When to withdraw money from a stocks and shares ISA?

monkeyboyhero

Hello, I'm trying to get my head around how stocks and shares ISAs work as I'd like to move over some money I have from a cash ISA.  But I'm not sure I understand quite how they work.  Whenever I read the guidance on the ISA site, it just makes my head spin!

Maybe this is already an indicator these aren't for me...but regardless, I wonder if I could ask:  with these ISAs, is the intention that you invest a sum, wait for a while for it to appreciate (hopefully), then then withdraw it?

E.g. I put in £10,000.  After two years, it's now £12,000.  I take all that out.


Or, do you invest a sum, and then as it appreciates withdraw some, essentially "creaming" off the top.  Leaving the rest it to continue accumulating, and then take some off again?

E.g. I put in £10,000.  After a month it's £10,100.  I withdraw £100 to a separate account, reducing it back down to £10,000.  Wait until it goes up again, and repeat.

I would really appreciate any advice on this!

(PS I am not planning to invest £10k!)

Albermarle

You can do all the things you mention above if you want , although whether it would be wise to do so is another matter.
Also what would you do if after two years the £10K was now only £8K ??

The most important point is that investing in this way is really for the long term, which means >10 years , with an absolute minimum of 5 years ( not 2 ) . In the shorter term investments can go up and down , but hopefully in the longer term the trend is up . Therefore the longer you hold the investments the less likely is that you will make a loss. Follow this link
Long-term investing: Increasing your chances of positive returns (nutmeg.com)

If you think you will need the money in two years time , then stick to cash savings .

MX5huggy

The idea is that you invest for a long period to you benefit from compounding. 

Invest your £10k for 20 years and given a fair wind (7%) it will be worth £38700. 

Do your second option of taking out the 7% growth each year you would have the original £10k plus £14k in the bank. 

Note 7% growth is just an optimistic guess of average growth be prepared for any thing between minus 50% and plus 20%.

tebbins

monkeyboyhero said:

Hello, I'm trying to get my head around how stocks and shares ISAs work as I'd like to move over some money I have from a cash ISA.  But I'm not sure I understand quite how they work.  Whenever I read the guidance on the ISA site, it just makes my head spin!

Maybe this is already an indicator these aren't for me...but regardless, I wonder if I could ask:  with these ISAs, is the intention that you invest a sum, wait for a while for it to appreciate (hopefully), then then withdraw it?

E.g. I put in £10,000.  After two years, it's now £12,000.  I take all that out.


Or, do you invest a sum, and then as it appreciates withdraw some, essentially "creaming" off the top.  Leaving the rest it to continue accumulating, and then take some off again?

E.g. I put in £10,000.  After a month it's £10,100.  I withdraw £100 to a separate account, reducing it back down to £10,000.  Wait until it goes up again, and repeat.

I would really appreciate any advice on this!

(PS I am not planning to invest £10k!)

Why would you do that? Why not just let it grow?
You can do whatever you want, it's your money. It's just an amount of money that you have saved, and instead of accepting the safety but low interest of cash savings, you invest it in the reasonable expectation of higher longer term growth.
I understand that a lot of people think in terms of getting to a certain number and then taking or locking in the profits - and no one ever got poor by taking a profit/gain - but why would you say no to potential further growth?
The way I do it is I keep around £10k of cash, I have my LISA and some DC pensions, I want to retire before 55/57/58 so for now all of the saving, any cash that takes me much above £10k, goes into my Vanguard. Others prefer to have more cash on hand, others prioritise pensions.

Langtang

Albermarle said:

The most important point is that investing in this way is really for the long term, which means >10 years , with an absolute minimum of 5 years ( not 2 ) . In the shorter term investments can go up and down , but hopefully in the longer term the trend is up . Therefore the longer you hold the investments the less likely is that you will make a loss. Follow this link

MX5huggy said:

The idea is that you invest for a long period to you benefit from compounding. 

Invest your £10k for 20 years and given a fair wind (7%) it will be worth £38700. 

Do your second option of taking out the 7% growth each year you would have the original £10k plus £14k in the bank. 

What would be the options if you wanted to use the (hopefully) growth as an income/pension top up? How would the investment(s) differ from the longer term ones?

Should you have a cash buffer (say 3 years) and leave the investments to grow and then remove the growth?

Albermarle

Langtang said:

Albermarle said:

The most important point is that investing in this way is really for the long term, which means >10 years , with an absolute minimum of 5 years ( not 2 ) . In the shorter term investments can go up and down , but hopefully in the longer term the trend is up . Therefore the longer you hold the investments the less likely is that you will make a loss. Follow this link

MX5huggy said:

The idea is that you invest for a long period to you benefit from compounding. 

Invest your £10k for 20 years and given a fair wind (7%) it will be worth £38700. 

Do your second option of taking out the 7% growth each year you would have the original £10k plus £14k in the bank. 

What would be the options if you wanted to use the (hopefully) growth as an income/pension top up? How would the investment(s) differ from the longer term ones?

Should you have a cash buffer (say 3 years) and leave the investments to grow and then remove the growth?

One option is to hold investments that are orientated to providing a steady income , by paying regular good dividends. However these funds tend to be rather laggard in terms of growth . So you get the income but your capital base could get slowly eroded.

Or you can use a cash buffer as you suggest and only withdraw when the fund has gone through a growth period.

Also if you are using the money as pension top up , you can maybe tolerate a slow decline in its overall value , as long as it outlasts you , which is the same idea as pension drawdown of course.

jimjames

monkeyboyhero said:

Maybe this is already an indicator these aren't for me...but regardless, I wonder if I could ask:  with these ISAs, is the intention that you invest a sum, wait for a while for it to appreciate (hopefully), then then withdraw it?

E.g. I put in £10,000.  After two years, it's now £12,000.  I take all that out.

Do you do that with your savings account? Draw out the interest as soon as it's credited? If not then there is no need to draw out from a S&S ISA. Take money out when you need money, leave it in there until you do.

ISAs are very simple, they are just a tax free wrapper. For cash it's tax free wrapper on a savings account, for S&S ISA it's tax free investment wrapper that can contain any sort of investment like funds or shares. If you're new to it then funds would be the best option rather than buying individual shares

monkeyboyhero

MX5huggy said:

The idea is that you invest for a long period to you benefit from compounding. 

Invest your £10k for 20 years and given a fair wind (7%) it will be worth £38700. 

Do your second option of taking out the 7% growth each year you would have the original £10k plus £14k in the bank. 

Note 7% growth is just an optimistic guess of average growth be prepared for any thing between minus 50% and plus 20%.

This is exactly the kind of answer I was looking for, thanks so much!   Compounding, that makes perfect sense when you explain it like that.

lozzy1965

And just to finally add (apologies if I missed this in someone else's answer), that there is a 'risk' to leaving your money in cash, or in an account that pays less than the rate of inflation, in that your money will be worth less over time.  Unfortunately we don't get off scot free by taking the easy option! 

JGB1955

I wait until the dividends in the ISA reach £1,000, then buy some more shares with that £1K.  If you leave it in cash it's got no hope of increasing,
.

P933alilli

I made the stupid mistake last year of taking out 85K from my cash isa so now dont have the tax free wrapper. Just caused by having a stressful time and lack of thinking things through!