Move stocks and shares ISA to cash?
Discussion
There's no right answer to this.
A cash ISA is safe and the return is guaranteed but equally if you have a long term timescale investments are usually a better choice.
They aren't risk free but have you looked at a money market fund?
Generally they track BoE base rate but you can hold them in an ISA but as above they are still an investment product not a savings product.
A cash ISA is safe and the return is guaranteed but equally if you have a long term timescale investments are usually a better choice.
They aren't risk free but have you looked at a money market fund?
Generally they track BoE base rate but you can hold them in an ISA but as above they are still an investment product not a savings product.
gareth h said:
Interested to know folks views, I’ve got stocks and shares ISA, and am starting to think it would be best converted to cash with a 4.7% interest rate over 2 years, I really can’t see the S and S ISA doing better than this.
Any thoughts?
Yes; as soon as you do it, the markets will do 20% in a year Any thoughts?
But you could back both horses and try it with half.
It's an interesting question, which I suspect many people are asking themselves.
Coincidentally, PensionCraft published a YouTube video yesterday highlighting that yields from short-term US treasuries, investment-grade US corporate bonds and US stocks have now equalised. This also highlights how much of the S&P500's overall performance is currently relying on just a handful of companies.
Of course, one consequence of yield parity could be that money flows from stocks into government / corporate bonds, leading to (temporarily?) reduced stock prices.
https://www.youtube.com/watch?v=7JvLRb5zU2c
I guess that the answer to the OP's question depends on various factors including time horizons and attitude to risk. Personally, I won't be switching out of stocks (strapped in for the ride), but nor will I be adding to my holdings in the immediate future.
Coincidentally, PensionCraft published a YouTube video yesterday highlighting that yields from short-term US treasuries, investment-grade US corporate bonds and US stocks have now equalised. This also highlights how much of the S&P500's overall performance is currently relying on just a handful of companies.
Of course, one consequence of yield parity could be that money flows from stocks into government / corporate bonds, leading to (temporarily?) reduced stock prices.
https://www.youtube.com/watch?v=7JvLRb5zU2c
I guess that the answer to the OP's question depends on various factors including time horizons and attitude to risk. Personally, I won't be switching out of stocks (strapped in for the ride), but nor will I be adding to my holdings in the immediate future.
C69 said:
I won't be switching out of stocks (strapped in for the ride), but nor will I be adding to my holdings in the immediate future.
Isn’t the usual advice to just keep on drip feeding in throughout the highs and the lows and given time, the performance and compounding effect will do its thing. I’m just sticking with my monthly payment and ignoring the short term ups and downs & predictions.
I.e Try to ignore the underlying human nature when it comes to stock market risks as the mistake is to try and time the market as the potential upside is small but the downside massive.
fat80b said:
Isn’t the usual advice to just keep on drip feeding in throughout the highs and the lows and given time, the performance and compounding effect will do its thing.
I’m just sticking with my monthly payment and ignoring the short term ups and downs & predictions.
I.e Try to ignore the underlying human nature when it comes to stock market risks as the mistake is to try and time the market as the potential upside is small but the downside massive.
You're absolutely correct, and there have been plenty of studies that demonstrate this. To clarify, I currently have a cash balance on my S&S ISA which I'll continue to drip-feed into funds over the coming months, but I'm not intending to add to that cash holding.I’m just sticking with my monthly payment and ignoring the short term ups and downs & predictions.
I.e Try to ignore the underlying human nature when it comes to stock market risks as the mistake is to try and time the market as the potential upside is small but the downside massive.
I've just pulled out almost all my fund ISAs and stuck it all in my offset Mortgage account.
They all did brilliantly until Covid, lost quite a bit but still in profit but these past 3 years the value has been more or less the same, eroding my formerly amazing annualised return down to under 6 percent.
So as the BoE have raised the base rate again I'm now at 6% on my IO tracker mortgage thus that money is now effectively 'earning me' half my mortgage cost a month.
Best not look at what the performance of my former funds will be over the next few years now
They all did brilliantly until Covid, lost quite a bit but still in profit but these past 3 years the value has been more or less the same, eroding my formerly amazing annualised return down to under 6 percent.
So as the BoE have raised the base rate again I'm now at 6% on my IO tracker mortgage thus that money is now effectively 'earning me' half my mortgage cost a month.
Best not look at what the performance of my former funds will be over the next few years now
You could buy gilts within your S&S ISA
They are currently offering a yield of over 4%
eg: https://www.hl.co.uk/shares/shares-search-results/...
They are currently offering a yield of over 4%
eg: https://www.hl.co.uk/shares/shares-search-results/...
nyt said:
You could buy gilts within your S&S ISA
They are currently offering a yield of over 4%
eg: https://www.hl.co.uk/shares/shares-search-results/...
You’d be bit glum if you bought that towards the end of 2019 when it was £150 (vs ~£100 now). I’m They are currently offering a yield of over 4%
eg: https://www.hl.co.uk/shares/shares-search-results/...
Sheepshanks said:
nyt said:
You could buy gilts within your S&S ISA
They are currently offering a yield of over 4%
eg: https://www.hl.co.uk/shares/shares-search-results/...
You’d be bit glum if you bought that towards the end of 2019 when it was £150 (vs ~£100 now). I’m They are currently offering a yield of over 4%
eg: https://www.hl.co.uk/shares/shares-search-results/...
In fact our Pension Scheme advisors have suggested that now would be a good time to move some of our investments from equities into bonds to reduce risk.
Noob question - if we invest in UK gilts now are we locking into that 4% yield until we sell? I mean that if I buy £100 of UK Gilts now is that going to generate 45 pa until redemption?
If it's a pension with 20 years to run, then global tracking funds are still the right choice.
Otherwise for the 1-10 year time horizon, I'm sticking with cash deposits for now. Stocks are far too high risk now for anything below this.
I'm also playing with couple of % of my total liquid net worth on short term speculation on AI stocks.
Otherwise for the 1-10 year time horizon, I'm sticking with cash deposits for now. Stocks are far too high risk now for anything below this.
I'm also playing with couple of % of my total liquid net worth on short term speculation on AI stocks.
Countdown said:
Good point. However surely they can't go down much further.
In fact our Pension Scheme advisors have suggested that now would be a good time to move some of our investments from equities into bonds to reduce risk.
Noob question - if we invest in UK gilts now are we locking into that 4% yield until we sell? I mean that if I buy £100 of UK Gilts now is that going to generate 45 pa until redemption?
You get the coupon rate (interest rate) until the gilt matures. So 4.5% until September 2034 in the case of that HL link above. Bear in mind that if you sell the gilt on the secondary market before the maturity date then you might get more than £100, or you might get less.In fact our Pension Scheme advisors have suggested that now would be a good time to move some of our investments from equities into bonds to reduce risk.
Noob question - if we invest in UK gilts now are we locking into that 4% yield until we sell? I mean that if I buy £100 of UK Gilts now is that going to generate 45 pa until redemption?
Countdown said:
Good point. However surely they can't go down much further.
In fact our Pension Scheme advisors have suggested that now would be a good time to move some of our investments from equities into bonds to reduce risk.
Noob question - if we invest in UK gilts now are we locking into that 4% yield until we sell? I mean that if I buy £100 of UK Gilts now is that going to generate 45 pa until redemption?
To be honest, I find Gilts / Bonds somewhat baffling, so if anyone else wants to comment, that'd be good. Or do some reading up.In fact our Pension Scheme advisors have suggested that now would be a good time to move some of our investments from equities into bonds to reduce risk.
Noob question - if we invest in UK gilts now are we locking into that 4% yield until we sell? I mean that if I buy £100 of UK Gilts now is that going to generate 45 pa until redemption?
The Gilt linked 4.5% but that's based on the Gilt's nominal value of £100. Its yield varies depending on the current trading price. If you paid £150 for them back in late 19 then the yield would be 3%.
You wouldn't normally buy individual Gilts though - you'd buy a fund which invested in wide range of them so it would hopefully avoid big swings in price.
As to where they'll go from here - who knows? One thing I've read is Government will have to issue a lot more Gilts to raise money. I suppose it depends what rate they offer - if there's a new 10yr Gilt offering 6% then the price of the 2034 Gilt paying 4.5% would have to drop until its yield was competitive - logically it would need to drop to £75, unless I'm missing something?
Sheepshanks said:
To be honest, I find Gilts / Bonds somewhat baffling, so if anyone else wants to comment, that'd be good. Or do some reading up.
The Gilt linked 4.5% but that's based on the Gilt's nominal value of £100. Its yield varies depending on the current trading price. If you paid £150 for them back in late 19 then the yield would be 3%.
You wouldn't normally buy individual Gilts though - you'd buy a fund which invested in wide range of them so it would hopefully avoid big swings in price.
As to where they'll go from here - who knows? One thing I've read is Government will have to issue a lot more Gilts to raise money. I suppose it depends what rate they offer - if there's a new 10yr Gilt offering 6% then the price of the 2034 Gilt paying 4.5% would have to drop until its yield was competitive - logically it would need to drop to £75, unless I'm missing something?
I think that you are about right in your thoughts.The Gilt linked 4.5% but that's based on the Gilt's nominal value of £100. Its yield varies depending on the current trading price. If you paid £150 for them back in late 19 then the yield would be 3%.
You wouldn't normally buy individual Gilts though - you'd buy a fund which invested in wide range of them so it would hopefully avoid big swings in price.
As to where they'll go from here - who knows? One thing I've read is Government will have to issue a lot more Gilts to raise money. I suppose it depends what rate they offer - if there's a new 10yr Gilt offering 6% then the price of the 2034 Gilt paying 4.5% would have to drop until its yield was competitive - logically it would need to drop to £75, unless I'm missing something?
A gilt's price depends on interest rates in the wider world (among other things).
So the 4.5% gilt is trading at about par (£100) because its coupon payments are about the same as you can get on the open market. If the B0E's base rate goes up, then you would expect the price of the gilt to decline and vice versa.
Your example of the gilt trading at £150 reflects this. Interest rates were very low so an instrument paying 4.5% was valuable.
The initial sale of gilts is via auction, so, if the govt issues a 6% instrument then (at current rates) it would be paid more than £100 for each one so that the yield would be about 4.3%. It shouldn't affect the price of other gilts. The govt can also choose to issue gilts paying less than 4.5% (they'll be paid less than £100). There are also index linked gilts.
Your point about buying a fund is valid and probably a better idea.
I was just attracted to locking in a risk-free 4.5% yield for the next 10 years - that's more than my investments usually make.
There are bond fair price calculators online.
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