Short term "optimisation"

TMSG

We have around 40k coming up from a nice 5yr fix to invest. Interest rates will be going up (may be quite a bit) I think so I am not looking for any lengthy new fix now. Plus I think that at least some of that money could and should go into an S&S ISA (I have one and my wife has another one).

So in normal times this would be easy but in times like these it's not so obvious. Well, to me at least and that's why I am posting this.

I see two ways forward: We put most of it into our resp S&S ISAs and buy a selection of multi-asset funds now. We don't NEED the money in the short/mid-term (say at least for 5-7 years) so we could hopefully out-wait the current situation.

Or we put the money into a (relatively ) well-paying 6month (or even a year) fix. A Cash ISA doesn't make sense ATM as we can get better fixes than cash ISAs, even with 20% marginal tax rate (which my wife doesn't pay anyway). Long term would be different but this is a short term thing. The expectation/speculation here is that if the markets tank within that timeframe we can buy whatever fund we'd have bought under scenario 1 but somewhat cheaper.

So, in six months' time (or a year) we could re-evaluate the situation and either go for another short fix or go down the S&S ISA route.

We could also go for easy access savings that would give us some more flexibility but I have a hunch that this thing will take longer than some think.

Thoughts?

AlanP_2

You seem to be deciding on whether to buy Apples (cash savings at x%) or Oranges (S&S ISA with unknown returns).

Given what is already in your fruit bowl do you want more Apples, more Oranges or some of each?

Nobody knows what markets will do next week let alone over 5-7 years but historical trend is to increase and to beat inflation but 5-7 years is not long in market terms. What happens in 2027/2029 will it be spent or do you actually have 10+ years for it to grow?

Do you have enough spare / emergency cash apart from this £40k?

Are you earning an income, unemployed or retired? All of these factors could lead to different suggestions.

Albermarle

 Interest rates will be going up (may be quite a bit) 

Probably some saving rates will go up in the next weeks following the BofE rate increase. After that nobody knows.

So in normal times this would be easy  but in times like these it's not so obvious

Many investors have so called 'recency bias' This means they lend too much weight to events currently in the news, whilst forgetting that there have been numerous previous periods of problems in the world, some a lot worse than today. Plus there will be many more in their lifetime, some probably worse than todays issues.

so we could hopefully out-wait the current situation.      but I have a hunch that this thing will take longer than some think.

Three points here

1) You might be waiting a long time

2) Global events/ economic situations and financial markets are often not very well correlated. The markets are looking one to two years ahead. When the Bof E issued its dire warnings of recession, the market hardly twitched. It had priced in the chance of a recession many months ago. By the time there is better news, the market will have already risen in anticipation and you will have missed the boat

3) In fact it is already happening, The US market is up over 10% in the last 4 weeks. Of course it might go down again and more, then again it might not.

As AlanP 2 says, you should have a strategy and stick to it and not try and time your investments, as it doesn't work most of the time. 

bostonerimus

What about setting up a fixed term saving ladder. Divide your cash into say 5 equal parts and buy 1,2,3,4 and 5 year fixed saving accounts. As they mature you can decide what to do. You could buy another 5 year fixed each time and so you end up with a string of 5 yera accounts with one maturing every year.

TMSG

@AlanP_2 I want the oranges. The question is simply whether I want them NOW or whether I wait a while (and earning some interest) and buy them later when they may (or may not) be cheaper.

I see the point that timing the markets is hard and I would not dream to try to do that on my own. I was simply hoping for some input (as crowd wisdom normally beats any single source) re the expectations (not firm facts... expectations) of others as to the markets for the coming months. Obviously that's not the way to do that.

Perhaps @bostonerimus idea is something to look into, thanks for that!

Albermarle

 I was simply hoping for some input (as crowd wisdom normally beats any single source) re the expectations (not firm facts... expectations) of others as to the markets for the coming months

You will get diverse opinions so you will be none the wiser. My expectation is that they have bounced back a bit and will probably keep bobbing around the current levels for some time. Just a guess though.