Liquidate investments as they're needed for house deposit?

nottsphil

jacquelinestar said:

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), 

Sounds like your accountant was more mindful of the fee he would command than the consequences for you. 

When taking advice, always consider how beneficial the advice is to the adviser. 

kinger101

Money for a deposit for a house you intend to but this year (or within the next five) belongs in a savings account with a FSCS guarantee, or National Savings.  Nowhere else.  

You have to make a decision now.  Do you want a house this year or not?  You mention "locking in a loss" but the truth is, nobody knows whether your funds will recover on one week, one month, one year, or ten years.  You have to balance this with the cost on not owning you home for an unknown period to time while you wait for your funds to recover (in the hope house prices don't run away in the meantime).  I think the loss of opportunity to purchase your own home will make these losses look trivial in comparison.

If it were me, I'd liquidate tomorrow and get on with progressing to home ownership.  It's much easier to think about longer term financial goals once you've passed that milestone.  

Thrugelmir

jsj25 said:

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!

To guarantee a positive return, 12 years is the minimum historical period. Easy to become complacent during bull markets. As always they come to an unexpected end. That's the nature of investing. 

Alexland

Even if you started investing 6 years ago some of these accounts are newer suggesting you were increasing your exposure when you should have been reducing risk back to cash over the final 5 years in anticipation of the lump sum being required to support this purchase. It was a gamble, which hasn't paid off but at least your losses are modest and with the negative economic outlook and reducing intetest rates your property purchase may well require a smaller mortgage - so you may win overall.

jsj25

Thrugelmir said:

jsj25 said:

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!

To guarantee a positive return, 12 years is the minimum historical period. Easy to become complacent during bull markets. As always they come to an unexpected end. That's the nature of investing. 

Definitely. I was completely new to investing at the time and blindly put a windfall into that Stocks and Shares ISA. In hindsight, it's not what I should have done, though at the time I didn't have a time frame with regard to when I wanted to use it, and I recognise I was very fortunate in that it more than doubled in value - which is why I can't complain about a £4k 'loss'. Could have been much worse.

Alexland

jsj25 said:

Definitely. I was completely new to investing at the time and blindly put a windfall into that Stocks and Shares ISA. In hindsight, it's not what I should have done, though at the time I didn't have a time frame with regard to when I wanted to use it, and I recognise I was very fortunate in that it more than doubled in value - which is why I can't complain about a £4k 'loss'. Could have been much worse.

There's nothing wrong with putting a lump sum into a S&S ISA at any time provided you have the asset allocation correct.

Thrugelmir

Alexland said:

jsj25 said:

Definitely. I was completely new to investing at the time and blindly put a windfall into that Stocks and Shares ISA. In hindsight, it's not what I should have done, though at the time I didn't have a time frame with regard to when I wanted to use it, and I recognise I was very fortunate in that it more than doubled in value - which is why I can't complain about a £4k 'loss'. Could have been much worse.

There's nothing wrong with putting a lump sum into a S&S ISA at any time provided you have the asset allocation correct.

To achieve better prospective returns investors have been forced up the risk scale. Many people now hold highly correlated portfolios. 

Alexland

Thrugelmir said:

To achieve better prospective returns investors have been forced up the risk scale. Many people now hold highly correlated portfolios. 

Yup but you can't blame the tax wrapper.

Malthusian

kinger101 said:

Money for a deposit for a house you intend to but this year (or within the next five) belongs in a savings account with a FSCS guarantee, or National Savings.  Nowhere else. 

This year yes, undoubtedly. Within the next five, not necessarily. If you invest in a non-geared diversified fund now, after markets have dropped 20%, then if it takes 5 years for you to beat cash, it will have been the most prolonged recovery in history, beating the dot com crash and the Great Depression.

That said, records are made to be broken. So you have to ask yourself "what if I was extremely unlucky and was still down 5 years after investing in a 20% crash". In my case the answer would be "wait another year or so" or "buy a cheap house from someone who is desperate to sell despite the equivalent slump in the housing market, mitigating my loss". If in your case it would be "rend my garments and gnash my teeth" then you should not take the gamble.

If you do not take the gamble and aim to buy a house in 5 years' time you should bank on saving at least an extra 40% (adjusted for your own local housing market) to counteract the effect of running to stand still, i.e. saving in cash to buy an appreciating asset.

Malthusian

Nobody has been forced up the risk scale. They could have adjusted lifestyle expectations or done more work. "The world does not owe you a living" doesn't just apply to hoi polloi.