ISA advice - Money market funds.

AsifM068

Hi Forum,

Having successfully transferred my Royal London ISA to Vanguard's FTSE Global All Cap (Accumulation) fund, I have about circa 200K in that fund now.

However in 3 to 4 years time I will need to withdraw about £10,000 for a family matter.

My question is, whether I should withdraw this amount from the All Cap at that time, or to switch £ 10,000 from the Global All Cap now to Vanguard's Sterling Short Term money market fund - VASTMGA in readiness for 3 to 4 years time?

If the above plan is plain rubbish please say so.

I also have around £55,000 with NS&I in premium bonds and an index linked certificate that mature is 2 years time; this is my emergency fund.

I am 56 years old and will retire at 60 on my Civil Service Classic DB Pension with 18 years reckonable service.

Your thoughts would be most welcome in newbie speak please as as I am fairly inexperienced in the investment space.

Many thanks

dunstonh

My question is, whether I should withdraw this amount from the All Cap at that time, or to switch £ 10,000 from the Global All Cap now to Vanguard's Sterling Short Term money market fund - VASTMGA in readiness for 3 to 4 years time?

Royal London's STMM fund is generally regarded as the best one.

Derisking for a withdrawal will be the wrong option around 3/4 of the time.   However, it is usually still recommended as it gives you certainty.   If you have other funds that can used instead, then de-risking is not so much an issue.

You need to forget about looking at individual accounts and look everything together.   So, you have the option of NS&I or the ISA.  Not just the ISA.

masonic

It would be sensible to do this, yes. Money that you need within the next few years should not be risked in equities. Fortunately you should be able to sell at or near the all-time high. Could be a very different story in a couple of years time.

Archerychick

I would probably leave my investments and take the £10k out of premium bonds - just another idea for you to consider 

AsifM068

Thank you team.🙂

Albermarle

masonic said:

It would be sensible to do this, yes. Money that you need within the next few years should not be risked in equities. Fortunately you should be able to sell at or near the all-time high. Could be a very different story in a couple of years time.

I sense some element of market timing here....

masonic

Albermarle said:

masonic said:

It would be sensible to do this, yes. Money that you need within the next few years should not be risked in equities. Fortunately you should be able to sell at or near the all-time high. Could be a very different story in a couple of years time.

I sense some element of market timing here....

It's not really market timing. Over short periods of time, the probability of achieving a greater than risk-free return from equities is relatively low. The recommendation would be the same regardless of where markets are. Investors should be prepared to commit money to equities for the long term. If money is invested that cannot be committed, then the rational thing to do is take corrective action as soon as you know about it. It's just fortunate that the OP is able to correct the mistake during a positive period. Had markets had just fallen 10%, I would not be suggesting he holds on because he might recover that loss within the next couple of years.

The question of whether the OP really needs to use this money given the large emergency fund is worth raising, but if he wishes to reserve this for actual emergencies then making a plan to sell equities in a couple of years to fund the expense comes with an unreasonable amount of risk.

Another point that hasn't been brought up yet is whether the OP is saving or investing from income, and whether those contributions could instead be saved up to cover this upcoming expense.

AsifM068

I only temp for a couple of days a week, so not a lot left over to save. Cannot go full time due to care commitments for mum. These earnings essentially covers rent, bills and the weekly shop. I think my saving days are over tbh.

My strategy is to stay invested in the Global All Cap during retirement whilst retaining an emergency fund. The GAC will supplement my DB pension from 60 to hopefully give me a yearly pension of around 25k per year. That's the plan. I also have an 'experiment' ISA with 212. It's a pie comprised of The City of London and Murray Investment Trusts. It only has about 2k in it but the dividends are set to re-invest. After about 3 years old I have made a 6% return. 

silverity

Hello, I have been looking at those MM income funds, but I was also looking for a USD equivalent to hedge against a drop in the pound. I haven't found one yet that can go in an ISA. I saw the HSBC US Treasury Liquidity Fund but the initial investment was $1M!

Gsaver1

See with a MMF is it acceptable to hold more than say the 85k which is the most that the regulator will cover in case of a failure? 

masonic

Gsaver1 said:

See with a MMF is it acceptable to hold more than say the 85k which is the most that the regulator will cover in case of a failure? 

There is limited potential for compensation when investing in MMF, but unlike banks, investment providers cannot use your money for their own purposes. Take for example CSH2, which is a popular ETF, domiciled in Ireland. If you were investing through for example Trading212, then you'd be covered up to £85k for any losses resulting from T212 going bust (but to have losses of £85k you'd likely need to have many times more than that invested). Whereas if Amundi went bust, or the bonds held within the MMF defaulted, then there would be no protection. For an open-ended fund, for example, Royal London's STMMF, you would have protection if Royal London went bust, again losses would not be anything close to 100% of the sum invested, but any defaults within the fund would not be covered.