Cash Isa or Investment Isa

Dedge77

I saw a financial advisor over the weekend who said I should put my savings into an Investment Isa instead of Cash. I am always browsing on this site and it said the first stop for savings would be a cash-isa.

The amount I have will be in the region of 40k (hopefully, in process of selling flat) and I feel instead of renting my property I would get a better rate of interest if I sold up and put the money away.

The advisor went over a few portfolio's that they offer with even the lowest risk fund coming out with 173% over the past 5 years.

I know from just listening to the radio that the market at the moment is going pretty bad so was wondering if I could get some advice from people who know a bit more about it. I know that only the first 7k would be tax free so should I just lump it all into investment or follow Martin's waterfall plan and have a few accounts?

Thanks in advance
Kev

dunstonh

I am always browsing on this site and it said the first stop for savings would be a cash-isa.

That is only if you are not investing.

The advisor went over a few portfolio's that they offer with even the lowest risk fund coming out with 173% over the past 5 years.

Past performance is no guide to future returns. Over the long run you would expect to see investments outperform cash but there will be periods of volatility when things are not as good. It may be an idea to look at the last 12 months for an indication of the sort of volatility that can occur as 2007 was not a good year. You should also ask to look at the last 10 years as 2000-2002 was not a good period (far worse than now) and you can see what impact there was on this portfolio then. If the adviser cannot provide 10 year data then it suggests they do not have the tools to give proper investment advice (data on periods longer than 5 years is typically available on subscription services only and any real investment adviser would have those services unless they do investments part time or are a tied agent).

Is this adviser a tied agent, multi-tied or an IFA?
What has the adviser given you as an indication of a potential negative year on that portfolio? i.e. minus 10%, 20% or more?

I know from just listening to the radio that the market at the moment is going pretty bad

it is down but then that is the time to look to invest. It could go down a bit more. Also, you wouldnt expect any decent investment spread to be 100% stockmarket. It could be as little as 10% stockmarket. In which case, what the stockmarket does or doesnt do isnt really a big issue.

Dedge77

I went to the Independant Financial Advice shop on our local high street but I see from his business card he works for a known local company so dont know how Independant his advice was. I was just asking him if I would be better off selling than renting as I dont think the house market would give me the kind of returns I could get with savings. My flat is already valued just over 100% more than I paid for it 4 years ago (Crazy like)

Having a look at the different fund details he gave me they do have the percentage over 10 years but the single years are only detailed back to 2002/2003. Certainly last year was a poor year for all of the funds except the China one which he said is the highest risk one. Although each of the funds were at least 6.9%. A friends said it might be good to invest in the Chinese market especially with the olympics games coming up.

cloud_dog

Sooooooooooooooooo....................

• Do you want to take risks with your money
• What do you want to do with the money, i.e. will you want to actually use / spend it?
• How long are you willing to leavethe money alone?
• Are you finacially sound (debt etc)

yada, yada, yada, yada, yada......................

Dedge77

Im hoping that I can leave it for as long as possible, at least for 5 years.

I am willing to take a risk but since its basically gonna be all the money we have I dont want to take too much of a risk.

Once I sell off my flat I am gonna be debt free but with a little un on the way in July it might get harder financially as I am gonna be the only income for the family. Im hoping to put away a couple hundred pounds each month into a savings account to cover birthdays, xmas etc... so hopefully I wont need to touch my other savings at all.

I take it that once I use up my 7k allowance for the year all the other savings will get taxed no matter where I put it or is there something else I can do with it?

Primrose

If I were in your shoes, with your financial responsibilities, I'd be a little wary of piling into the stockmarket with your savings. Also, when you have stockmarket investments and need to cash them in you're entirely dependent on the state of the market at that time, so you could run up some nice profits and find them suddenly disappearing just as you needed them. You might want to consider whether it's safer for you and your wife to use up your Cash ISA allowances this tax year and next, and consider Index Linked National Saving Certificates (which are tax free). If you don't want to tie up the money for several years, several building societies are offering one-year fixed rate bonds which you could roll over into new ones every year when they mature. One thing to consider when selling your property is that you will incur expenses, and more expenses when buying again later, and these will effectively mount up and reduce the value of your savings and any "profits" you make from your interest. This may make the "sell up and rent" equation look a little different when these costs are taken into account.

Dedge77

My plan is to sell up just now and then possibly buy later in life, depending on how the savings go. I would like to try and tie up as much as possible in fear of spending it.

I know I will have charges when I sell but hopefully will still have enough to put away. I might put some in a high risk and the majority of it in a cash/low risk investment Isa.

It all gets confusing as I aint ever been good with money hence wanting to tie it away before I take my family on holiday heh heh.