Where to put ~£6k for 2-3 years
Discussion
Hi all, currently saving for my first house.
I'm maxing out a Skipton Cash LISA (£330/pcm for the £4k annual limit) and the 'Flex Regular Online Saver' which is linked to my Nationwide current account (£250/pcm for the first 12 months to get the 5% AER.
I am weighing up the idea of parting ways with my motorcycle, which is owned outright and in the current market, good for at least £6k.
Assuming I am 2-3 years away from being in a position to buy (depending on deposit required and other expenses), what is the best place to put that chunk of cash that will help hold its value?
Am I right in thinking that an S&S ISA won't be suitable unless I'm looking to save for 5+ years to ride out any ups and downs?
What's the next best option, another ISA? If so, what type, can I pay into more than 1 cash ISA per year?
Otherwise, can I just park it / divide it up between other current account(s) that pay decent interest? How does that work if you're not actively using the current account, ie. no regular payments in or out?
Wildcard idea - is there another asset that I could 'invest' the money in, that would at least hold value against inflation? A watch for example? That's probably a daft idea, tempting as it may be..
I'm maxing out a Skipton Cash LISA (£330/pcm for the £4k annual limit) and the 'Flex Regular Online Saver' which is linked to my Nationwide current account (£250/pcm for the first 12 months to get the 5% AER.
I am weighing up the idea of parting ways with my motorcycle, which is owned outright and in the current market, good for at least £6k.
Assuming I am 2-3 years away from being in a position to buy (depending on deposit required and other expenses), what is the best place to put that chunk of cash that will help hold its value?
Am I right in thinking that an S&S ISA won't be suitable unless I'm looking to save for 5+ years to ride out any ups and downs?
What's the next best option, another ISA? If so, what type, can I pay into more than 1 cash ISA per year?
Otherwise, can I just park it / divide it up between other current account(s) that pay decent interest? How does that work if you're not actively using the current account, ie. no regular payments in or out?
Wildcard idea - is there another asset that I could 'invest' the money in, that would at least hold value against inflation? A watch for example? That's probably a daft idea, tempting as it may be..
Edited by smithyithy on Thursday 2nd August 15:43
Without being facetious, I think the answer lies somewhere between keeping and enjoying the bike and putting the sale proceeds in the bank.
Your horizon lies within the end of the transition phase of Brexit and still coming to terms with a hard Brexit. It could be a rocky road, or it could be investment Nirvana, but can you really afford to take the risk?
If you have several million to invest then it is reasonable to be exposed to much higher risks for higher returns as you do not need the cash. But, If you know that you are going to need to liquidate all your investments to step on the housing ladder, then you cannot afford to be really confident and expose yourself to any significant risk. In your timescale, fees and volatility could easily eat up any potential growth.
Your horizon lies within the end of the transition phase of Brexit and still coming to terms with a hard Brexit. It could be a rocky road, or it could be investment Nirvana, but can you really afford to take the risk?
If you have several million to invest then it is reasonable to be exposed to much higher risks for higher returns as you do not need the cash. But, If you know that you are going to need to liquidate all your investments to step on the housing ladder, then you cannot afford to be really confident and expose yourself to any significant risk. In your timescale, fees and volatility could easily eat up any potential growth.
2-3 years is in that tricky in-between period: a little bit long to keep in a normal cash savings account with inflation and low interest nibbling away at it, but too short to make equities a sensible choice.
You could invest in a bond fund, which would shield you from the dramatic drops that you could get with equities, but in a period of rising interest rates that’s unlikely to give a good return and may well lose.
A property fund tends to give fairly smooth returns, but all the ones I’ve seen have a sizeable spread between the buying and selling price, amounting to an effective entry fee of perhaps 5% which will wipe out your first 8 to 12 months of returns - not good if you’re only investing for 2-3 years. And who knows what on earth will happen to those funds during Brexit. (Actually, that comment could apply to any investment!)
Is your bike a rare or classic model? Might it hold its value or even appreciate, whilst also giving you some intangible enjoyment as well? Is it really worth selling it? If it’s a relatively new machine with little enthusiasts’ following then maybe it is worth selling, but otherwise...
To be honest I think the best you can do is find the highest cash interest rate and accept that you’ll lose some value to inflation, and the return isn’t going to make you cum in your pants. Pretty sure you can’t open a second cash ISA in one year.
You could invest in a bond fund, which would shield you from the dramatic drops that you could get with equities, but in a period of rising interest rates that’s unlikely to give a good return and may well lose.
A property fund tends to give fairly smooth returns, but all the ones I’ve seen have a sizeable spread between the buying and selling price, amounting to an effective entry fee of perhaps 5% which will wipe out your first 8 to 12 months of returns - not good if you’re only investing for 2-3 years. And who knows what on earth will happen to those funds during Brexit. (Actually, that comment could apply to any investment!)
Is your bike a rare or classic model? Might it hold its value or even appreciate, whilst also giving you some intangible enjoyment as well? Is it really worth selling it? If it’s a relatively new machine with little enthusiasts’ following then maybe it is worth selling, but otherwise...
To be honest I think the best you can do is find the highest cash interest rate and accept that you’ll lose some value to inflation, and the return isn’t going to make you cum in your pants. Pretty sure you can’t open a second cash ISA in one year.
@rdjohn
The bike decision is definitely of heart vs brain I think.. I love the thing but I just don’t get chance to ride it much anymore, and as much as I maybe shouldn’t be, I am looking at it as a depreciating asset.. I could potentially scrape the top off the sale cash to put towards some of my other hobbies anyway so it won’t be a total loss of fun.
Very good points re. Brexit and economic uncertainty, I wouldn’t want to be taking any significant risks right now, not least because of that but also as I don’t really have the luxury of having the money to ‘spare’..
I think if I do decide to sell and release the cash, I’d be happy if I can just beat inflation for the 2-3 years..
@Dr
Oh I know, it's a bit of an awkward timeframe. I'll take a look at bonds, they're not something I know much about to be honest.
The bike is a 2012 Triumph Daytona 675R. I bought it in 2014 if I remember right.. For £8k, so about £2.5k less than a new one. They seem to have held firm for a few years, and are going up for £6.5k with more miles than mine.. So I could potentially get a but more but I'd rather not have to advertise it for months.. They seem to go a lot quicker this time of the year too so it's probably a bit better to sell around this time than, say, January.. I'm also paying the insurance and road tax on it which kinda doesn't justify the amount I use it :/
I'm not sure what to do.. I think I'd just feel better having the cash released and somewhere I can see it, so I've got a clear picture of my savings as times goes on..
The bike decision is definitely of heart vs brain I think.. I love the thing but I just don’t get chance to ride it much anymore, and as much as I maybe shouldn’t be, I am looking at it as a depreciating asset.. I could potentially scrape the top off the sale cash to put towards some of my other hobbies anyway so it won’t be a total loss of fun.
Very good points re. Brexit and economic uncertainty, I wouldn’t want to be taking any significant risks right now, not least because of that but also as I don’t really have the luxury of having the money to ‘spare’..
I think if I do decide to sell and release the cash, I’d be happy if I can just beat inflation for the 2-3 years..
@Dr
Oh I know, it's a bit of an awkward timeframe. I'll take a look at bonds, they're not something I know much about to be honest.
The bike is a 2012 Triumph Daytona 675R. I bought it in 2014 if I remember right.. For £8k, so about £2.5k less than a new one. They seem to have held firm for a few years, and are going up for £6.5k with more miles than mine.. So I could potentially get a but more but I'd rather not have to advertise it for months.. They seem to go a lot quicker this time of the year too so it's probably a bit better to sell around this time than, say, January.. I'm also paying the insurance and road tax on it which kinda doesn't justify the amount I use it :/
I'm not sure what to do.. I think I'd just feel better having the cash released and somewhere I can see it, so I've got a clear picture of my savings as times goes on..
Edited by smithyithy on Thursday 2nd August 18:07
smithyithy said:
@rdjohn
The bike decision is definitely of heart vs brain I think.. I love the thing but I just don’t get chance to ride it much anymore, and as much as I maybe shouldn’t be, I am looking at it as a depreciating asset.. I could potentially scrape the top off the sale cash to put towards some of my other hobbies anyway so it won’t be a total loss of fun.
Very good points re. Brexit and economic uncertainty, I wouldn’t want to be taking any significant risks right now, not least because of that but also as I don’t really have the luxury of having the money to ‘spare’..
I think if I do decide to sell and release the cash, I’d be happy if I can just beat inflation for the 2-3 years..
@Dr
Oh I know, it's a bit of an awkward timeframe. I'll take a look at bonds, they're not something I know much about to be honest.
The bike is a 2012 Triumph Daytona 675R. I bought it in 2014 if I remember right.. For £8k, so about £2.5k less than a new one. They seem to have held firm for a few years, and are going up for £6.5k with more miles than mine.. So I could potentially get a but more but I'd rather not have to advertise it for months.. They seem to go a lot quicker this time of the year too so it's probably a bit better to sell around this time than, say, January.. I'm also paying the insurance and road tax on it which kinda doesn't justify the amount I use it :/
I'm not sure what to do.. I think I'd just feel better having the cash released and somewhere I can see it, so I've got a clear picture of my savings as times goes on..
Inflation over that period is anticipated to be 3-5%. The downside risk plus fees could easily exceed that. The bike decision is definitely of heart vs brain I think.. I love the thing but I just don’t get chance to ride it much anymore, and as much as I maybe shouldn’t be, I am looking at it as a depreciating asset.. I could potentially scrape the top off the sale cash to put towards some of my other hobbies anyway so it won’t be a total loss of fun.
Very good points re. Brexit and economic uncertainty, I wouldn’t want to be taking any significant risks right now, not least because of that but also as I don’t really have the luxury of having the money to ‘spare’..
I think if I do decide to sell and release the cash, I’d be happy if I can just beat inflation for the 2-3 years..
@Dr
Oh I know, it's a bit of an awkward timeframe. I'll take a look at bonds, they're not something I know much about to be honest.
The bike is a 2012 Triumph Daytona 675R. I bought it in 2014 if I remember right.. For £8k, so about £2.5k less than a new one. They seem to have held firm for a few years, and are going up for £6.5k with more miles than mine.. So I could potentially get a but more but I'd rather not have to advertise it for months.. They seem to go a lot quicker this time of the year too so it's probably a bit better to sell around this time than, say, January.. I'm also paying the insurance and road tax on it which kinda doesn't justify the amount I use it :/
I'm not sure what to do.. I think I'd just feel better having the cash released and somewhere I can see it, so I've got a clear picture of my savings as times goes on..
Edited by smithyithy on Thursday 2nd August 18:07
The important thing is to focus on getting on the housing ladder. That has the long term potential to alleviate many of your future financial concerns.
rdjohn said:
Inflation over that period is anticipated to be 3-5%. The downside risk plus fees could easily exceed that.
The important thing is to focus on getting on the housing ladder. That has the long term potential to alleviate many of your future financial concerns.
Why do you believe that near-term inflation expectations are anywhere near 5% - I’m pretty sure that’s not what the Bank of England is expecting nor the ‘market’!The important thing is to focus on getting on the housing ladder. That has the long term potential to alleviate many of your future financial concerns.
Some more options for you:
- Premium Bonds: no risk to capital, and a risk you don’t achieve normal return, but also a chance of a bigger windfall (my FiL got £10k back on £10k held aside to pay the builder)
- Zopa: peer to peer lending, so some (choosable) risk, a fee, but good (4%+) return
- Current accounts: takes a bit of effort, but many offer £100+ of incentives for switching, which if you did once every 6 months would be better returns than most saving accounts.
Disclaimer: just some ideas, not advice, as like everyone on PH, I don’t know your broader situation. Do seek qualified independent advice before making financial decisions. And ask whoever pays the bill, investments can go down as well as up, smoking isn’t good for you, etc.
- Premium Bonds: no risk to capital, and a risk you don’t achieve normal return, but also a chance of a bigger windfall (my FiL got £10k back on £10k held aside to pay the builder)
- Zopa: peer to peer lending, so some (choosable) risk, a fee, but good (4%+) return
- Current accounts: takes a bit of effort, but many offer £100+ of incentives for switching, which if you did once every 6 months would be better returns than most saving accounts.
Disclaimer: just some ideas, not advice, as like everyone on PH, I don’t know your broader situation. Do seek qualified independent advice before making financial decisions. And ask whoever pays the bill, investments can go down as well as up, smoking isn’t good for you, etc.
Could definitely make a few £hundred just by doing that account switch as they all seem to be offering the incentive for doing so.. It's a bit of a hassle though even with that Account Switching Service. I'll see if I can just open one alongside my current that offers decent interest without having to be in constant use..
I was in a similar position with about £14k. Dropped it into a Stocks and Shares ISA and made £20k tax free profit, mostly through Boohoo which is currently trading at £2. Having now been invested in the share about 3 years, I'd say (and have about £15k of savings into it) the share could easily climb back up to £2.20 within 12 months.
Dave350 said:
I was in a similar position with about £14k. Dropped it into a Stocks and Shares ISA and made £20k tax free profit, mostly through Boohoo which is currently trading at £2. Having now been invested in the share about 3 years, I'd say (and have about £15k of savings into it) the share could easily climb back up to £2.20 within 12 months.
Or could easily fall to £1.80...sidicks said:
rdjohn said:
Inflation over that period is anticipated to be 3-5%. The downside risk plus fees could easily exceed that.
The important thing is to focus on getting on the housing ladder. That has the long term potential to alleviate many of your future financial concerns.
Why do you believe that near-term inflation expectations are anywhere near 5% - I’m pretty sure that’s not what the Bank of England is expecting nor the ‘market’!The important thing is to focus on getting on the housing ladder. That has the long term potential to alleviate many of your future financial concerns.
The Bank are obviously targeting 2% / annum, so for two to three years that is either 4%, or 6%. Back in May GlobalEcconomics thought the respective figures would be 4.3% for two years, or 6.3% for three.
I think a messy Brexit now looks more likely, hence my pessimism.
rdjohn said:
I am a pessimist.
The Bank are obviously targeting 2% / annum, so for two to three years that is either 4%, or 6%. Back in May GlobalEcconomics thought the respective figures would be 4.3% for two years, or 6.3% for three.
I think a messy Brexit now looks more likely, hence my pessimism.
My mistake, I thought you meant 3-5% per annum.The Bank are obviously targeting 2% / annum, so for two to three years that is either 4%, or 6%. Back in May GlobalEcconomics thought the respective figures would be 4.3% for two years, or 6.3% for three.
I think a messy Brexit now looks more likely, hence my pessimism.
Apologies
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