Investment with moving timescale

learningmoneybasics

Hi,
As I understand it, when investing we should be looking at a 10year plus timescale and if the money is needed before then perhaps savings maybe a better option. What if that 10 year timescale is moving?

I currently have my investments half in S&S ISA and half in an investment account. My original plan was to add new money to the S&S ISA then move the investment account over to use up any remaining allowance. I currently have a cash lump sum that next April I'm not sure where to direct it to. We are thinking of moving in around 10yrs time, however that time scale could be 10, 15 or 20 yrs depending on family commitments and jobs etc. If it was 20 I'd invest it, if its 10 maybe I should be saving it.

So my options are:
Add the lump sum to the S&S ISA (This holds HSBC Global Strat Balanced & Vanguard 80, plus small amount in Vanguard Global Small caps)
Add the lump sum to a Cash ISA (10 years in cash and inflation could eat away at it)
Keep the lump sum outside an ISA and move existing investments into an ISA instead. (Currently just over the 1K savings tax threshold though)

Not really sure which option is the best in circumstances.

Malthusian

learningmoneybasics wrote: »

Hi,
As I understand it, when investing we should be looking at a 10year plus timescale and if the money is needed before then perhaps savings maybe a better option. What if that 10 year timescale is moving?

It virtually always is moving. Almost nobody knows exactly what they want to do and how much they want to spend on it in 10 years' time.

There has not been a stockmarket crash that took 10 years to recover from in living memory. (Dot-com crash took 6 years, credit crunch 4 years, the Great Depression apparently took c. 6 years but the data is sketchy.) But it could happen.

The possibility of a crash that takes 10 years to recover is just realistic enough that it doesn't qualify as an apocalypse scenario: an apocalypse scenario is something so bad, e.g. zombie invasion, that there is no point planning for it because planning won't make any difference.

With a 10-20 year timescale, investment is almost certain to outperform cash in the long term unless an apocalypse scenario happens.

You can always de-risk if the need for the funds looks more imminent. I.e. in 2027, if you still think you'll be moving in 2029, you might take out what you might need for the upcoming move. Unless the market has crashed in 2027.

Conventional wisdom is that a 5-10 year timescale is needed to make investment worth considering. Less than 5 years and it's a pure gamble. At 10 years it's almost certain that a properly diversified non-geared investment will outperform cash unless an apocalypse scenario happens. Between then it's highly likely that investments will outperform cash but you could get very unlucky. Someone who was very unlucky and invested a lump sum in 2007 that they wanted to spend in 2012, would probably just shrug their shoulders and wait another year or two, or suck up the small loss.

Thrugelmir

Malthusian wrote: »

There has not been a stockmarket crash that took 10 years to recover from in living memory.

The Nikkei has never recovered from the fall of the early 90's.

In the past the S&P 500 lost 1.4% after inflation for a decade. Serial underperformance is equally as bad as a singular (infrequent) event.

learningmoneybasics

Thank you for the replies. It backs up more what I was thinking. I doubt the move will be before 10 years time and therefore I should invest this lump sum at the next ISA allowance. As we get further down the line and have a better idea of when a move may be I can sort the money as needed.

Once that's in I'll need to start moving the investment account over to the ISA as well, however its currently sitting in the red so hopefully in a couple of years that will be looking more healthy.

Malthusian

Thrugelmir wrote: »

The Nikkei has never recovered from the fall of the early 90's.

And Enron never recovered from going bust. It can be taken as read that I am talking about a properly diversified stockmarket investment. The OP didn't indicate he was considering anything else.