#InvestingUK #HouseDeposit #InvestmentStrategy
Hey everyone! 👋 I have £20k that I’m looking to invest for around 2 years as a house deposit in a General Investment Account. I’ve maxed out my ISA and I’m considering options like Global All Cap or S&P 500, even though a high yield savings account might be the safer choice.
But here’s where I need your advice: With the uncertainty of upcoming elections worldwide, would it be too risky to go for these options with a short time horizon? Or could the potential rewards outweigh the risks?
Possible solutions:
– Consider a mix of high yield savings account and a more aggressive investment option for diversification
– Monitor the market closely and be prepared to adjust your strategy if needed
What do you think? Let’s discuss! 💸📈 #InvestmentAdvice #RiskReward #MarketVolatility
Feels like you answered your own question there – the low risk answer and therefore more “sensible” way is to just use savings accounts for that timeframe. You said so yourself that you’re more risk tolerant. You understand the risks, if you still want to go ahead then do it.
The time horizon is too short. Investing in the s&p 500 over two years is no different to gambling unless you have some compelling reason to believe it will be nothing but up in that time period.
20% loss is not the worst case scenario here.
50-70% has been seen before.
Just put it in premium bonds if you’re concerned about risk
Fixed rate savings, quick before they drop interest rates!
If the house you expect to purchase would be less than £450k then a gov LISA is a good option. You would be guaranteed a £2k bonus on £8k paid in plus some interest and can withdraw from it penalty free to purchase a house. Not many ways you can guarantee 25% on top risk free.
This is only a good option if you are definitely buying at £450k and below though, otherwise you’ll pay a 25% penalty on the withdrawal.
Historically the S&P500 has lost 20% in one **day**. The worst-case scenario would be more like losing 50+% of your capital.
Are you actually suggesting you’re willing to risk money you need to buy a house on the stock market? Wise up and put it in Premium Bonds (if you’re a higher tax payer) or government bonds. You’ll get c 4% per year.
Year 1 = 20,800
Year 2 = 21,632
That covers your solicitor fees for doing absolutely nothing and taking no risk
My golden rule:
Never invest any money you know you need within the next 5 years.
I ask myself this annually and sell some investments if required to make sure that rule is never broken.
Gilts. T26A has a gross equivalent yield to maturity for a 40% tax payer of 6.75% and matures in October 2026
£SMGB. easy money
I put money monthly into stocks that I’ve picked and hold only for a year at which point sell most it to pay tax bill each January. Up 39% this year so it can be done (I see it as just a bonus that I don’t have to pay as much of my own tax bill). But I do so knowing I might have to add in more (if so, think of it as the tax man’s fault obviously).
I’m only talking about £3k-5k though so not the end of the world either way, I might be more reserved with £20k…
Have you considered gilt/bonds? If you are willing to consider a savings account, which has the potential for income tax on the interest (depending on your income), it’s worth considering high-yield corporate bonds. Relatively more stable/predictable cash flow than index but reasonable return of up to 10-12% interest (depending on your risk threshold).
If your income is high, tax on interest can eat into returns considerably, that’s where gilts come in, they are tax-free 5% and fairly liquid.
Given your use case, savings account or fixed term bond.
Just take 5% interest at a bank.
Government insures up to £85k so risk free.
People take gambles all the time. If you invested two years ago in either of those funds, you’d be in the green right now. The choice is yours. People will say to not use historical performance as future indicator, so you could take that into consideration however you want. I wouldn’t risk it.
Why risk it just stick it in an high interest savings account watching out for the 1k savings limit before tax becomes due or you got buy a money funds within an isa for same effect without risking losing money during such a short time horizon especially given the uncertain us election result and impact on russia/Ukraine and gaza war potentially expanding into a regional war with all the Sabr rattling going on
How much are you spending in rent and what’s your income. We need more info to assess risk
NEST pensions:
> It is possible for people to be risk seeking and also strongly loss averse. People may be comfortable in the abstract or under experimental research conditions with the notion of investment risk. When confronted with the reality of an investment losing value, they may have a negative reaction that could not be anticipated from their self-reported level of risk tolerance. The research found this to be the case most strongly among younger people. Young people self-report higher levels of risk appetite, research shows they may be the most loss averse in practice and most likely to take action if confronted with loss.
> …
> Findings from this suggest that the target group are often strongly loss averse. They displayed quite emotional responses to loss during the research: disappointment, anger, helplessness and often surprise and incredulity being typical. When participants’ hypothetical pension lost value, they wanted to know where the money had gone and who to blame for losing it.
> Pension loss was also felt with a sense of immediacy and was not considered within the context of a long term savings vehicle. Participants talked about the loss as if it they had less in their current account or wallet than they expected to have, given what they had put in. It was commonly thought that pensions grew slowly but steadily in value, in line with their contributions and with a modest amount of gain. A loss was seen as an anomaly or a fault, particularly by those who were un-pensioned, as they did not understand the difference between pensions as a form of investment and savings accounts that accumulated with interest.^[PDF](https://web.archive.org/web/20170705214114/http://www.nestpensions.org.uk/schemeweb/NestWeb/includes/public/docs/member-research-brief,PDF.pdf)
I’d put it in a money market fund and just take the 9-10% 2 year gain to be honest.
Savings accounts or money market funds.
The stock market is for at least 5 years. Ideally 10 or more.
A lot of the upside of stocks comes from the compounding of the higher rate of return over long periods of time. Even if you get ‘average’ (~9%) market returns (or a bit better) over the next two years, is that really going to put you in a radically better financial situation than the 5% you’ll get from MMF? Are you going to better off enough from only two years of compounding to compensate you for the risk that you could end up 50% worse off? 9% vs 5% would mean you’d be £1700 better off with stocks. To me that’s not enough upside for the risk.
Very different story if you’re talking 5-10+ year investment horizon