Stocks and Shares ISA

jicms

I've just reached retirement with virtually no pension. I have savings but am fed up with chasing the market to keep an interest rate of currently 1.5%. I'm also disposing of my BTL due to the hassle and increasing taxes.

I'd like to invest around £20K in a stocks and shares ISA. I have absolutely no knowledge and the more I read the more confused I become. I'm happy with medium risk so should I just try a global fund like Vanguard or HL £1. Is it unlikely I'll see any decent return in less than 5 years? Why is drip feeding preferable to investing a lump sum?

A_T

Noone knows where the stock market is going. A global passive fund like the ones Vanguard offer has returned on average over 12% per annum over the last 5 years - but no there are no guarantees that the same will happen again - you could lose money.

MK62

Medium risk would suggest a global multi asset fund.......Vanguard's Lifestrategy 60 is one example, but there are many others (L&G multi index 4/5 depending on your chosen risk level....HSBC Global Strategy Balanced, Blackrock Consensus 60......). There are also a plethora of actively managed multi-asset funds....most of the established fund houses will have one.....look on Trustnet in the Mixed 20-60 category (technically the 40-85 too but many of these will be at the upper end of equity level....ie around 85% and so then couldn't really be classed as medium risk).

Nobody can really say what returns will be over the next 5 years.....could go either way tbh...but that's the nature of investing, no guarantees.

Lastly, invest all at once, or drip feed?
Again, nobody can really say which will be best...personally I'd invest it in tranches over a set period, say over the next 6-12 months but others would probably go the other way and invest the lot on day one......no way to know beforehand which will be best I'm afraid.

Reed_Richards

jicms wrote: »

Why is drip feeding preferable to investing a lump sum?

Time in the Market is Better Than Timing the Market

I'm not sure who I am quoting here but the principle is that you cannot know when is a good time to invest so do so as soon as possible. On average you will be better off if you invest the lump sum all at once now rather than drip feeding it. The virtue of drip feeding is that if the market falls you may feel worse about investing on a high than if the market rises and you missed the opportunity to invest it all. So you even out your luck, even if on average it is the wrong thing to do.

jicms

MK62 wrote: »

Medium risk would suggest a global multi asset fund.......Vanguard's Lifestrategy 60 is one example, but there are many others (L&G multi index 4/5 depending on your chosen risk level....HSBC Global Strategy Balanced, Blackrock Consensus 60......). There are also a plethora of actively managed multi-asset funds....most of the established fund houses will have one.....look on Trustnet in the Mixed 20-60 category (technically the 40-85 too but many of these will be at the upper end of equity level....ie around 85% and so then couldn't really be classed as medium risk).

How does a beginner get their head around these? I suppose just go with the latest one the money articles recommend.

JohnRo

If you don't need to touch the £20K for many years then investing for growth or as an income supplement is an option.

With 'virtually no pension' that implies you will in all likelihood need easy access to at least some of the cash you have available.

Assuming that the disposal of the BTL nets you a capital windfall perhaps that's where the money for any future investment should be coming from.

If not is this potential £20K investment a significant chunk of the money you already have sitting in bank accounts earning 1.5%?

Is it unlikely I'll see any decent return in less than 5 years?

Noone can answer that with any certainty, simply put noone knows what what the heck is going to happen to global markets in future years.

What really does matter though is that after 5 years, if there still isn't the proverbial decent return you desire, that you can then at that point keep waiting for one to materialise without any pressure to cash in your chips.

That's why it's important not to over extend. Other than getting wiped out there isn't much worse in terms of investment than being a forced seller who needs the cash soon after a market downturn and sharp valuation fall.

Why is drip feeding preferable to investing a lump sum?

It isn't preferable, in an ideal world a lump sum in a suitable investment on day one, then left alone to do it's thing for many years is the way to go in all but the most extreme and unfortunate of scenarios. Vanguard did a study on this a while ago and reached that conclusion.

The reasons why it's preferrable for some people to drip feed investments vary but usually it's for psychological reasons, fear of losing a large chunk of capital soon after pulling the trigger. Especially if there's lots of talk about an imminent market downturn.

In reality all it does is throttle potential returns over the longer term. The window in which regular 'drip fed' investments act in the way some folks imagine, as an insurance policy against market falls is small in terms of years, as the regular contributions soon create that much larger lump sum anyway (in relative terms).

The other more likely reason is obviously that many folks simply don't have six figure cash sums sat around waiting to be invested so have to feed the investment as and when spare cash becomes available.

jicms

MK62 wrote: »

Lastly, invest all at once, or drip feed?
Again, nobody can really say which will be best...personally I'd invest it in tranches over a set period, say over the next 6-12 months but others would probably go the other way and invest the lot on day one......no way to know beforehand which will be best I'm afraid.

Great replies, thank you.

What is the reason for this if choosing one fund. Isn't this more for people that know what they're doing to move funds regularly?

jicms

I have enough savings and property assets to risk investing the £20k as a lump sum to simplify things and yes could invest further in the future.

It's really a question of which of the press or platforms' suggestions are most reliable.

jicms

MK62 wrote: »

The reasons why it's preferrable for some people to drip feed investments vary but usually it's for psychological reasons, fear of losing a large chunk of capital soon after pulling the trigger. Especially if there's lots of talk about an imminent market downturn.

Is this pre Brexit downturn a good or bad time, is it best to wait for the outcome good or bad?

Albermarle

What is the reason for this if choosing one fund. Isn't this more for people that know what they're doing to move funds regularly?

The main reason to drip feed/invest in tranches is only to avoid the scenario where you invest the whole £20K in one go and then a few days later the markets plunge and then on paper at least you have lost > £5K overnight. A seasoned investor can live with this but it can be scary for a new and/or nervous investor. If you drip feed you partly avoid the possibility of this scenario.

How does a beginner get their head around these? I suppose just go with the latest one the money articles recommend.

Firstly all the funds mentioned are very similar . They contain approx. 60% equities/shares and 40 % less volatile investments like bonds and are known as multi asset funds . They are perceived to give a decent level of potential growth with a medium risk ( assuming an investment period of minimum 5 years , preferably longer )
To buy a fund like this you first need choose an S&S ISA provider.and then choose the fund you actually want the money to be invested in. These links may help>https://www.moneysavingexpert.com/savings/stocks-shares-isas/
https://www.moneyadviceservice.org.uk/en/articles/investing-beginners-guide

Reed_Richards

jicms wrote: »

It's really a question of which of the press or platforms' suggestions are most reliable.

No, not really. The simplest thing to do is to buy a tracker fund that tracks the value of the FTSE100 or FTSE All-Share index. But the disadvantage of that is that these investments are biased towards the UK and not so influenced by the rest of the word's markets. So a slightly more sophisticated investment is to get something akin to a FTSE index tracker but for world markets. This seems to be the preferred strategy of this forum. They also like the Vanguard funds which throw-in some bond content.