Holding XSTR In S&S ISA.... Thoughts?

dreamypuma

I've recently transferred a S&S ISA from T212 to Freetrade. In addition to my Global ETF, I tend to hold a reasonable amount of cash in the same account. This wasn't a big deal in T212 as it attracted daily interest from money market funds.

Freetrade offer limited interest on cash, so I've considered buying XSTR ETF or CSH2, as money market funds (not sexy I know). I am currently favouring XSTR, as Freetrade don't offer fractional ETFs.

As XSTR is a distributing ETF, do I need to consider when I time the purchase of a lump sum? - Looking at past performance it all looks quite relative, where the unit cost falls to compensate for the dividend payment.

Additionally, with Cash ISA reforms incoming, am I correct in thinking that Money Market Equivalents like XSTR & CSH2 may attract penalties from HMRC after 2027? - Not sure if this is just speculation or yet to be defined.

Logic says that I should hold this money in a cash ISA, but I like the agility of holding cash in the same account and topping up global funds when needed.

incus432

It's very common to hold MMF in ISAs and SIPPS which is why I heartily dislike the complexity last budget is bringing in to ISAs

I have held CSH2 and ERNS in ISA/SIPP (AJBell rather than FT). AFAIK for Dis ETF it shouldn't matter when you buy as the price should reflect whether it is ex-div or not. Of course if it goes ex div you may show a loss until the dividend date when you actually get the interest. Using an Acc ETF does make it simpler.

The tax/penalties on cash/cash like holdings has yet to be defined I think, but is still a way off.

dreamypuma

https://forums.moneysavingexpert.com/discussion/comment/81869439#Comment_81869439

Thanks! I bought into ERNS today probably the cheaper of MMFs and easier to ensure maximum cash is invested when compared to CSH2 (and absence of fractional shares on FT). I couldn't bare to see the cash sat doing the minimum.

I'm quite happy with the distributing of dividends, as the funds will just get re-invested into ERNS, and I'm normally quite timely with these things. It looks like the dividend, just rebalances against the unit price.

Agree with the the complexity of last budgets ISA reforms. I was hoping that any ambiguity had been resolved. I've been a bit out of touch with developments and last heard the proposal had hit an impasse with multiple platforms, including AJBell. - Another ill thought out policy with zero foresight into it's implications.

I guess we'll just have to wait this one out.