Worried about stocks and shares ISA

DiamondLil

jaybeetoo said:

I started investing (many decades ago) by putting in a regular amount each month.  That way you’re not timing the market.  I started my investment journey with F&C investment trust, reinvesting dividends.  Once you’ve invested, do not keep looking at the share price!

I did the same - in 1994 I started paying in monthly to F&C; at the time, I think the shares were around 80 /90 pence. I still hold F&C today.

Albermarle

Every time the market has crashed it has recovered however the FTSE 100 is based on UK companies so bare in mind that if anything happens to the UK your money is also finished.

Be interesting to know what this 'anything'  might be to set off such a doomsday scenario?

Aretnap

Uriziel said:

the FTSE 100 is based on UK companies so bare in mind that if anything happens to the UK your money is also finished.

Not really. The FTSE100 is mainly comprised of global companies which do business all over the world but happen t have their stock market listing (and in some but not all cases, their head office) in the UK. Not sure what you're imagining might be about to happen to the UK, but if it's less than a nuclear war and if it happens only to the UK, then companies like AstraZeneca, HSBC (Hongkong and Shanghai Banking Corporation), British-American Tobacco or BP would carry on as normal and barely notice. There is very little correlation between the performance of the FTSE100 and the UK economy (as opposed to the global economy).

The bigger problem with investing mainly in the FTSE 100 is that it's a fairly arbitrary selection of just 100 of the many thousands of companies that you could choose to invest in. It is dominated by large, mature companies in a small number of sectors (financial services, pharmaceuticals, oil/mining). It includes no equivalent of Nvidea, Google or Microsoft, or indeed Toyota or VAG; and probably as a result its performance has lagged global indexes for decades.

Newbie_John

Investment in general isn't gambling - so no - you can't lose all your money that easily - unless you put all your money into X company that went into administration.

For beginner just follow @Eyeful post - honestly if you invest in funds which invest in hundreds of companies, governments - that the chances that everything will go into administration is near impossible.

There will be days when you may have less than when you invested but that means nothing - it's like living in a house that's currently valued less than you paid - it only matters when you sell.. and the closer you come to your sell day, the more you can derisk by moving down to safer/lower in return funds.

Aretnap

TractorFactor said:

It seems with the announcement from the government reducing the amount of cash I can invest in a cash ISA, I'm sort of forced to use stocks and shares.

Not really. If you really think that cash savings are the best option for you then you can still keep all your money in cash if you want to. You are better off keeping your money in a non-ISA savings account and getting an effective interest rate of 3.6% after tax rather than 4.5% tax-free than you would be investing in something that is unsuitable for your needs. Do not let the tail wag the dog - decide what your money should be invested in, then work out the most tax efficient way of doing it, not vice-versa.

That said, most savers do keep too much of their money in cash and too little in investments, and as a result suffer from poorer returns than they could otherwise get. If you have more than £12,000 spare to save per year, and 15 years or more before you need to access it, then you are almost certainly one of them! So a little nudge from the tax system that encourages you to invest more might not turn out to be a bad thing for you.

InvesterJones

There is another way - bonds. Historically these have been lower risk than equities, with a lower return too, but higher return than cash.

These can be held up to the full £20k in ISAs, so you can hold £12k cash and £8k bonds if you wish. If you buy individual bonds and hold to maturity, for example UK govt gilts, then you are guaranteed to receive the return on offer when you buy them, save only if the govt defaults on its debts, which is extremely unlikely (and we'd have bigger things to worry about if so).

The point about equities being a better investment against the risk of inflation over the long term is still true.

jimjames

DiamondLil said:

jaybeetoo said:

I started investing (many decades ago) by putting in a regular amount each month.  That way you’re not timing the market.  I started my investment journey with F&C investment trust, reinvesting dividends.  Once you’ve invested, do not keep looking at the share price!

I did the same - in 1994 I started paying in monthly to F&C; at the time, I think the shares were around 80 /90 pence. I still hold F&C today.

I also did (still one of my largest holdings) and it's a great example why investing is a long term plan. It's easy to get caught in the day to day noise and price movements but long term is up. Those 90p shares are now trading at £12.46 as of today and still invested in a basket of worldwide companies. 

TractorFactor said:

It seems with the announcement from the government reducing the amount of cash I can invest in a cash ISA, I'm sort of forced to use stocks and shares.I have some money, up to £10,000 t

If the money you have spare is £10k and you really don't want to invest then no-one is forcing you to. The rules haven't even changed yet but once they do then just wait until the next tax year and you'll have another £12k available to use in cash ISAs. The limit is £20k (planned to be £12k cash) per year, not one off.