Help. What should I invest my lifetime ISA in?

Sam3007

Hi all,

I am a sole trader .. 40 years old .. I opened my LISA with A J bell last year just before I turned 40.
I am planning to use my LISA when I am 60.

I have been paying the 25 DD min payment and I have £125 in my account.

I am planning to invest 4K this year and possibly another 4K next year into my LISA in stock and shares.

My questions are:
1- Does it make a big difference if I put the 4K in December 23 instead of now? Growth wise
2- What products/investments do you recommend with low fees - 20 years?
3- I have a pension with Aviva (totalling £1.185) when I worked for a company for a couple of years long time ago. Is it recommended to pay into both of LISA and pension or just to conentrate on the LISA one?

I have tried to do some rearch but I am new to investment and I cannot tell the difference between.. say .. AJ Bell funds, AJ Bell Responsible Growth fund, AJ Bell Ready-made portfolios, AJ Bell Favourite funds..etc.

Thanks

Reed_Richards

I would recommend a stock market (FTSE) tracker fund.  These generally have the lowest fees.  Fund managers find it surprisingly difficult to beat the market and over 20 years whatever actively managed fund you chose will probably go through several managers and you would need all of them to be good. 

Albermarle

Sam3007 said:

Hi all,

I am a sole trader .. 40 years old .. I opened my LISA with A J bell last year just before I turned 40.
I am planning to use my LISA when I am 60.

I have been paying the 25 DD min payment and I have £125 in my account.

I am planning to invest 4K this year and possibly another 4K next year into my LISA in stock and shares.

My questions are:
1- Does it make a big difference if I put the 4K in December 23 instead of now? Growth wise. If markets grow in the meantime you will lose out by delaying. If they go down, delaying will be seen to a be a good idea. On average it is better to invest today rather than delay, but until December 2023 arrives you will not know which was the best decision.
2- What products/investments do you recommend with low fees - 20 years?
3- I have a pension with Aviva (totalling £1.185) when I worked for a company for a couple of years long time ago. Is it recommended to pay into both of LISA and pension or just to conentrate on the LISA one?
Pension wins out easily if you get employer contributions an/or you are a 40 % taxpayer. Otherwise it is down to other factors.
Later in this article is an explanation of the pros and cons of each.
Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

I have tried to do some rearch but I am new to investment and I cannot tell the difference between.. say .. AJ Bell funds, AJ Bell Responsible Growth fund, AJ Bell Ready-made portfolios, AJ Bell Favourite funds..etc. Be aware that you do not have to buy A J Bell funds just because you are on the AJ Bell platform, despite the fact they are heavily promoted

Thanks

Normally in this situation an index tracker is suggested. Basically it just passively tracks the stock markets . Normally there is a global mix. They will move around quite a lot and can go down alarmingly quickly. Although they should easily recover over your long time frame, some investors get jumpy when they suddenly drop. If you think you might be the nervous type you might be better in a low cost multi asset fund, with less than 100% equity ( shares).
In both cases you should be looking at charges between 0.15% to 0.25% ( plus 0.25% A J bell platform charge)

Examples of a global index fund areFidelity Index World Fund P Accumulation Key Statistics | GB00BJS8SJ34 | Fidelity

Here is a link to a range of multi asset funds  Multi Asset Funds | Ready-made Portfolios - HSBC UK

These , and others , are available on the A J Bell platform

Sam3007

Albermarle said:

Normally in this situation an index tracker is suggested. Basically it just passively tracks the stock markets . Normally there is a global mix. They will move around quite a lot and can go down alarmingly quickly. Although they should easily recover over your long time frame, some investors get jumpy when they suddenly drop. If you think you might be the nervous type you might be better in a low cost multi asset fund, with less than 100% equity ( shares).

In both cases you should be looking at charges between 0.15% to 0.25% ( plus 0.25% A J bell platform charge)

Examples of a global index fund areFidelity Index World Fund P Accumulation Key Statistics | GB00BJS8SJ34 | Fidelity

Here is a link to a range of multi asset funds  Multi Asset Funds | Ready-made Portfolios - HSBC UK

These , and others , are available on the A J Bell platform

Thanks.

I have done some reseach and it seems there are different types Fidelity Index funds.
What is the advantage of the World fund compared to Fidelity Index US P Acc or Japan or emerging markets?

am I better off staying with the US one (more secure?) or have two?

am I able to sell and then buy in a different fund anytime I want?

 shall I include or exclode charges when buying? 

Thanks

Reed_Richards

'World' presumably tracks a weighted index of all major stock markets, US presumably tracks the S & P Index, Japan the Nikkei Index (which has been fairly static for the last 30 years) etc.

If you invest outside the UK you take-on an additional exchange rate risk.  Should sterling ever recover in value your foreign shares would be worth less in pounds but if the pound continues to sink in value they would be worth more.

You should invest in the US if you think the US stock market will outperform the rest of the world's stock markets and/or if you think the value of the pound will continue to fall against the US dollar.

You can buy and sell the funds whenever you want but I would not recommend doing it often.

If you invest £1000 and include charges then your investment will cost you £1000.  If you exclude charges you will get £1000 worth of your chosen units but it will cost you a bit more than £1000 to cover the charges.     

Linton

Sam3007 said:

Albermarle said:

Normally in this situation an index tracker is suggested. Basically it just passively tracks the stock markets . Normally there is a global mix. They will move around quite a lot and can go down alarmingly quickly. Although they should easily recover over your long time frame, some investors get jumpy when they suddenly drop. If you think you might be the nervous type you might be better in a low cost multi asset fund, with less than 100% equity ( shares).

In both cases you should be looking at charges between 0.15% to 0.25% ( plus 0.25% A J bell platform charge)

Examples of a global index fund areFidelity Index World Fund P Accumulation Key Statistics | GB00BJS8SJ34 | Fidelity

Here is a link to a range of multi asset funds  Multi Asset Funds | Ready-made Portfolios - HSBC UK

These , and others , are available on the A J Bell platform

Thanks.

I have done some reseach and it seems there are different types Fidelity Index funds.
What is the advantage of the World fund compared to Fidelity Index US P Acc or Japan or emerging markets?

am I better off staying with the US one (more secure?) or have two?

am I able to sell and then buy in a different fund anytime I want?

 shall I include or exclode charges when buying? 

Thanks

As you are a new investor I suggest you buy a global fund.  This will contain all of the main investments contained by a US and a Japan and a UK and etc index fund.

If one area performs very badly the effect will be diluted, similarly if one area performs very well so you are likely to get a smoother ride.  The US has peformed well in the past 10 years or so but performed badly in the 2000's.  Sadly no one knows which area will perform best in the next decade.

Also different countries specialise in different industries.  By focusing on one area you will be emphasing some industries (eg USA and Technology) and putting less money in others.  Again covering all bases helps reduce major booms and crashes.  The US again provides an example.  In the years up to 2000 there was a boom with the internet starting to have a commercial impact.  A lot of money was poured into technology companies with ".com" in their name, many of which went bust and the market collapsed.

As to your other questions - you can buy and sell any number of funds anytime you want.

When buying or selling you will do so at the market price of the underlying investments as stated by the fund manager.  However depending on the platform you use there may be an additional fixed transaction charge.  If you are talking about the published fund charges they have no direct effect on either the market price or the published performance, the latter always being after charges.  The fund charges are a piece of information based on the previous year's data.

Sam3007

Thank you all for your valuable comments. 

I have searched the investment (SEDOL BJS8SJ3) on A J bell and this one come up.
Fidelity Index World P Acc (FUND:BJS8SJ3)

taking into consideration the current market, is is better to put 4K in one go for 2023 and another 4 K in Jan 2023 or just to pay £300 dd each month from now on?

Last year I was focsing on overpaying my mortage, but it feels to me now that I will be better off investing in such a fund for 20 year than overpaying my mortgage, but I still see many people focusing more on overpaying their mortgages.


Am I missing something here? When does overpaying a mortage beat a LISA?


thanks



 

eskbanker

Sam3007 said:

taking into consideration the current market, is is better to put 4K in one go for 2023 and another 4 K in Jan 2023 or just to pay £300 dd each month from now on? 

On average markets rise more than they fall (that's why we invest!) and therefore, for those starting with a lump sum, it's more likely to be beneficial to invest it at the earliest opportunity rather than drip-feeding it, the simplistic adage being "time in the market, not timing the market".  That's not an unanimous view though, there are those who are convinced that they can predict what's coming, based on what charts and analysts are saying....

Sam3007 said:

Last year I was focsing on overpaying my mortage, but it feels to me now that I will be better off investing in such a fund for 20 year than overpaying my mortgage, but I still see many people focusing more on overpaying their mortgages.

Am I missing something here? When does overpaying a mortage beat a LISA? 

There are two different answers to that - from a purely financial point of view, overpaying a mortgage is typically sensible if it's a high rate, but from a psychological perspective many will swear by the benefits of being genuinely debt-free even if it's not necessarily the most financially advantageous approach.

Sam3007

Can anyone help me decide between Fidelity Index World P Acc and global all cap. Which one is better in my situation ?
Thanks 

Linton

Sam3007 said:

Can anyone help me decide between Fidelity Index World P Acc and global all cap. Which one is better in my situation ?
Thanks 

Both funds would be expected to behave in much the same way. It does not matter very much which you choose.  Either would be fine.  As it happens the Vanguard Global All Cap has a wider coverage but Fidelity Index World has generally out performed it possibly because of higher US tech holdings.  However the reverse could happen in the next 10 years, no one knows.

You need to be aware that investing 100% in shares could lead to significant volatility at some time, or rather several times, in the next 20 years - perhaps a temporary fall of 40-50% as happened in 2001 and 2008. The important thing to do is to do nothing.  Dont panic and sell out. Barring the end of the world you would expect prices to recover in a comparatively short time.  Over 20 years one would expect the underlying upward trend to strongly win out.

If you aren't prepared to face the volatility you should look for something more cautious.

Sam3007

Linton said:

Sam3007 said:

Can anyone help me decide between Fidelity Index World P Acc and global all cap. Which one is better in my situation ?
Thanks 

Both funds would be expected to behave in much the same way. It does not matter very much which you choose.  Either would be fine.  As it happens the Vanguard Global All Cap has a wider coverage but Fidelity Index World has generally out performed it possibly because of higher US tech holdings.  However the reverse could happen in the next 10 years, no one knows.

You need to be aware that investing 100% in shares could lead to significant volatility at some time, or rather several times, in the next 20 years - perhaps a temporary fall of 40-50% as happened in 2001 and 2008. The important thing to do is to do nothing.  Dont panic and sell out. Barring the end of the world you would expect prices to recover in a comparatively short time.  Over 20 years one would expect the underlying upward trend to strongly win out.

If you aren't prepared to face the volatility you should look for something more cautious.

Thanks a lot that was really insightful
 I have run a test on A J bell for the Fidelity Index World.
I put £100 and got the following:
Dealing charge £1.50
Charges taken from the fund over a year - Ongoing charges 0.12%
Are these the only two charges I need to worry about?
So If I invest say 4K + 1K bonus = 5K, then I will only need to pay £1.50 + £6 (0.12%), right?
Any reason why this fund price on A J bell is showing as 270.21 whereas it is 268.43 on fidelity webiste?
Thanks