Coming Year's ISA.. What will you do?

Tonski

I'm also interested to see why a few of you are interested in money market funds? From my limited understanding, they are designed as safe, short-term holdings with little return. Is it not just better to put it in something like a flexible cash ISA or even premium bonds, till you decide what you really want to do with it? Are you expecting the market to crash in the near future and waiting for this?

ChilliBob

Tonski said:

I'm also interested to see why a few of you are interested in money market funds? From my limited understanding, they are designed as safe, short-term holdings with little return. Is it not just better to put it in something like a flexible cash ISA or even premium bonds, till you decide what you really want to do with it? Are you expecting the market to crash in the near future and waiting for this?

I think the point is that you can get basically near enough the current interest rate, which at say 4.25 or so, is a decent return. It's higher than anything 'easy access'. The only way to get higher cash rates is to lock it up for say a year or so. With the money market fund you can take out when you want.

Obviously it's not directly comparable to easy access, there's transaction costs for one - say a fiver to pay in, a fiver to pay out. But you get the idea.

I think many are going for this as there's a fair few reports etc stating that a recession is looming and that say the s&p is likely to fall, and only increase again later in the year.

Obviously this could be entirely wrong, it might just continue to grow - nobody knows.

I suppose if you thought for sure it was going to fall you'd put the cash in money market funds, bonds or something else non equity. If you thought it wouldn't fall you'd put it into equities. 

I suppose a mixture is a halfway house saying I don't know what's going go happen so at least let's lock in some returns from money market funds anyway.

Note, whilst it's one of the lowest risk 'investments' it does have higher risk (marginally) than cash.

Interestingly, and unlikely to be relevant to many on here, but it's quite often used for people with large cash balances they want to keep in one place - I dunno, 4 million quid or something lol. NS&I covers you up to 2mn but their easy access ad 2.86 or so is clearly quite a bit lower.

Well that's my tuppence worth on it! 

ChilliBob

Tonski said:

My plan this year is to start investing in long term, passive funds to grow money for my retirement, and to transfer money from my cash ISA into S&S ISA. This will be my first time investing in S&S so hopefully all of the research that I've done makes sense but if anyone has any improvements or suggestions, I would be interested to hear them:

Increase my pension contribution from 10 to 15% to ensure that I stay under the higher tax threshold and just pay 20%.

Open a S&S LISA with HL and buy HSBC FTSE all world index Class C accumulation. I'll put in £4k over the year to get the full £1k bonus. Only fees will be 0.25% flatform fee and 0.13% fund fee. As this is a fund not an ETF, i avoid the trading fees.

Open a S&S ISA with Invest Engine and transfer in £10k from cash ISA which will get me a £100 investment bonus. I will then transfer in £500 monthly to buy 90% Vanguard FTSE developed world ETF (VHVG) and 10% Vanguard FTSE emerging markets. This will mimic the Vanguard FTSE Global all Cap but with cheaper fees (90%*0.14% + 10%*0.22% vs 100%*0.23%) and there are no fees for the DIY setup on Invest Engine.

Finally, open a junior S&S ISA for my daughter (4) with Fidelity. I'll transfer the balance from her current cash JISA and set up a recurring £100/month to buy Fidelity Index World Fund P Accumulation. No platform fees and just 0.1% fund fee.

Any spare cash I have will probably go into premium bonds as a safe, easy access emergency fund.

Any comments on these plans would be really helpful to make sure I'm on the right track.

The Jisa platform and choice of funds seems sound, I'm doing the same for my daughter (8 months). For my son (5) I was like a magpie collecting active funds being a total novice, predictably the returns aren't great lol.

The invest Engine idea sounds good to me too - obviously with the usual disclaimers of it suiting your risk profile, having emergency funds yada yada etc. It's a good plstform, i played with it for a bit and got a good chunk of referrals!

It'll auto rebalance for you too, which is good with your DIY all world approach I guess