapses then we might get hyper inflation so your cash could be worthless anyway.

I find the graph in the below article particularly helpful:

https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

When markets crash I just try and remember that the share prices are just an indication of what others are selling at - not me. If anything I try and buy some extra fund units to bring down my average cost per unit. Also I try and remember that the dividend reinvestment are buying more share units as the prices are very attractive. This helps reduce the recover time.

I find the below blog helpful in showing that it's earnings not share prices that really matter to a seasoned investor.

https://pensioncraft.com/animal-spirits-rule/

Yes p/e ratios are currently a bit high compared to historic averages but after a few years of dividend reinvestment and the earnings will probably look very attractive relative to your original purchase price.

Alex.

DennisTenus

Alexland wrote: »

Hi

Personally with an £80k cash buffer, a long investment time period and having maxed your pension contributions I would definitely put £4k in the LISA (Nutmeg for Robo or AJ Bell for DIY) and £16k in a globally diversified S&S ISA with a bit extra UK exposure to balance the currency risk (Vanguard Investor direct LifeStrategy 60 fund?)

I would take advantage of 5% regular saver accounts from Nationwide (Inc the 5% Flex Direct current account), HSBC and maybe Santander. This interest will probably be tax free anyway due to the personal savings allowance.

Then after some period of experiencing investment and considering your tollerence to routine and exceptional market volatility consider moving more of your cash into the S&S ISA wrapper?

Market crashes are only a problem during the accumulation phase if you bottle out and sell low. If you have confidence in the earning potential of the underlying assets and just sit tight markets have always recovered. It just a question of how long it will take and the remote possibility that next time will be different. However if the whole global economy collapses then we might get hyper inflation so your cash could be worthless anyway.

I find the graph in the below article particularly helpful:

https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

When markets crash I just try and remember that the share prices are just an indication of what others are selling at - not me. If anything I try and buy some extra fund units to bring down my average cost per unit. Also I try and remember that the dividend reinvestment are buying more share units as the prices are very attractive. This helps reduce the recover time.

I find the below blog helpful in showing that it's earnings not share prices that really matter to a seasoned investor.

https://pensioncraft.com/animal-spirits-rule/

Yes p/e ratios are currently a bit high compared to historic averages but after a few years of dividend reinvestment and the earnings will probably look very attractive relative to your original purchase price.

Alex.

I would tend to agree with you (I hope) and have those accounts you mentioned.

The thing is, isn't it possible that the value could keep going down and continue to go down so it's worth nothing? or almost nothing? or is this extremely unlikely?

Alexland

Yes it is extremely unlikely that a well diversified fund containing real (not synthetic) holdings of thousands of stock market companies in all sectors weighted by market capitalisation and rebalancing periodically would reduce in value to zero.

It would be a world in which nobody was willing to buy Coca Cola, or a Samsung fridge, patented drugs, financial services, electricity, food or a new car at a price that enabled the companies to report a modest profit.

Also a world in which all companies and governments did not pay regular coupon or upon redemption of fixed income debt securities.

In this world would anybody value your old cash anyway? I wouldn't trust a bank note issued by a government that wasn't honouring its debt.

But yes it's the fear of Armageddon (this time it might be different...) that causes people to sell low and crystallise losses. I reckon the best thing to reassess the holdings for earning potential, be aware of market noise & behavioural investment pitfalls, buy more then try not to think about it and get on with other aspects of your life.

Then in 5 or 10 years time with reinvested dividends even in the unlikely event the share price hasn't recovered you could still be showing as up on your initial investment.

Alex

DennisTenus

Alexland wrote: »

Yes it is extremely unlikely that a well diversified fund containing real (not synthetic) holdings of thousands of stock market companies in all sectors weighted by market capitalisation and rebalancing periodically would reduce in value to zero.

It would be a world in which nobody was willing to buy Coca Cola, or a Samsung fridge, patented drugs, financial services, electricity, food or a new car at a price that enabled the companies to report a modest profit.

Also a world in which all companies and governments did not pay regular coupon or upon redemption of fixed income debt securities.

In this world would anybody value your old cash anyway? I wouldn't trust a bank note issued by a government that wasn't honouring its debt.

But yes it's the fear of Armageddon (this time it might be different...) that causes people to sell low and crystallise losses. I reckon the best thing to reassess the holdings for earning potential, be aware of market noise & behavioural investment pitfalls, buy more then try not to think about it and get on with other aspects of your life.

Then in 5 or 10 years time with reinvested dividends even in the unlikely event the share price hasn't recovered you could still be showing as up on your initial investment.

Alex

Ah yes good point!

What do you mean by "real (not synthetic) holdings" ?

Now don't jump on me but I've had £3K in my HL S&S ISA now for almost 3 weeks. I have this split between HL's own balanced portfolio+ and about 7 funds and was testing it out to see what happened. I know this is a tiny amount of time and too soon and not that much in the grand scheme of things etc etc but it's gone up and down and down and up and down... a bit but generally I'm still down... only a few quid as we speak but generally I'm down, is this completely normal considering it's very well diversified?

Thanks