Investing For Shorter Term

st182

Hi All,
I think I may know the answer to this one- but thought I’d run it by you all anyway just for confirmation.
I currently have approx 10k in savings, 5k in shares (worth considerably less- 4K- it was my “learning” account!) and 5k in investment funds.
Recently myself and the girlfriend decided to save up and try to buy a flat in the next 5 years, so my aims have changed for these investments.
Am I correct in assuming that the best thing to do is to close all my share and find positions over the coming months and put it all in to cash savings?
Thanks in advance :beer:

st182

Just to note I also have 1k in p2p, perhaps that should be the first to be wound down!

DrSyn

If you are expecting to need money within 5 years it should be held as cash in a savings account. So the answer is yes.

I suppose with interest rates so low and going lower, you could put it into NS&I Premium Bonds and hope you have the good luck of winning £1M.

bowlhead99

st182 wrote: »

Am I correct in assuming that the best thing to do is to close all my share and find positions over the coming months and put it all in to cash savings?

Generally, yes, although if the debts in your signature are up to date and the 'CC3' is not at a zero percent interest rate, pay it off instead of creating further cash savings.

Also for good financial discipline, when listing the approximate values you have, don't tell yourself you have "10k in savings, 5k in shares" when actually the shares are "worth considerably less, 4k". Simply say you have 10k savings and 4k shares. What they used to be worth is irrelevant and the shares themselves don't know how much you paid for them; what their current value would buy now, is the important thing.

Just to note I also have 1k in p2p, perhaps that should be the first to be wound down!

P2P is typically lower risk than shares so if you are looking to avoid investment risk, more sensible to get out of the shares first. But there may be notice periods with p2p which may need you to gradually come out of them over time, so if you want to come out, the sooner you start the sooner that will be achieved.

At the end of the day if you have £20k total and the P2P is only £1k, it's only 5% of your total savings and investments at the moment. and in 5 years time by the time you have been saving another 5 years, £1k is not so important.

You can generally assume that funds will be less volatile than shares although if any of the funds are 100% equity funds you may find they are capable of losing 50%+ of their value over a one to two year period and could take a long time to recover. That's why people say to invest for 10+ years in funds because you have ups and downs and flat bits and if you don't get any ups over the next 5 years and you get some downs, you will wish you had just used cash savings. Still, it probably wouldn't hurt in the grand scheme of things to leave a couple of thousand of mixed asset funds running rather than closing all your accounts.

If you are young enough to qualify for lifetime ISA, make sure you are each contributing at least £4000 per tax year to a cash LISA.

DrSyn wrote: »

I suppose with interest rates so low and going lower, you could put it into NS&I Premium Bonds and hope you have the good luck of winning £1M.

I wouldn't bother with premium bonds given you can get higher rates on cash and it's incredibly unlikely that you will win a meaningful prize with only £20k. With average luck it would take you hundreds of thousands of years, and you have a 5 year goal.

If you want to save for a property but fancy a highly unlikely chance of winning a lifechanging amount of money, you will be better to maximise the interest you earn and spend a couple of quid on a lotto ticket on a rollover week a few times a year. In some circumstances (e.g. if you are a higher rate taxpayer, already earning over more interest than your personal saving allowance each year and needing to pay 40% tax on the excess interest), you might find premium bonds relatively more attractive because the returns are tax free even though the expected returns are lower than the top savings account.

Albermarle

If you are young enough to qualify for lifetime ISA, make sure you are each contributing at least £4000 per tax year to a cash LISA.

Still, it probably wouldn't hurt in the grand scheme of things to leave a couple of thousand of mixed asset funds running rather than closing all your accounts.

Another possibility would be to close all current share/investment accounts - open A LISA each - one as a cash Lisa and one as a S&S LISA . Due to the relatively short time frame ( 5 years) it would be best to be invested quite cautiously in the S&S LISA though , say with a simple 40:60 multi asset fund.
Basically it is hedging your bets .

st182

Firstly, thanks all for reading and for taking the time to reply- appreciate it

DrSyn wrote: »

If you are expecting to need money within 5 years it should be held as cash in a savings account. So the answer is yes.

I suppose with interest rates so low and going lower, you could put it into NS&I Premium Bonds and hope you have the good luck of winning £1M.

Thanks for confirming, i thought as much as for premium bonds, yes, i am considering them- already have an account but just with £100. I may grow that a little as i de- risk my portfolio. Thanks!

bowlhead99 wrote: »

Generally, yes, although if the debts in your signature are up to date and the 'CC3' is not at a zero percent interest rate, pay it off instead of creating further cash savings.

Also for good financial discipline, when listing the approximate values you have, don't tell yourself you have "10k in savings, 5k in shares" when actually the shares are "worth considerably less, 4k". Simply say you have 10k savings and 4k shares. What they used to be worth is irrelevant and the shares themselves don't know how much you paid for them; what their current value would buy now, is the important thing.
P2P is typically lower risk than shares so if you are looking to avoid investment risk, more sensible to get out of the shares first. But there may be notice periods with p2p which may need you to gradually come out of them over time, so if you want to come out, the sooner you start the sooner that will be achieved.

At the end of the day if you have £20k total and the P2P is only £1k, it's only 5% of your total savings and investments at the moment. and in 5 years time by the time you have been saving another 5 years, £1k is not so important.

You can generally assume that funds will be less volatile than shares although if any of the funds are 100% equity funds you may find they are capable of losing 50%+ of their value over a one to two year period and could take a long time to recover. That's why people say to invest for 10+ years in funds because you have ups and downs and flat bits and if you don't get any ups over the next 5 years and you get some downs, you will wish you had just used cash savings. Still, it probably wouldn't hurt in the grand scheme of things to leave a couple of thousand of mixed asset funds running rather than closing all your accounts.

If you are young enough to qualify for lifetime ISA, make sure you are each contributing at least £4000 per tax year to a cash LISA.

I wouldn't bother with premium bonds given you can get higher rates on cash and it's incredibly unlikely that you will win a meaningful prize with only £20k. With average luck it would take you hundreds of thousands of years, and you have a 5 year goal.

If you want to save for a property but fancy a highly unlikely chance of winning a lifechanging amount of money, you will be better to maximise the interest you earn and spend a couple of quid on a lotto ticket on a rollover week a few times a year. In some circumstances (e.g. if you are a higher rate taxpayer, already earning over more interest than your personal saving allowance each year and needing to pay 40% tax on the excess interest), you might find premium bonds relatively more attractive because the returns are tax free even though the expected returns are lower than the top savings account.

A very comprehensive reply with some good food for thought- I appreciate you taking the time

Yes- cc debt at zero%, plan is to be unsecured debt free by end of 2020 (been a target for a while).

Thanks for the pointers on getting across what I have- I'll remember that in future. I suppose the onl;y thing it does show how terrible I am at selecting shares!

Thanks for the thoughts on p2p. I'll keep my eye on my current loans and only put in shorter term / zero fee stuff, and when it becomes a chunk I'll pull it out and put it in savings. On the back of this I'll concentrate on shares first.

Good thought on funds. I'm 66/33 equities / bonds, so I'll start pulling out the equity ones to begin with- and again- once I get a "chunk" i'll transfer across into savings or bonds.

I have a LISA, I only put a very small amount in each month as I'll need my money in the next 5 years. Can't have a first time buyer as I've had my main property for 15 years. Other half is too old to get one

Yep as i said earlier I may put some into premium bonds. I might stop postcode lottery and put it in there instead as I can get my stake back when the time comes! Also if there are any changes to teh PSA (personal savings allowance) then I might consider them for a chunk also

Albermarle wrote: »

Another possibility would be to close all current share/investment accounts - open A LISA each - one as a cash Lisa and one as a S&S LISA . Due to the relatively short time frame ( 5 years) it would be best to be invested quite cautiously in the S&S LISA though , say with a simple 40:60 multi asset fund.
Basically it is hedging your bets .

We've both passed that stage in life unfortunately- I already have a property and she is too old to open one. I do have one however I'm only gonna put a small amount in until I have my deposit- can't get to it until I'm 60? :eek:

Thanks for the thoughts folks, appreciate your time. :beer: