Lifetime ISA - 1 year on..

adonis10

bowlhead99 wrote: »

I think you are confusing the terminology here. What you had in your previous post #17 was fine: ... .

Makes sense, thanks for clarifying.


Next step is to decide what to invest in and when. I am probably going to opt for a split between VG LS 80 and 100 but really struggling to decide when to invest. I would rather drip feed but this would obviously result in more transaction costs, however this could be offset at times by gains made through paying a lower unit price. I'd hate to invest 3k now only for the fund to lose 10% over the next year, whereas that could be minimised to, say, 5-6% with drip feeding.


Any advice? I fully expect an answer of 'you are over thinking it and cannot time the market'!

Zorillo

You're overthinking it and cannot time the market.

adonis10

Zorillo wrote: »

You're overthinking it and cannot time the market.

:doh: .

bowlhead99

adonis10 wrote: »

. I'd hate to invest 3k now only for the fund to lose 10% over the next year, whereas that could be minimised to, say, 5-6% with drip feeding.


Any advice? I fully expect an answer of 'you are over thinking it and cannot time the market'!

I agree with the answer you suggested, kindly supplied by Zorillo

Let's say for example you invest your £3000 today at £1 a unit and it falls 10% in a year and so at the end of the year you will have 3000 units at 90p for £2700 of value.

You would hate that because you know that if you had drip fed in £500 chunks every other month, you might have been buying at a range of prices which might include £1 the first purchase but later 99p and 96p and 95p and 92p etc, so over the year your £3000 would have bought more than 3000 units so when the price falls to 90p you have more than £2700 left. You'd have lost less money because you get a blended result somewhere between taking the risks and rewards of the investment and the risks and rewards of staying in cash.

But, what if you decide to not buy all today and do a drip feed model, and the range of prices over the course of the year is 100p, 102p, 105p 101p, 99p, 92p. Then you'll have purchased fewer than 3000 units. So after a year or so when they price falls to 90p, you have less than £2700 of value for your £3000 cost, because you bought fewer than 3000 units.

I'd put it to you that you can't time the market so you don't reliably know whether the price is going to go 100 99 96 95 92 90, or 100 102 105 101 99 92, so you don't know whether the drip feed will be worse or better than just doing 3000 units at the first price you're offered. But presumably you are buying because you hope/expect it will go up rather than down. If you are cautious really think it will go down, best to buy something with lower risk.

Buying something high risk but buying it really slowly so you only just finish getting your £3k into it (at potentially higher prices) just before it crashes... is going to be equally frustrating, or even more so, than just buying it now and bracing for impact

FWIW, I do indulge in some timing and portfolio shifts myself from time to time but couldn't recommend it to anyone else. If it's my money I only have myself to blame and am fine with that. Everyone else should practice what I preach rather than what I actually do for myself. Most of my money gets invested when I have it available which results in some sort of natural 'drip' effect. If you invested £3k this year and £3k in another year or so and another £3k after that and so on... you'll be investing at a range of prices in different parts of the economic cycle; no need to do monthly or quarterly really.