Should I bail out of my FTSE 100 tracker ISA and pay into cash?

Penguintron

I've been paying £50 a month into my ISA for the past 6 months since I opened it but the balance isn't going up like I was hoping. Should I keep on paying into it or should I put the money into my cash ISA or a regular saver given this years forecasted doom and gloom? I know investing in the stock market is a good idea and something for the long term but the current goings on are putting me off a little for the time being.

I intend to keep it open but would it be a good idea to wait until I think the market has fallen as far as it will go and then top it up with missed months payments? Any suggestions?

janken

Wish i had a crystal ball;)

Remember this sort of investment (Stocks and shares) should be looked at as a long term investment and 6 months is way too short a timescale. Over the last year the stockmarket has been very volitile and you would make a fortune if you could predict the next 6 to 18 months

At this point in time most people would agree that a cash ISA would be "safer".

Dont give up saving because of a short term disapointment

Best of luck

ken

LongTermLurker

I always think if you're uncomfortable about something - and have thought about it - then it might be time to stop (instinct can be a good thing). No-one knows what the market will do, but a FTSE100 tracker probably isn't the best place to have your money anyway.

I like that you haven't asked "should I sell and take a loss?". Diversifying risk has to be a good thing so I'd say you would be on the right track leaving the tracker as is and putting new money into cash - as you say, you have the rest of the year to add to the tracker ISA.

But if you're still looking long term, you could investigate whether it would be better to put new cash into unit trusts alongside the tracker (assuming the provider allows this) - but you would need to do some research.

Milarky

(Would this be an L&G ISA by any chance?)

mark13

A crystal ball would be the best thing. As you are investing on a regular basis, if the unit price fallls, your £ will buy more units , which will be fruitful when the ftse starts to rise. 6 months isnt a long time in terms of growth, how much would you have made from a savings account in that time ?

dunstonh

FTSE 100 trackers have been a pretty naff investment for quite a long time (about 14 years). However, paying monthly and only recently starting is probably a great time to be paying into one.

but the balance isn't going up like I was hoping

after just 6 months, what were you expecting?

I know investing in the stock market is a good idea and something for the long term but the current goings on are putting me off a little for the time being.

From this investment point of view you should be hoping for a drop as you will gain from it.

Penguintron

Milarky wrote: »

(Would this be an L&G ISA by any chance?)

(Yes, it would)

I'm down about £20 against what I have put in so far but I did sign up for it through Quidco so I got a £110 payment from there so I'm still £90 up.

Penguintron

dunstonh wrote: »

FTSE 100 trackers have been a pretty naff investment for quite a long time (about 14 years). However, paying monthly and only recently starting is probably a great time to be paying into one.



after just 6 months, what were you expecting?



From this investment point of view you should be hoping for a drop as you will gain from it.

I understand that 6 months is no time at all really for investing in the stock market but I was hoping to be in the black slightly. Perhaps I should keep on paying into it and getting the units at a lower price because, historically, they will probably seem like a good deal in a few years time.

dunstonh

Penguintron wrote: »

I understand that 6 months is no time at all really for investing in the stock market but I was hoping to be in the black slightly. Perhaps I should keep on paying into it and getting the units at a lower price because, historically, they will probably seem like a good deal in a few years time.

You probably wont see a profit at any point in the next 12-18 months. However, it is the units you buy in this period that will make the most money long term. It doesnt matter if it goes down short term. It just improves your potential long term.

Tate65

I'm thinking the opposite - now could be a great time to start an ISA tracker fund! They're not short term things, so you have to be prepared for them to go down, but it makes more sense to put money in when the markets are low than when they're high.

If the markets drop further, you'll be losing more in the short term. But all the future money you put in will be buying you more units at a lower cost so when the market does go back up (which isn't guaranteed - look at Japan!) you'll be making a lot more.

Never buy funds if you expect them to go up like a bank account. If you're only £20 down then that's really not a lot in the grand scheme of things - but if you're feeling it is then perhaps it would be wiser to cancel it, keep the £90 profit (from Quidco) and put it in a high interest account like Kaupthing Edge's.

nrsql

There are times when you can be pretty sure the market is undervalued and times when it is overpriced.
At both times you can't be sure what is going to happen because it is governed by sentiment. Usually the highest growth rate is when it is overvalued - just before a correction.

At the moment I still think it is overvalued - was a bit surprised how quickly it went down earlier in the year and even more surprised that it recovered. Now it's doing about what I expected it to do then.

As to whether you should leave money in the market or continue investing? Of course if you think you won't make any gains over the next 18 months then you should put in into cash - depends how confident you are.

I haven't come out of the market but changed the focus and stopped adding more - I'll add another lump if there's another sudden large drop at which point a tracker would probably be good if it suffers disproportionately.

In your situation I would probably be putting the money into cash at the moment - you could get 10% on a regular saver which the market will probably struggle to beat (and isn't a bad return anyway). The problem with that is it's not tax sheltered. I would get money into a cash isa before going for a market based investment
It's true that with regular investments you get more growth from a downturn - problem is that after the first few months you would lose a lot more than you gain. Look at the investment as a whole not how much each months tranche makes otherwise you would be better to bed and breakfast.

Here's my view on savings (a cautious approach I'll admit).
http://www.mindsdoor.net/Finance/Savings.html