Lifetime ISA - Reinvest or Hold Cash

TommyISA

Hi All,

First time poster and newbie to all of this so please bare with me :-)

I am looking to open up a Lifetime ISA and I notice on Hargreves Landsdown that there is and option to Automically reinvest or hold cash.

If i choose to auto reinvest does this mean that I could lose all my saving if we have a stock market crash?

Thanks

Alexland

If investing in stocks and shares with HL in a LISA wrapper your whole invested value is at risk of capital loss.

Some investments produce income and others accumulate so the unit price grows. The option to reinvest would get the income and buy more units.

If saving for the short term would transfering to a cash LISA from Skipton better meet your needs?

Alex

TommyISA

Hi Alex,

Thanks for the reply. Sorry perphaps I should have stated my intentions first for this.

I am looking to buy a property in a year or two, and also already have an ISA which invests in shares ( Vanguard LifeStrategy® 80% Equity Fund - Accumulation ) . I want to put in the maximum each month into a a LISA and the get a the bonus of 25% and after a couple years use it again a property.

Thats why I am confused as I dont want to feel the need to invest in anymore shares, i just want to invest in the ISA.

Does this makes sense?

Thanks

Tom

Eco_Miser

TommyISA wrote: »

Thats why I am confused as I dont want to feel the need to invest in anymore shares, i just want to invest in the ISA.

Does this makes sense?

No because if you invest in an ISA, you buy shares (or bonds or funds like VLS).
You could savein a Skipton LISA (the only cash LISA available), and that would be sensible. I'm not sure of the costs of holding cash in HL's LISA.

TommyISA

Thanks again,

I think I am starting to get this now. So I have opened up a LISA with H & L as it states on their description "As with other ISAs, you can choose to save cash or invest in the stock market, and your money can grow free from UK tax. But the real benefit is an extra 25% from the government of up to £1,000 a year."

The account fee is 0.45%

So when you say that Skipton is the only "cash" LISA avaialble, how does that differ from having this H&L one but opting to "save cash" as opposed to " invest in the stock market"

Also it might sounds like a stupid question, but what happens if try to open one of each?

Thanks

Tom

ColdIron

There is no fee for holding cash in HL's LISA but it's really intended for investments (which attract the 0.45% fee). You can leave cash there if you want but it pays little or no interest. Skipton's LISA is a true cash product and pays 0.75% interest

Alexland

I find the 'buy your first house' marketing from the S&S LISA providers to be very misleading. In the majority of cases stocks and bonds are inappropriate for those saving towards their first property as short investment timescales carry an unacceptably high risk of crystallising losses.

It might be ok for someone who has only just turned 18 and is investing to buy a house in their late 20s but most customers are probably thinking 1-3 year timescales so the Skipton Cash LISA (or even the OPs cash inside a S&S LISA) would be more sensible.

Alex