Experienced Investors - Help me spend my cash!

efunc

Sorry for the clickbait title. The reality is that I find myself sitting on a considerable amount of cash in savings and ISAs having been indecisive about my general direction and potential property purchase, etc for some time.

Anyway, I now feel that my cash savings, earning about 4.5% interest, are a potential liabilty being eroded by inflation long term and should have been moved to S&S ISAs and SIPPs a long time ago - at least just tracking markets. In my defense I wanted to keep things liquid at the time, but not any longer.

I've put away about 300k in savings, 300k in cash ISAs and have about 300k in private pensions with just 10 years to go before I can retire.

That brings me to my dilemma. I strongly believe we are about to experience a global rewiring that is going to disrupt the market - geopolitical multi-polarity, USD debasement, fiscal dominance, rolling over the debt, etc. I don't want to make this a debate about politics or economics, and you may strongly disagree with my thesis, but suffice to say, I'm concerned that I've had a lot of my potential retirement funds sitting in cash for years (decades!) that I might now sink into ETFs only to see 40% wiped out in a near term market adjustment. I understand that with the right portfolio mix and ballast that could be side-stepped to a degree, and could also recover within 2-3 years anyway, but still, it gives me pause to think about the precise timing.

My initial reasoning was that sitting on so much cash was a liability (which it was over the past decade), but now could it actually be a safe haven for a year or so? I think we could see some market shockwaves before the midterms, (precious metal spike and BTC dive are indicative) and that doesn't even account for any AI bubble which could follow in the next couple of years.

I do need to reallocate my 3 private pension funds to more diverse and defensive investments anyway, but when it comes to my cash, rather than buy a bunch of ETFs, Guilts, commodities, etc, is it safer in, say 1-2 year fixed interest bonds and ISAs @ 4 .25% right now, just to give any volitility time to settle? This is a different thought process than those of you who already are invested. In my case I have the opportunity to delay. Or are well thought out investments still a sensible thing compared to cash, irrespective of the market conditions?

El_Torro

You say you plan to retire in 10 years. Do you plan to buy an annuity? If not then a big chunk of your pension could remain invested for decades to come. That could also be the case for much of the £300k that you currently have in ISAs.

I think it’s worth having some of your money in volatile investments, it doesn’t have to be 100% equities, a multi asset fund with say 60% or 80% equities could be an alternative. You could for example keep the next 10 years worth of money in cash, bonds, etc.. and the rest in riskier investments.

While it’s true that global stock markets are looking pretty inflated at the moment the same has been true at many points over the last 15 years, yet a major crash has eluded us til now. I m one of those people who think that a crash is closer now than it has been for a long time, though I also believe in the fundamental benefit of investing for the long term.

To make your move to investing less intense you could drip feed the money over the course of some months. Better than leaving everything in cash at least,

Bostonerimus1

With 10 years until retirement you probably have at least 30 years to plan for, and for safety that should perhaps be 40. So I would start by doing a budget to see what your retirement spending might be. If you are worried about sequence of returns risk I would try to minimize your income requirements before you retire: so pay off debt, pay down mortgages and make large purchases like cars and home repairs before your retire. The come up with an asset allocation to deliver the lifetime income you need. That might include a cash buffer, guilt ladder or annuity for basic income when added to SP and DB pensions, and an equity allocation for growth to keep up with inflation and maybe leave a legacy.

efunc

Thank you both for very thoughtful responses. I didn't want to provide too mch needless detail in my post, but in response to your points I would add that, 'yes' I'\ve planned a glide path for the next couple of decades and will review and expect to drawdown in 10 years at around 3-3.5% with reallocation and rebalancing along the way.

The reason why this is such a pressing question right now is that I have to decide whether to go all in on the investments I've identified, or wait it out a year. I cannot really drip feed too much, (although I actually am to an extent already with a couple of small investment ISAs). This is because to secure the best rates I need to lock the cash away in fixed rate ISAs. 1 year is currently 4.2%, 3 years about 4.1% and 5 years incredibly 4.5%. Any less than those rates and I really would be loosing it to inflation and better off in a mixed portfolio earing potentially 5-6.5%.

Albermarle

Can we assume that this is not the first time that you have thought about investing some of that cash, but have decided it was not the right time? Or is this really the first time and if so why the sudden change?

efunc

Very good question, and understandably suspecting that I might be a bit risk averse. I do have a small S&S ISA with Santander which I'm going to transfer to Trading212 or IInvestEngine because their fees seem to be a bit higher than I'd like. I opened a trading account too back in 2008 and was posed to start buying individual shares at the time, and then the market crashed and being inexperienced I became spooked. However the main reason for sitting on the cash for so long is because I was planning to buy a house but because of uncertainties with family and being the main carer for my parents I ended up putting that all on hold to focus on caring, which was all consuming for many years. Now that my priorities are changing I find that I no longer need to buy the property and hence can do something more constructive with the funds. I am prepared to pursue growth but with a balanced risk appetite, particularly given that I don't have decades left to recover from any near term losses.

Nebulous2

This sounds more like a psychological / attitude to risk problem than an investing one. You seem to be aware of the options but just struggling to use them.

You can do a bit more than drip feeding relatively easily. Are you working? Getting the 300k in cash savings tax sheltered would be a priority for me.

The balance of this year's allowance, and all next years allowance, into an S&S ISA would be possible in the next 6 weeks or so, as would a lump sum, subject to having the earnings, into pension now and after the beginning of the financial year.

PixelPound

If you have a considerable amount of cash, then look to see an Independent Financial Advisor, pref one with a fixed fee. Why risk taking advice from forum members who are not financial advisors?

intalex

https://forums.moneysavingexpert.com/discussion/comment/81899573#Comment_81899573

I wonder if basic uncomplicated IFA is something that can be automated with a hierarchical questionnaire, wouldn't even need AI… anyone seen anything online?

efunc

https://forums.moneysavingexpert.com/discussion/comment/81899529#Comment_81899529

Yeah, possibly a grain of truth to that, but also particular circumstances. In any case, I've been gearing up to take more action over the past couple of years as things have moved on. Naturally I've maxed out my ISA allocation but will transfer another £20k in April. I did just transfer £30k in cash to a new SIPP last week though.

But my main point of the thread was querying the pros/cons of making a big move from cash to equities now or waiting a few months since there seems to be some seismic shifts coming down the line by my reading.

efunc

I had high hopes of working with a truly independent adviser so went through unbiased and had a number of session with one a year or two ago. Despite the amount of time I put into the exercise I ended up disappointed that he just wanted to push me into a Quilter investment platform and it came at a considerable price tag too. That definitely put me off since I thought for the price being charged and the platform I could do better myself. Hence opening an InvestEngine SIPP and a Trading212 SIPP.

I talked to 3 or 4 IFAs and really think it can be tricky to find someone you trust who is on your wavelength.