Liquidate investments as they're needed for house deposit?

jacquelinestar

I have around £33.5k of my £53k savings for a house deposit in a Stocks and Shares ISA with Moneyfarm (on a relatively low risk level - 2 out of 5), with about £9.5k in an AJ Bell Lifetime ISA and a smaller chunk into Moneybox. I have lost all interest apart from £200 in Moneyfarm now, have lost about £400 out of my investments in AJ Bell (split between a cautious account and a balanced account), and have lost £400 of my Moneybox investments (11% of the total amount, which is now £3.5k).

Given I was planning on this being my house deposit this year, I am not keen to lose any more. Would you advise disinvesting now, to protect it? I'm tempted to disinvest all accounts apart from Moneybox, where I don't want to lock in an 11% loss. Maybe I could just leave this as a longer term chunk.

What would you do?

jacquelinestar

Also worth saying I may well not buy a house this year, due to potential market instability and loss to income (I'm freelance). But I just have no idea at the moment!

Aylesbury_Duck

With interest rates low and recently cut, could you afford to borrow more and leave your savings where they are?

jacquelinestar

I think I probably can't, just because I'm at the limit of what mortgage lenders will give me at a decent rate on current salary (which is relatively good, but I'm a single person buying in London!). I guess I could check with my mortgage advisor what he thinks is possible? We were waiting till the end of my business's financial year to see what lenders will say. I didn't realise last year that bringing my personal income / company profits down to save on tax would mean that on paper it would look like I earn relatively little (wish my accountant had been mindful of that), so am potentially bringing official up quite a bit this year to try and get the amount lent to me up.
All a bit complicated - I'm not a natural at this stuff and head is swimming a bit.

dunstonh

Given I was planning on this being my house deposit this year, I am not keen to lose any more.
You shouldnt have been invested long ago.  Anything less than 3 years should be cash.

Would you advise disinvesting now, to protect it?
That would be a regulated activity so I cannot answer.   However, if you were asking today if you should be investing in risk based assets, the answer would be no.

jacquelinestar

Hm, I did start investing about 6 years ago and had put my risk level to low, but I see your point. Perhaps I should just count myself lucky I have not made a bigger loss and just sit on cash for safety.

jacquelinestar

Maybe it's best to just give up the flat buying idea for the time being, and keep everything invested - seems like over time, investments do better than property anyway?

tropic_of_Username009

jacquelinestar said:

Maybe it's best to just give up the flat buying idea for the time being, and keep everything invested - seems like over time, investments do better than property anyway?

Perhaps, but I wouldn't make the decision about whether to buy your home primarily on investment grounds anyway. IMHO, it should be more about

1) Do you want the stability / being able to do what you want with your home / responsibility / being tied down to one place?

2) Can you afford it reasonably comfortably, including allowing for things like variability of your earnings and the possibility of mortgage rates rising in the future?

If after considering those factors, you think it's better to postpone buying for now, then staying invested is perfectly reasonable from an investment point of view. A recovery is likely at some time; but nobody knows when or how strong a recovery it will be.

OTOH, if you think the time to buy for you should still be soon, then the £800 loss you mentioned should perhaps be looked at as one of the costs of buying (and they will add up to a lot more than that ).

Thrugelmir

Investments are not a suitable home for money required for a specific purpose for good reason. Every level of risk carries a degree of volatility. 

Malthusian

If you've been investing for 6 years aren't you still considerably in profit even after the dip? I can't see what Moneyfarm's returns were over that timeframe, but "risk 2" appears to mean around 20% equities. For a quick and dirty comparison, Vanguard LifeStrategy 20% Equities is still up 38% over six years, the Mixed Investment 0-35% shares sector is up 21%. Much better than cash either way.

(Moneyfarm's risk levels appear to be out of 7 rather than out of 5?)

If the crash had been in 2014 rather than 2020 you would currently have exactly the same amount of money today, only you'd be congratulating yourself for holding your nerve through the crash of 2014 instead of bemoaning your bad luck in 2020. (A share in 2020 is worth what it is worth. It makes no difference now whether it went up and then down to get to that point, or down and then up. Psychologically, down and then up would feel better today than the up and then down that actually happened, but it is all in the mind and makes absolutely zero difference to your house-buying budget.)

How much do you need for the house deposit?

jsj25

I was/am in a similar situation. About half of everything I'd saved towards a house deposit was in a Stocks and Shares ISA that I'd seen a very good return on over six years. I'm hoping to finally get on the property ladder within the next 12 months or so, and for the past five or six months I'd been telling myself to pull the money out for that very reason, but I never got round to it. Sure enough, when the value started tumbling a couple of weeks ago, I called it a day and pulled everything out. The final valuation was £4k lower than what it'd been at its peak only a month or two before which was frustrating, but for me it was worth it for the peace of mind that there weren't going to be any further losses. If the money had been invested for the long-term, I wouldn't have bothered taking it out, but seeing as I know I'll be wanting the money in the near future, for me it just wasn't worth the risk. At least I don't have to check the markets in a state of panic every day now!