Planning to open a Stocks and Shares ISA and a regular LISA - thoughts?

investing222

Hi everyone! I am new to the forums here  
I've worked really hard to save over the past few years. I have around £55K now, in a basic savings account. I know this money is depreciating in value, but I'm very risk averse. I've just now made the decision to start investing some of it. I will need most of it at some point in the next 3-5 years to pay for a house deposit.  

I would like to start by putting the max amount I can afford annually into a Lifetime ISA - so £4K this year. If I manage to put £4K in each year until I'm 49 (which is the cut off), I'll be saving a total of £64,000, my government bonus will be £16,000, and online calculators are telling me I'll be able to withdraw around £87,749 including interest. That's approximately a 37% return on investment over 26 years. Which sounds great to me but I have no idea if that's decent or not? Would I be better off investing in a Stocks and Shares LISA instead? The idea is that I'll use the money when I am 60 to pay off the remainder of my mortgage. 

I would also like to open a regular Stocks and Shares ISA, and start feeding some money into it monthly. However I have no idea how much to invest, and like I said I am quite risk-averse. I've worked so hard to save up this money, I need it for a house deposit, I can't afford to lose any of it. Any advice anyone has greatly appreciated!

eskbanker

investing222 said:

I will need most of it at some point in the next 3-5 years to pay for a house deposit.  


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I've worked so hard to save up this money, I need it for a house deposit, I can't afford to lose any of it. Any advice anyone has greatly appreciated!

If you need the money within 3-5 years and "can't afford to lose any of it" then investing it is riskier than most would accept, so if you're risk-averse then keep the money in cash deposit form.

A cash LISA would be sensible if this is your first property though.

investing222 said:

That's approximately a 37% return on investment over 26 years. Which sounds great to me but I have no idea if that's decent or not?

No, that really isn't a great return on money over a long term!

masonic

A 37% return over 26 years is equal to an annual return of 1.2%. This is going to be less than inflation, so while £87,749 is a bigger number than £64,000, it won't go as far as £64,000 would today.

Over the long term, the only way to beat inflation using a LISA over a long period of time is to invest in a S&S LISA. If you intend to use your LISA for a house purchase, then that should be in cash as you'll need the money in the short term. Have you factored this into your plans to accumulate money in the LISA? Likewise you should not invest any money you intend to use for a house deposit in the next few years. The impact of inflation is not so much of a concern over the short term as it is over 26 years!

TheMilkmansDad

assuming you meet the criteria - I'd max out the LISA and stick the rest in Premium Bonds for now. Drip feed from the Premium Bonds to LISA each year accordingly. Keeps it simple and save you having to chase the best savings rates until your house purchase comes to fruition.

Albermarle

When you talk about investment returns , it is best to talk about returns above inflation i.e real growth .
We do not know how high inflation will be over the next 29years but it is very likely to be well above 37%.
So in fact every year your money will go down in value and your £64K might only be worth half of that in terms of what can be bought with it .

You do not mention your pension situation ??