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ISA investment this year and next
Bravepants
Posts: 1,664 Forumite
Good afternoon all,
My partner does not yet have a S&S ISA but has multiple 10s of k in cash accounts! I have persuaded her that investing in an S&S ISA is the best way forward in order to help plan for retirement and get more potential return on her money above inflation.
We are coming up to the end of the ISA year and so far she has not contributed to an ISA, but was thinking of opening an S&S ISA before the end of the month.
Now, here's the rub. We have over the last few years seen markets rise and rise, and I have been thinking about the consequences of popping in the full £15400 allowance for this year and the risk involved. I myself have VLS 60 and a World Equity Index Tracker fund in my ISA and in the past I have drip fed and made lump sum contributions. I will likely drip feed again in the new ISA year.
If my partner was to make a lump sum of the full £15k this year would she be better off using something like VLS 20 for this year's lump, and then next year drip-feeding into something like VLS 60?
The idea being that, should there be a dramatic fall in the markets, the lump sum would not fall as greatly and then can be transferred into the VLS 60 fund? My reasoning being is that she will have invested the lump sum to take advantage of the ISA allowance this year, but reduced risk incase of a fall, and continuing to reduce risk by drip feeding going forward. If there is a fall she could transfer the VLS 20 to VLS 60. By fall of course I mean a big 20% or 30% crash type fall. I know the mantras about timing the market etc.
My partner has never invested before and I have been talking to her about it. For the sake of domestic harmony I wouldn't want her to invest following my ideas and then suffer a huge drop!
I'm just wondering whether any of you have any thoughts on this general principle...not necessarily the funds involved but the general idea of investing a lump sum in something less volatile at the start and then drip feeding into something with a higher equity content going forward?
Thanks!
My partner does not yet have a S&S ISA but has multiple 10s of k in cash accounts! I have persuaded her that investing in an S&S ISA is the best way forward in order to help plan for retirement and get more potential return on her money above inflation.
We are coming up to the end of the ISA year and so far she has not contributed to an ISA, but was thinking of opening an S&S ISA before the end of the month.
Now, here's the rub. We have over the last few years seen markets rise and rise, and I have been thinking about the consequences of popping in the full £15400 allowance for this year and the risk involved. I myself have VLS 60 and a World Equity Index Tracker fund in my ISA and in the past I have drip fed and made lump sum contributions. I will likely drip feed again in the new ISA year.
If my partner was to make a lump sum of the full £15k this year would she be better off using something like VLS 20 for this year's lump, and then next year drip-feeding into something like VLS 60?
The idea being that, should there be a dramatic fall in the markets, the lump sum would not fall as greatly and then can be transferred into the VLS 60 fund? My reasoning being is that she will have invested the lump sum to take advantage of the ISA allowance this year, but reduced risk incase of a fall, and continuing to reduce risk by drip feeding going forward. If there is a fall she could transfer the VLS 20 to VLS 60. By fall of course I mean a big 20% or 30% crash type fall. I know the mantras about timing the market etc.
My partner has never invested before and I have been talking to her about it. For the sake of domestic harmony I wouldn't want her to invest following my ideas and then suffer a huge drop!
I'm just wondering whether any of you have any thoughts on this general principle...not necessarily the funds involved but the general idea of investing a lump sum in something less volatile at the start and then drip feeding into something with a higher equity content going forward?
Thanks!
If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.
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Comments
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At the risk of sounding like an advertisment for them why not open an ISA at Charles Stanley, this next tax year it will become a flexible ISA.
Others may offer the same, I don't know without checking, but you could open the ISA and then move money in to utilise the allowance at the end of this tax year, without purchasing anything.
You're then in a position to move the money out again on 6th April back to wherever it came from, if you so choose, without losing this years ISA allowance.
There are no costs involved.'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
But you're going to dismiss them, time the markets anyway and buy something you don't want?Bravepants wrote: »I know the mantras about timing the market etc.
If you want to drip feed why not pay the money in, hold it as cash, and make your purchases (in the fund you really want, not the one you don't) in several tranches. Make a rule, every two months or whatever, and stick to it so you take the emotion out of it
If your partner will throw a wobbly when valuations fall (and they will) perhaps she isn't really ready for investing?0 -
If you're partner will throw a wobbly when valuations fall (and they will) perhaps she isn't really ready for investing?
That's the major risk, for someone holding 'multiple 10s of K' in cash who has never invested before.
OP needs to tread lightly, perhaps moving money in just to grab this years allowance, then pulling it and moving it back in monthly or quarterly over the next 12 months up to the limit if needed.'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
If you want to drip feed why not pay the money in, hold it as cash, and make your purchases (in the fund you really want, not the one you don't) in several tranches. Make a rule, every two months or whatever, and stick to it so you take the emotion out of it
Because I didn't know that holding in cash was possible. That knowledge has changed things considerably, thank you.If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.0 -
what is VLS 20 and VLS 60?Another night of thankfulness.0
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Bravepants wrote: »Because I didn't know that holding in cash was possible. That knowledge has changed things considerably, thank you.
Of course. What are about dividends ? What would happen to those ?
What if you sell a fund and wish to buy another but not immediately ? If you couldn't have cash in an ISA then you'd never be able to sell one fund and buy another except immediately, or never put cash in and wait for a while.
And what about charges? Have yours been funded by selling units because there is zero cash in it?0 -
AnotherJoe wrote: »And what about charges? Have yours been funded by selling units because there is zero cash in it?
Yes, that's right. I use Fidelity as my platform and will take a look at what is possible over the weekend.If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.0 -
Vanguard Life Strategy 20% equity / 60% equity - two of a series of multi-asset funds often mentioned on here for their low charges.elephantrosie wrote: »what is VLS 20 and VLS 60?Eco Miser
Saving money for well over half a century0 -
It turns out that Fidelity offer an ISA Cash Park. I need to open one to sit alongside my existing S&S ISA. This is what I will also propose to my partner.
At the moment Fidelity does not deduct charges from the Cash Park, but they are going to change this during the year.
Thanks very much for all of your help.If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.0 -
Is their ISA cash park going to be made flexible?'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0
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