Money market fund for cash

Hello,

I'm not sure on the rules of ISAs and hoped someone could help.

I have a Vanguard ISA with ~£4k invested in "FTSE All-World UCITS ETF - Distributing (VWRL)" and ~£25k sitting in cash, from previous years ISA allowance. Vanguard pay 2.60% interest and I wondered if there was a better option e.g. "Sterling Short-Term Money Market Fund". If I'm understanding the Vanguard website correctly from Nov 22 to Oct 23 it paid 4.1% on this fund which seems better than 2.60% cash interest?

If I'm misunderstanding this or it's not what other people do with cash in their S&S ISA then what do other people do when they want to invest cash but don't think now is the right time?

Thanks
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  • dunstonh
    dunstonh Posts: 115,636
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    For most platforms, using the STMM fund is a better option than platform cash.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jimjames
    jimjames Posts: 17,489
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    edited 6 November 2023 at 2:48PM
    dt17634 said:

    If I'm misunderstanding this or it's not what other people do with cash in their S&S ISA then what do other people do when they want to invest cash but don't think now is the right time?
    Out of interest, how are you planning to judge the right time? I topped up more last week when markets dropped but have a regular monthly investment for my main contributions. If you're waiting until things recover then you could end up buying at a much higher price when for the best return buying low would enhance returns. £4k invested and £25k cash is a very big bet on things dropping more in future.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Hoenir
    Hoenir Posts: 1,158
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    dt17634 said:


    If I'm misunderstanding this or it's not what other people do with cash in their S&S ISA then what do other people do when they want to invest cash but don't think now is the right time?

    Thanks
    Timing the market is nigh impossible. Equities are a long term investment. For peace of mind. Drip feeding the money into the market over an extended period is one approach. As many people struggle with seeing a lump sum invested dropping very suddenly in value. A fund such as VWRL is likely to be highly volatile in price. 
  • jimjames said:
    dt17634 said:

    If I'm misunderstanding this or it's not what other people do with cash in their S&S ISA then what do other people do when they want to invest cash but don't think now is the right time?
    Out of interest, how are you planning to judge the right time?
    Waiting until P/E ratio of S&P500 becomes closer to the 60 year average

    Hoenir said:
    dt17634 said:


    If I'm misunderstanding this or it's not what other people do with cash in their S&S ISA then what do other people do when they want to invest cash but don't think now is the right time?

    Thanks
    Timing the market is nigh impossible. Equities are a long term investment. For peace of mind. Drip feeding the money into the market over an extended period is one approach. As many people struggle with seeing a lump sum invested dropping very suddenly in value. A fund such as VWRL is likely to be highly volatile in price. 
    I'm not looking to time the market i.e. sell at a high, but at a low. I am however looking to get out of VWRL as I don't like the 0.22% OCF. I now prefer 0.14% OCF of "Vanguard FTSE Developed World ex-U.K. Equity Index Fun GPB Acc / VVDVWE".

    I like the reduced fees and that it's accumulation and not dividend income. I don't particularly want to exclude EM or UK but there's not a cheaper global passive fund to choose from on Vanguard.
  • dunstonh
    dunstonh Posts: 115,636
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    Waiting until P/E ratio of S&P500 becomes closer to the 60 year average
    Are you planning to invest 100% into the S&P500 with currency hedging when you feel it is ready?

    If not, then why are you using that as your guide?

    I like the reduced fees and that it's accumulation and not dividend income. I don't particularly want to exclude EM or UK but there's not a cheaper global passive fund to choose from on Vanguard.
    That is one of the limitations of using a restricted provider and not a whole of market provider.


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh said:
    Waiting until P/E ratio of S&P500 becomes closer to the 60 year average
    Are you planning to invest 100% into the S&P500 with currency hedging when you feel it is ready?

    If not, then why are you using that as your guide?

    Only my guide due to North America being 63.1% / 73.3% of the two funds I've mentioned - I'm being a bit lazy in only mentioning S&P500 I suppose.

    dunstonh said:
    That is one of the limitations of using a restricted provider and not a whole of market provider.
    I am thinking of either:

    - HSBC FTSE All-World Index Fund Accumulation C (MDAABG), which is 0.13% OCF and includes EM and UK. 
    - Invesco FTSE All-Word UCITS ETF Acc (FWRG), which is 0.15% OCF and includes EM and UK. 

    I'm not really sure which platform might be best to buy either of these funds. I'd welcome any suggestions. I know for example that the HSBC fund isn't an ETF and so T212 wouldn't include it as T212 is ETF only.

    To add some final info, the total that'd invest would be approx ~£40k.

    Thanks
  • Albermarle
    Albermarle Posts: 21,048
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    I'm not sure on the rules of ISAs and hoped someone could help

    In fact your question is not about ISA rules at all, but about investment strategy.

    An ISA is just somewhere you can hold investments protected from tax ( although there are quite a lot of rules about how much you can add, how many you can have , there are different types of ISA's etc )

    How you invest the money when it is in a S&S ISA, is a totally different subject.

    Best not mix the two up ( as many do ). 

  • I'm not sure on the rules of ISAs and hoped someone could help

    In fact your question is not about ISA rules at all, but about investment strategy.

    An ISA is just somewhere you can hold investments protected from tax ( although there are quite a lot of rules about how much you can add, how many you can have , there are different types of ISA's etc )

    How you invest the money when it is in a S&S ISA, is a totally different subject.

    Best not mix the two up ( as many do ). 

    Do you pay tax on the interest from a money market fund assuming the 20k ISA limit is already used up? Thanks
  • dt17634 said:
    I'm not sure on the rules of ISAs and hoped someone could help

    In fact your question is not about ISA rules at all, but about investment strategy.

    An ISA is just somewhere you can hold investments protected from tax ( although there are quite a lot of rules about how much you can add, how many you can have , there are different types of ISA's etc )

    How you invest the money when it is in a S&S ISA, is a totally different subject.

    Best not mix the two up ( as many do ). 

    Do you pay tax on the interest from a money market fund assuming the 20k ISA limit is already used up? Thanks
    If held in an ISA (or SIPP) then you don't pay tax on the interest from a money market fund. If held in a GIA then you may pay tax depending on the total amount of interest you earn and whether you exceed your PSA or not.
    'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it' - Albert Einstein.
  • dt17634 said:
    I'm not sure on the rules of ISAs and hoped someone could help

    In fact your question is not about ISA rules at all, but about investment strategy.

    An ISA is just somewhere you can hold investments protected from tax ( although there are quite a lot of rules about how much you can add, how many you can have , there are different types of ISA's etc )

    How you invest the money when it is in a S&S ISA, is a totally different subject.

    Best not mix the two up ( as many do ). 

    Do you pay tax on the interest from a money market fund assuming the 20k ISA limit is already used up? Thanks
    If held in an ISA (or SIPP) then you don't pay tax on the interest from a money market fund. If held in a GIA then you may pay tax depending on the total amount of interest you earn and whether you exceed your PSA or not.
    So the 20k limit can be exceeded by interest payments from a MM fund?
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