B2L vs stocks/bonds/etc... for 5 year investment

thegentleart

Hi,
Background: I have no debt apart from B2L mortgage and an emergency fund with 6 months expenses. I'm making max contributions to my pension (any more would bring me below the National Living Wage) and plan to continue doing so until it's maxed out (Lifetime Allowance) so I think my retirement is sorted.
I've been keeping my living costs to a minimum so I have savings and additional income I would like to invest for 5 years so that I'm in a position to buy as nice a house as I can afford.
With the savings: I was originally thinking of buying another B2L with the savings, however house prices seem very high whereas the stock market is taking a tumble. I'm not trying to time the market, I'm also shying away from B2L as it's a lot of work (more of a business as opposed to investment). Is it sensible to invest it in a well-diversified all weather portfolio? I'm not hugely worried about drawndown since I can wait for recovery (I can delay buying house as to not crystallise any losses).
With the additional income: not sure how to invest this but I could drip feed it into portfolio?
If a portfolio is a sensible idea: I'm all for accumulation funds but considering holding some income funds:
1. Tax efficiency: I'm thinking it's worth getting some income funds to benefit from £2,000 tax free dividend?
2. Altruism: I donate the suggested % of my income from The Life You Can Save Pledge but it would be good to do more.
3. Some luxuries: I’m thrifty AF but would be good to have a little income stream for treats and luxuries!

Any help/advice/suggestions would be welcome.
Thanks,

eskbanker

thegentleart said:

If a portfolio is a sensible idea: I'm all for accumulation funds but considering holding some income funds:
1. Tax efficiency: I'm thinking it's worth getting some income funds to benefit from £2,000 tax free dividend?

On this point, that's not a differentiator between Acc and Inc - if you hold investments unwrapped (it's better to do so inside an ISA if possible) then the tax treatment of dividends is the same regardless of whether you choose to reinvest them or not, automatically or otherwise.

Regarding the broader issues, if you're really looking at five years then that's right at the bottom end of investment timescales so is significantly riskier than ten or fifteen - there is a school of argument that it's a better time to invest now than it was a few weeks ago but that still doesn't mean that there won't be further falls or that recovery will fit your timescales....

Thrugelmir

With a five year horizon stick to fixed term deposit accounts. Speculation is ideally a long term pastime. 

Username999

thegentleart said:

.... I would like to invest for 5 years so that I'm in a position to buy as nice a house as I can afford.

How would you feel if your 'investment' lost 50% over that 5 years? (including dividends)

thegentleart

eskbanker said:

thegentleart said:

If a portfolio is a sensible idea: I'm all for accumulation funds but considering holding some income funds:
1. Tax efficiency: I'm thinking it's worth getting some income funds to benefit from £2,000 tax free dividend?

On this point, that's not a differentiator between Acc and Inc - if you hold investments unwrapped (it's better to do so inside an ISA if possible) then the tax treatment of dividends is the same regardless of whether you choose to reinvest them or not, automatically or otherwise.

Regarding the broader issues, if you're really looking at five years then that's right at the bottom end of investment timescales so is significantly riskier than ten or fifteen - there is a school of argument that it's a better time to invest now than it was a few weeks ago but that still doesn't mean that there won't be further falls or that recovery will fit your timescales....

Thank for clarifying this. Do Acc funds give you a yearly divident breakdown for your tax return?
I appreciate the stock market might not recover in 5 years but that's only one asset class in a well diversified portfolio? I thought it was very unlikely that all classes (long term bonds, intermediate term bonds, gold, commodities, etc...) are all down consistenly over 5 years? I would be happy holding the classes that haven't recovered and only selling the classes that have done well.

thegentleart

Thrugelmir said:

With a five year horizon stick to fixed term deposit accounts. Speculation is ideally a long term pastime. 

That's a good idea. Any recommended reading/information to reseach and get a good RoR?

thegentleart

Username999 said:

thegentleart said:

.... I would like to invest for 5 years so that I'm in a position to buy as nice a house as I can afford.

How would you feel if your 'investment' lost 50% over that 5 years? (including dividends)

I would feel like I haven't invested wisely and hopefully learn a very valuable lesson. I have a very high risk tolerance and it's only money: there are far more important things in life. I'm quite confident that I would hold my position and just wait to buy my dream home.

Thrugelmir

thegentleart said:

Thrugelmir said:

With a five year horizon stick to fixed term deposit accounts. Speculation is ideally a long term pastime. 

That's a good idea. Any recommended reading/information to reseach and get a good RoR?

At your finger tips,
https://www.moneysavingexpert.com/savings/

thegentleart

Thrugelmir said:

thegentleart said:

Thrugelmir said:

With a five year horizon stick to fixed term deposit accounts. Speculation is ideally a long term pastime. 

That's a good idea. Any recommended reading/information to reseach and get a good RoR?

At your finger tips,

Sorry, I didn't realise you meant savings account, I thought you were talking about CDs and time deposits. The best saving rates are barely equal to inflation so I'm not interested in these. I would much rather buy another B2L.

eskbanker

thegentleart said:
Do Acc funds give you a yearly divident breakdown for your tax return?

Yes, the platform on which you hold the funds (of whatever variant) will issue an annual tax certificate specifying the dividends issued by each, regardless of whether they're reinvested automatically (Acc) or manually, or taken as income....

Audaxer

thegentleart said:

Username999 said:

thegentleart said:

.... I would like to invest for 5 years so that I'm in a position to buy as nice a house as I can afford.

How would you feel if your 'investment' lost 50% over that 5 years? (including dividends)

I would feel like I haven't invested wisely and hopefully learn a very valuable lesson. I have a very high risk tolerance and it's only money: there are far more important things in life. I'm quite confident that I would hold my position and just wait to buy my dream home.

If you have a very high risk tolerance and a high risk portfolio, you could have invested wisely but your portfolio would be subject to high volatility and could have a 40% or 50% fall in a bad equity crash. That's why I would think a 5 year timescale is better suited to cash savings rather than investments.