Smart to use Stocks and Shares ISA as main savings account?

[Deleted User]

I have a stocks and shares ISA with vanguard and I invest into a lifestrategy 80% stocks and shares/20% bonds fund. I'm pleased with the results, often getting 4/5% gains. I wonder whether anyone can advise on whether it would be sensible or daft to put the majority of my savings in the ISA where it will earn more (in all likelihood) than my SAGA savings account?

I don't have a huge amount of savings. Less than 30k. I'm 30 years old and saving for a home. I use the full allocation of a lifetime ISA. My remaining savings are in a SAGA savings account and I have a few thousand in my ISA. 

I understand that experts advise to keep money in an ISA for at least five years but is there a downside to keeping it there for say a year or two until I come to buy a property? It seems unlikely that it will decrease in value and may gain well.

Thanks.

masonic

Is this a serious post? VLS80 fell 18% between 1st-18th March 2020. If "It seems unlikely that it will decrease in value" to you, then you perhaps need to do some more research. It would be unfortunate if a similar event should happen just as you needed the cash. The odds of you seeing a positive return in any given year are not much better than 50:50.

Albermarle

 It seems unlikely that it will decrease in value 

As they always say 'Investments can go down as well as up ' ' past performance is no guide to future performance ' etc etc

Archie_Duke

You need to be prepared to take any ‘downs’ with the ‘ups’. All your savings? - unwise

Archie_Duke

At age 30, I’m intrigued about Saga letting you open a savings account, seems their USP is to provide to older customers. I see it’s just a rebranded Marcus account though, and 0.4% is at the top of the market (unbelievably!).

kuratowski

wildbilljones said:

whether it would be sensible or daft

Daft, with a time horizon of "a year or two" it would be most unwise.

eskbanker

The oft-cited Nutmeg study concluded that, for MSCI World Equity Mid and MSCI Large Cap Total Return in GBP between 1971 and 2020, "Investing for any one year would have generated a positive return 71.83% of the time, while investing for ten years increased your chances to 93.91%", although multi-asset funds will obviously hold non-equity components that should be expected to dampen volatility.

However, the elephant in the room in that is the lack of quantum, so there is no recognition of the fact that a year of -50% would effectively be given the same weight as a +1% one in those simplistic percentages....

DrSyn

wildbilljones said:

 It seems unlikely that it will decrease in value and may gain well.

Thanks.

I sure many thought so to, just before the many stock market  crashes. Take a look at these charts.   https://www.getrichslowly.org/bull-bear-markets/


You should remain invested for at least 10 years or longer to get the best odds of winning the investment game.

You need money within 5 years. Keep it in a savings account.
 
If you want to gamble, put it in Premium Bond for those 2 years,

dunstonh

I have a stocks and shares ISA with vanguard and I invest into a lifestrategy 80% stocks and shares/20% bonds fund. I'm pleased with the results, often getting 4/5% gains.

It hasn't had a great few years (relative to similar funds) but the fund will have loss levels up to around 35% in a 12 month period that could take 3-4 years to recover.

 Less than 30k. I'm 30 years old and saving for a home.

So clearly, VLS80 is unsuitable for that objective unless the plan is to buy in around 7 years or more.

I understand that experts advise to keep money in an ISA for at least five years but is there a downside to keeping it there for say a year or two until I come to buy a property? It seems unlikely that it will decrease in value and may gain well.

It is a medium to high risk fund that will drop again and again and again.   Stop looking at growth periods and thinking they are the norm.   You have to average out the ups and downs  Not just take the ups in isolation.

Adyinvestment

I know I am going to get slated for this post.

I think there is a case of being too cautious, most people on this forum are very level headed and give advice based on what is "the right thing to do" whilst taking as little risk as possible, which is great and all, but not necessarily best for all individual cases if the individual is happy to accept risk.

The OP is quite young at 30 and this is not exactly a crazy risk depending on how much a loss would affect your life.

There is the "more unlikely" outcome of losing 1-30%ish compared with the "more likely" outcome of gaining x%

If the OP lost some money would this be a huge upset? would it take long to replenish? would the OP be distraught? Are dependents involved? ...the OP could be living with parents paying next to nothing and living the high life for all we know.

Is the 1-2 years to buy a house set in stone or could it turn into 7-8 years or more? If so perhaps it could have doubled in the ISA

Perhaps the OP could take a risk with some of his money and a loss may be able to be replenished in a few months?

Only the OP knows his exact position and risk tolerance but the fact they are considering it shows some risk tolerance, I would not say the advice would be the same as perhaps a pensioner who needs this money to make ends meet.

If losing money would have a real negative affect on your life then of course don't do it.

I believe I have a higher risk tolerance than alot on this forum, so please take this with a pinch of salt...just wanted to put out a different perspective.

masonic

Adyinvestment said:

Is the 1-2 years to buy a house set in stone or could it turn into 7-8 years or more? If so perhaps it could have doubled in the ISA

Obviously if the intention to buy in a year or two is flexible, and the OP is currently living rent free and happy with that arrangement, then that does change the situation. However, the sensible approach in that situation would be to flip the plan and intend to invest for 10 years and take the decision to buy if investment returns are good in the early years.

If delaying the purchase, OP would need to consider the leveraged effect of house price inflation (investment returns may need to be 10x house price inflation if investing £30k vs buying a home valued at £300k), and any excess rental costs vs mortgage costs would also need to be deducted from returns. These will very likely outstrip investment growth, which is why the vast majority of people try to get on the housing ladder as soon as they can afford to do so and their circumstances permit it.

Of course, house prices don't always go up, just as other investments don't always go up, but with the amount of effort successive governments have spent manipulating house prices for the benefit of their home owning voters, it is a very brave person who bets on house prices falling.