ISAs

[chris-suffolk]

I

Thats interesting. Im doing some homework, reviews etc and have created.an account and.may well dip a toe into a.managed fund.

Im nowhere near knowledgeable enough to manage a fund or investments so will look at this with interest.

Historically the FTSE has outperformed inflation by some margin over a rolling 5 year time span. So I plumped for that for the bulk. Then, looking at the world generally, figured that a fund focused on defence companies would be a good idea - and so is has been with 33% growth in less than 6 months. Just wish I'd put more into it.

 

[wakemalcolm]

The market's full of fund managers who think that they can persistently out perform the average despite charging you a large fee for the privilege of their expertise. The truth is that some of them can, some of the time but the majority lag the index over the long haul; they're just punters.

An alternative is to invest in index funds which charge very little and automatically spread your money across a huge range of investments in the areas of your choice.

 

[Dorset Boy]

The market's full of fund managers who think that they can persistently out perform the average despite charging you a large fee for the privilege of their expertise. The truth is that some of them can, some of the time but the majority lag the index over the long haul; they're just punters.

An alternative is to invest in index funds which charge very little and automatically spread your money across a huge range of investments in the areas of your choice.

Except that the Mag7 represent about 35% of the S&P500, so a huge concentration risk in an index tracker.
There are some markets and market conditions where trackers make sense, others where they don't.
Also if you do not regularly rebalance, you will get risk drift, but most on here seem to be doing the classic punter thing of onlty looking at returns, not balancing that with risk.

 

[wakemalcolm]

Agree, that's why my area of interest would be the entire world (once there's an exchange on the moon, I'd spread there too). Yes, even on a world wide basis the Mag 7 make up around 20% but actively invest to dilute those holdings and you're back into 'punting' again.

There's certainly a need for education with respect to risk but when I read about bitcoin and gold being touted as alternative safe havens to bonds, my blood runs cold.

 

[T4tomo]

fund managers who think that they can persistently out perform the average despite charging you a large fee for the privilege of their expertise

Also if you do not regularly rebalance, you will get risk drift

A managed fund is a relatively small premium over a tracker fund and they will regularly rebalance it as part of the management fee.

 

[Pblakeney]

Agree, that's why my area of interest would be the entire world (once there's an exchange on the moon, I'd spread there too). Yes, even on a world wide basis the Mag 7 make up around 20% but actively invest to dilute those holdings and you're back into 'punting' again.

There's certainly a need for education with respect to risk but when I read about bitcoin and gold being touted as alternative safe havens to bonds, my blood runs cold.

Everything is a punt in an ever changing world. Nobody knows what's going to happen next week far less next year.
Some may get lucky with their punts and claim to be experts but they just got lucky. Sorry if that's not what you want to hear.

 

[wakemalcolm]

Some may get lucky with their punts and claim to be experts but they just got lucky. Sorry if that's not what you want to hear.

I'm here to hear that all day.

 

[FrankCrank]

Excellent thread this, have learned heaps so far - as an ISA newbie it's manna from heaven.
I'm at an age now where conversations down the pub often delve into pensions and ISA's etc, and it's a great way to exchange ideas and maybe pick up on things you were otherwise unaware of

 

[SpokeyDokey]

For ISA virgins it is really important to point out that your capital is at risk with a Stocks & Shares ISA. Unlike a Cash ISA.

Even without the benefit of considerable insight, Rachel from Accounts, who wishes that we invest in Great British companies via S&S ISA's, would not back a government funded scheme to limit an individuals capital exposure.

I am not negative on these types of funds, having done okay myself over the years, but it can be a scarey ride; especially if you are naturally cautious with your hard-earned.

 

[mistyoptic]

but it can be a scarey ride; especially if you are naturally cautious with your hard-earned.

and especially when some individual spooks the markets by having a tantrum...

 

[chris-suffolk]

and especially when some individual spooks the markets by having a tantrum...

Even if they do it on purpose sometimes, so when they U'turn they and their cronies make a mint - aka Tariffs springs to mind. Trump's net worth has increased by about $1.5 billion since he came to power, such are his powers in the business world.......!!

 

[Dorset Boy]

It is key to understand that holding cash, be it in a cash Isa, or savings account is just storing your money, and you are likely to see its value fall in real terms as interest rates do not keep pace with inflation over the medium to longer term (5-10+ years).

Investing (through a stocks & shares Isa, or by directly holding funds in a portfolio) is a longer term horizon, ideally a minimum of 7 years, and the objective is to beat inflation and grow your money in real terms. What happens in the short term really shouldn't matter, because you aren't looking at the short term.

If you look at the 780 monthly rolling 10 year periods since 1950, a medium risk portfolio has made you money in real terms something like 98% of the time over the 10 years. That is why you invest, and why in particular you invest when saving in a pension.

 

[gbb]

It is key to understand that holding cash, be it in a cash Isa, or savings account is just storing your money, and you are likely to see its value fall in real terms as interest rates do not keep pace with inflation over the medium to longer term (5-10+ years).

Investing (through a stocks & shares Isa, or by directly holding funds in a portfolio) is a longer term horizon, ideally a minimum of 7 years, and the objective is to beat inflation and grow your money in real terms. What happens in the short term really shouldn't matter, because you aren't looking at the short term.

If you look at the 780 monthly rolling 10 year periods since 1950, a medium risk portfolio has made you money in real terms something like 98% of the time over the 10 years. That is why you invest, and why in particular you invest when saving in a pension.

Even then(looking longer term) ...is still exposed to risk. It can all be going fine, then a crash at year 6, year 7 ? (Which of course I know you know) I had a works pension fund sat at 50k that went to 38 almost overnight...literally as I was thinking of a drawdown.
It's a risk, either way and my way of mitigating it will be to invest a sensible amount into it, an amount that isnt going to break me.
That of course will limit potential returns but 'cake and eating it' springs to mind.
A couple cash ISAs , saving earning a bit less interest and perhaps a dabble in InvestEngine .
I spent all.my life (and did ok by it) playing safe, partially because thats the way my wife was too but equally always kinda rued missed opportunities to do better . Time to put some of that right, even if its late on.0

 

[nogoodnamesleft]

Even if intending to invest long term, remember that there can be unexpected demands without much notice eg illness, eg move for new job, etc. which might require cashing in and if the stock market is on a down at that time "the value can go down as well as up".

So important to ensure savings are spread to provide access to cover a wide range of circumstances. Does not mean avoiding Stocks & Shares ISAs, just consider what other savings you have and on what access timescales.

Some years back talking to one of my mainstream private pension companies about where the fund was invested, they explained that their default investment schedule for an individual is that when investor is young they invest in more volatile higher return funds as there is plenty of time for the fund to recover from a "down". As the individual gets closer to retirement (and needing the fund) the investments move to more secure but lower return funds as were there to be a "down" there is no longer adequate time to "wait it out" for the next "up".

Also look at what stocks and shares sectors the fund is investing in. I have some (non-pension) investments and recently had the company report on how much of the funds were invested in AI. Personal view is that whilst the AI bubble won't "burst" it may easily deflate as the income revenues required are massive to balance the investments so expected returns are very uncertain. They had to answer with over 1 side of A4 and bottom line was they don't seperate out AI from "tech stocks" (and they'd already moved much of the fund out of tech stocks).