Basic Question: Premium Bonds vs Vanguard Global All Cap

[redrabbit29]

Hi,

It's approaching the end of the financial year, and I have some extra money (about £15k) which I can use to max out the Vanguard FTSE Global All Cap fund.

After doing so, I would still have an emergency fund left (and a bit extra). However, part of me wonders if I should keep the money in Premium Bonds and not fill up the ISA as it would be nice to have the extra money immediately available and not invested.

However, I am thinking that it would make more financial sense to invest it into the ISA and use up my full £20k allowance for the year.

How easy is it to withdraw from the Vanguard Global All Cap fund? I don't expect to, but say for example, we had a child or just wanted some extra funds? I realise it's more for long term investing which adds to my doubts over what to do.

Thanks
redrabbit

[okgo]

redrabbit29 said:

Hi,

It's approaching the end of the financial year, and I have some extra money (about £15k) which I can use to max out the Vanguard FTSE Global All Cap fund.

After doing so, I would still have an emergency fund left (and a bit extra). However, part of me wonders if I should keep the money in Premium Bonds and not fill up the ISA as it would be nice to have the extra money immediately available and not invested.

However, I am thinking that it would make more financial sense to invest it into the ISA and use up my full £20k allowance for the year.

How easy is it to withdraw from the Vanguard Global All Cap fund? I don't expect to, but say for example, we had a child or just wanted some extra funds? I realise it's more for long term investing which adds to my doubts over what to do.

Thanks
redrabbit

You can invest money to fill your ISA allowance and leave it in cash just sitting in vanguard I thought, haven't ever done it long term but was under the impression you could and they pay a small amount of interest against it.

I wouldn't miss the opp to fill my ISA allowance if you have emergency cash elsewhere. Obviously within Vanguard you also don't have to invest in 100% equities which is what All Cap is, there are a number of funds of varying risk including a money market fund IIRC which is obviously very low risk - https://www.vanguardinvestor.co.uk/investments/van...

"we had a child or just wanted some extra funds?" - this leads me to think you may need a larger emergency fund, personally, or at least need money not in 100% equities if what you have may not be enough to satisfy that need. I speak only for myself but there is a year of living exactly as we do while both employed in mine, perhaps worth bulking it out a touch? In any event, I'd imagine liquidating a position in Vanguard and it being in your bank account isn't going to take very long - if in the event you needed to make a payment right now, then overdrafts likely fine until funds clear from elsewhere, from bonds it should be within a couple of hours?

[redrabbit29]

okgo said:

You can invest money to fill your ISA allowance and leave it in cash just sitting in vanguard I thought, haven't ever done it long term but was under the impression you could and they pay a small amount of interest against it.

I wouldn't miss the opp to fill my ISA allowance if you have emergency cash elsewhere. Obviously within Vanguard you also don't have to invest in 100% equities which is what All Cap is, there are a number of funds of varying risk including a money market fund IIRC which is obviously very low risk - https://www.vanguardinvestor.co.uk/investments/van...

"we had a child or just wanted some extra funds?" - this leads me to think you may need a larger emergency fund, personally, or at least need money not in 100% equities if what you have may not be enough to satisfy that need. I speak only for myself but there is a year of living exactly as we do while both employed in mine, perhaps worth bulking it out a touch? In any event, I'd imagine liquidating a position in Vanguard and it being in your bank account isn't going to take very long - if in the event you needed to make a payment right now, then overdrafts likely fine until funds clear from elsewhere, from bonds it should be within a couple of hours?

Thank you for the comprehensive response.

Am I right that if I did invest into the All Cap, I could stil withdraw and sell anytime I wanted?

I have quite a decent emergency fund - about £30k which is enough for us for about a year. I'm lucky enough to be a fairly high earner, but just paying out a large-ish chunk of money for long term savings is just a strange feeling.

I think in my head I am putting it in the same bracket as pension - which is probably right, however the difference being is it's not locked away till I am 55+ years old.

[okgo]

redrabbit29 said:

Thank you for the comprehensive response.

Am I right that if I did invest into the All Cap, I could stil withdraw and sell anytime I wanted?

I have quite a decent emergency fund - about £30k which is enough for us for about a year. I'm lucky enough to be a fairly high earner, but just paying out a large-ish chunk of money for long term savings is just a strange feeling.

I think in my head I am putting it in the same bracket as pension - which is probably right, however the difference being is it's not locked away till I am 55+ years old.

Of course, you can sell whenever, the primary reason keeping emergency funds in cash type investments is so that if the st hits the fan you aren't forced to sell your investments and be at the mercy of the market at that time. The difference between liquidating a chunk of an All Cap based portfolio today vs 6 months ago would be vast, for example.

Sounds like you're fine, and is more a case o being honest with yourself about the timeframes surrounding needing to use the money as much as anything. As you say, 100% equities investments today are probably best not thought about for at least 5 years, ideally much longer, not always appropriate if you need a lot of the funds in 2 years time for example.

But I suppose the key here is that once that ISA allowance has gone, it aint coming back. But once you're in you can transfer around to different products to suit timeframe/risk.

Obviously the above isn't advice blah blah, but is how I would likely look at it.

[Kickstart]

The current pro-rata rate for cash at Vanguard is 5.4% - takes about 24 hours from requesting a withdrawal to hitting your account

[xeny]

redrabbit29 said:

I think in my head I am putting it in the same bracket as pension - which is probably right, however the difference being is it's not locked away till I am 55+ years old.

Think of it as a hierarchy of increasing accessibility.

Pension, then ISA, then general investment account (GIA or taxable investments) then savings accounts and finally current account.

You can get at any of them except Pension before you are 55, but want enough in the savings accounts that you aren't selling investments to pay the bills each month or pay for an annual holiday.