Getting FIREd up 😀

South_coast

Morning PIP,  thank you for your lovely message 🥰! 

I will leave KP to answer the question on the S&S LISA, as my LISA *whispers* is a cash one (I wanted to keep some money in cash, but it still goes up by 25% on whatever I put in, plus it's earning interest and compounding away in the background). However, I do know that with my S&S ISA, just transferring the money into it is not enough, as it will sit in the "cash" holding account in my name unless I actually choose a fund to put it into. See below screenshot from my account. This is the proceeds of a sale from a fund I don't like any more (which I have actually reinvested in another fund last night, but it's not gone through yet)



Unless I press the invest button, it's just going to sit there as cash. They'll pay me a few pennies in interest, but that's a lot less than it might earn out in the world. I would assume it's the same principle with the S&S LISA. 

themadvix

My S&S LISA is with Nutmeg and they invest automatically for you. You do a survey on opening the account and another yearly to check your risk profile and they rob-invest in alignment with that. For non-passive funds I’m pretty pleased with the performance. I’m surprised at you SC - my cash LISA (Skipton) has a terrible interest rate and basically does nothing, hence opening an S&S one. 

South_coast

Now I feel like I've disappointed you, Vix 🤣! I've already got multiple pensions and an S&S ISA, so there was always a cash element to my plans. Mine is with Beehive Money/Nottingham Building Society (not entirely sure what they call themselves). The rate has gone up a couple of times in the last year, currently at 3.5% - not great and below inflation, but the Govt is also adding 25% to my stake each year. There's a bit over £20k in there at the moment, so currently earning £1.95/day in interest. I think it'll be worth around £80k by the time I'm 60, so I'll probably pause any withdrawals from pensions/ISA for a few years at that point and just live off this cash pot, and leave the others growing in the background in the meantime

LadyWithAPlan

PennysIntoPounds said:

killerpeaty said:

I remember when the LISA came out, a friend told us (her friends) that she had done the maths and decided that LISA would be better for her than a pension (self employed). We were like "great, what did you invest in?" "A LISA". She didn't know that she would need to invest and we have never managed to convince her. 

So I can see that being confused is normal, but someone really should be checking those questions!

Hi @South_coast and thread friends, I was going to say hello anyway after randomly coming across your diary and thoroughly enjoying it-
and then saw this very pertinent post from @killerpeaty!
I've just been wondering on my own diary if I should be putting money into my S&S LISA as I have no idea about investing at all. Could you please explain like I'm very stupid what your friend should have been doing?! 
No worries if it's too arduous, I don't have any money anyway so I don't expect it'll end up mattering a great deal what I do 😁

But many congratulations @South_coast on being mortgage free, that's a lovely thing to hear and a great achievement 

PIP always best to start with a mutual fund so a basket of shares rather than individual ones to have much less risk

all funds have an annual mgt fee so look at low cost ones you can pay 0.10% on a vanguard one vs 2% on others so you can miss out on a lot of money on compound of the fees 

2 kinds of funds
 accumulation, means any dividends are paid into the fund itself so you don’t have to do anything
distribution or distributing share funds will pay you dividends which means you then have cash in your isa which you have to reinvest fine if you’re older or planning to use that but probably easier now just to buy accumulation

the vanguard funds  you can buy as part of a vanguard s$S but also in other ISA  providers and are a great first start 
you can go for a global one as then it’s companies across the world and you could buy  just  that - I get more complicated and then buy in other sectors /specific countries but one doesn’t need to 
 eg Vanguard Global Equity Fund 
and Global Equity Small Cap (smaller companies) 

I also have US funds eg Vanguard US Equity Fund and European
eg Vanguard   FTSE Developed Europe ex-U.K. Equity Index Fund - Accumulation



Vanguard  also do a life strategy one 100% which is all shares 
Lifestrategy is 80 % shares 20 % bonds 
personally I buy just shares but that’s cos I will have a DB pension which is guaranteed so 

There are also ETFs which mean that unless you buy them within a vanguard isa there is an upfront service charge to buy as with an individual share. So you can ignore as you start to learn 

themadvix

South_coast said:

Now I feel like I've disappointed you, Vix 🤣! I've already got multiple pensions and an S&S ISA, so there was always a cash element to my plans. Mine is with Beehive Money/Nottingham Building Society (not entirely sure what they call themselves). The rate has gone up a couple of times in the last year, currently at 3.5% - not great and below inflation, but the Govt is also adding 25% to my stake each year. There's a bit over £20k in there at the moment, so currently earning £1.95/day in interest. I think it'll be worth around £80k by the time I'm 60, so I'll probably pause any withdrawals from pensions/ISA for a few years at that point and just live off this cash pot, and leave the others growing in the background in the meantime

Not disappointed - just surprised! I guess the 25% makes the difference - I just have my cash holding in a higher-interest paying account and let the markets play with my 25% from the govt. My rate on my cash ISA is similar - very poor compared to inflation.

edinburgher

I have been feeling spreadsheety - must be the sun peeking through the clouds.

If you look at @South_coast vs @themadvix approaches over time, SC looks like she is winning the battle with but with time TMV wins the war. 

I looked at a few different scenarios. With all things being equal, the higher interest rate of cash ISAs vs cash LISAs more than compensates for the 25% gummint bonus on that year's contributions. It's a relatively close thing, in the 3 examples I looked at, it took 12/17/18 years for ISA to overtake LISA over a 20-year span. In the worst case scenario, someone using a LISA for cash loses perhaps £7,000-£8.000 vs the ISA).

There were a bunch of assumptions (such as assuming a constant interest rate over 20 years etc., that the delta between ISA and LISA cash savings rates will remain constant over this period, that both savers seek out the best rates the market has to offer).

themadvix

Ooh thanks Ed, that’s interesting. I confess there’s nothing more than internal hunch behind my logic (or even much of that!). That being said, I’m not convinced that the economic model of endless growth is the answer to sustainable life on the planet (nor feasible with demographic changes) so I am likely to be changing my investment strategy (if you can call it that) in the near future anyway.

South_coast

Very interesting Ed (slow day at work 🤣?) I'm not really 100% sure why I went for a cash LISA instead of S&S, but now I've got that as my "strategy" I'm happy to stick with it. I don't have any DB pensions, so nothing else "guaranteed" apart from the state pension, so good to know it'll always be there

Cornish_mum

Hello All - sorry to gate crash,

I recently read a very useful and evidence based book on investing called ‘live the life you want’ by Powell and Howell. I think it gives lots of sensible advice about what to invest in and why. 

We are investing with an strong ESG tilt in a index tracking fund (ie a mutual) because of similar concerns to Thermavix; as I think environmental sustainable economic growth is possible via technical innovation whilst reducing consumption and environmental impact.. but that’s just the optimist in me..

Also unfashionably I still like bonds especially the super boring government ones, as I remain the cautious type. Also I have a lot of money is cash (which is not advisable but I just like the security of it, and am terrible at spending it!)

And low fees are also important to me too.  

CM 

PennysIntoPounds

Thanks all for your advice, happily I also have Nutmeg so it doesn't sound like I've been doing anything too stupid!