S&S ISA jitters!

The total investment has gone down -6.2% overall and drops at a higher rate in the higher risk categories.

A 6.2% loss is tiny. You have broadly suffered half the drop in the correction. So, when a proper crash comes along you would expect to lose around 12-15%. When a depression style loss comes along then around 25-30%.

I understand that this should be looked at over at least a five year period. (If/when the 80% fund equals my original investment I will probably move it to the 20% fund)

5 years is around half an economic cycle. So, it is really the barest minimum. 10 years is more ideal. Typically one half of the cycle is much better than the other half. The last 5 years have been much better than expected. So, what does that mean for the next 5 years....

I would therefore hope that after 5 years I should have gained at least 5 x the 1.5% p.a. guaranteed ISA rates I can get now.

Is this realistic?

I think that is unrealistic as you are probably looking at the weaker half of the economic cycle in that period.

Given your 10 year cycle example, would you then expect at least a 10 X 1.5% return at the end of that period?

I think I have misunderstood what you were saying when you put 5x1.5% p.a. I thought you meant each year.

If you look at long term averages as a ballpark, the next 5 years are almost certainly going to be lower than the last 5 years. However, no-one knows for sure.

A 25% loss period is likely at some point. Whether its a slow multi-year decline (like the dot.com period which saw event after event pulling it down) or a sudden drop (or double dip quick drops) like the global recession, is always an unknown. However, it will probably take a multi-year recovery period.

So, when looking at just 5 years, you are not giving yourself many growth years if that happens. Whereas 10 years, you are getting close to the whole cycle and would expect to have enough good years to counter the negative and nothing years. Whilst nothing is guaranteed, you would expect to do a lot better than cash over a 10 year period. With 5 years, you hope but there is a chance you may not.

vigman wrote: »

After giving it careful consideration I put £25k in Vanguard Life Strategy funds ISA in July this year.

I balanced with more money in the 20% equity fund up to less in the 80% fund, most being in 20% and 40% equity funds.

The total investment has gone down -6.2% overall and drops at a higher rate in the higher risk categories.

I understand that this should be looked at over at least a five year period. (If/when the 80% fund equals my original investment I will probably move it to the 20% fund)

I would therefore hope that after 5 years I should have gained at least 5 x the 1.5% p.a. guaranteed ISA rates I can get now.

Is this realistic?

TIA
Vigman

That is a great way to not benefit from investment. You dont sound cut out for it.
Perhaps a number of monthly savers would be better (I'm being serious) then you dont have to worry about the stock market.

vigman wrote: »

Thanks AnotherJoe. I just thought I might have been better to stick to the 20% 40% 60% funds rather than keep the highest risk 80%?

Vigman

If you are not paying to switch funds, it would be simpler for you to stick to one, or at most two funds. You won't gain anything from holding more than the minimum number of funds to achieve the percentage equities you desire.

Pick the ratio you want and stick to it (unless markets have fallen significantly and look particularly cheap in which case maybe increase your equities).

However if you decide to go with low volatility VLS 20/40 then you have to question if you might be better with a cash savings account.

Alex