£5k left on ISA - what to do?
Discussion
I'm a bit conflicted.
I had two ISAS - one cash, one stocks and shares. I have £5,000 left to invest this year. The FTSE 100 ETF which makes up the majority of the stocks and shares ISA will go ex-dividend some time in the next couple of weeks, which is a good time to put the last £5k in since I'll save a pound or two on transaction fees.
I'm not sure what to do with it though. Play it safe and put it in cash, go a bit riskier and bump up the FTSE 100 tracker, or do something else? What would PH do?
I had two ISAS - one cash, one stocks and shares. I have £5,000 left to invest this year. The FTSE 100 ETF which makes up the majority of the stocks and shares ISA will go ex-dividend some time in the next couple of weeks, which is a good time to put the last £5k in since I'll save a pound or two on transaction fees.
I'm not sure what to do with it though. Play it safe and put it in cash, go a bit riskier and bump up the FTSE 100 tracker, or do something else? What would PH do?
Cash interest rates are very, very poor.
Let's say an ISA contains £10,000 and pays 1.5% interest. That's only £150 interest a year, on which the "tax free" ISA status saves the investor only about £30 of tax (if 20% taxpayer).
In contrast a stocks and shares investment should, on the historical average, give a much better return of about 7%. However, as they say in the ad's "you might get back less than you put in".
So,
Let's say an ISA contains £10,000 and pays 1.5% interest. That's only £150 interest a year, on which the "tax free" ISA status saves the investor only about £30 of tax (if 20% taxpayer).
In contrast a stocks and shares investment should, on the historical average, give a much better return of about 7%. However, as they say in the ad's "you might get back less than you put in".
So,
- if you want to invest in stocks and shares - ISA is a great place to do it. Should easily beat inflation, but no guarantee.
- if you just want to have some cash savings - ISA doesn't really help very much at all. You will still be losing money once inflation is taken into account.
Claudia Skies said:
Cash interest rates are very, very poor.
Let's say an ISA contains £10,000 and pays 1.5% interest. That's only £150 interest a year, on which the "tax free" ISA status saves the investor only about £30 of tax (if 20% taxpayer).
In contrast a stocks and shares investment should, on the historical average, give a much better return of about 7%. However, as they say in the ad's "you might get back less than you put in".
So,
Quite. I'm erring away from the "risk free" option, but what to put it into? FTSE 100 tracker, or something a bit more exotic?Let's say an ISA contains £10,000 and pays 1.5% interest. That's only £150 interest a year, on which the "tax free" ISA status saves the investor only about £30 of tax (if 20% taxpayer).
In contrast a stocks and shares investment should, on the historical average, give a much better return of about 7%. However, as they say in the ad's "you might get back less than you put in".
So,
- if you want to invest in stocks and shares - ISA is a great place to do it. Should easily beat inflation, but no guarantee.
- if you just want to have some cash savings - ISA doesn't really help very much at all. You will still be losing money once inflation is taken into account.
davepoth said:
Quite. I'm erring away from the "risk free" option, but what to put it into? FTSE 100 tracker, or something a bit more exotic?
Couple of points about the FTSE 100- Yes, it's the biggest 100 companies but the range of sizes within that 100 is enormous - a tiny handful of the very biggest companies essentially dominate the index.
- Over the past decade performance of the FTSE 250 has been massively better than the 100. [250 isn't the top 250, it's the next 250 - in other words from number 101 to number 350]
Some interesting stuff on this link about FTSE 100 and the impact of the biggest companies,
http://stockmarketalmanac.co.uk/tag/ulvr/
Gassing Station | Finance | Top of Page | What's New | My Stuff