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Answers to YOUR Questions

See what's bugging others. 

And what our experts say.

Hi, I've a Cash ISA with about £80k in it, only earning 0.85%. So I'm considering moving £50k into a Stocks & Shares ISA. I'm 73, retired, married, a house-owner and have about £1k spare per month after living expenses, so I don't often need extra money, but I would like to utilise my savings better. What would you advise?

Barry, Berkshire

18 April 2019

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Helena Wardle

Hi Barry,

I can understand with the low interest rates why you are looking into this and I would be happy to give you some direction and things to consider. However, at this stage I don’t know enough about you to give you any specific advice on whether investing in a Stocks and Shares ISA is the best option for you.

If you have a longer amount of time available to invest, historically stocks and shares have done better over time than deposit savings.

But due to ups and downs in the market, there will be times when it falls below what you put into the investment, so you need to think about how you would feel about it when this happens. Research has shown that most investors notice their losses more than their gains, and it is important to consider this and prepare yourself for it.

Only invest money that you know you can leave invested long term, and understand that at times the value of your investments will fall below what you initially invested, and when this happens it’s likely that the best thing to do is to ‘sit on your hands’, rather than react and sell.

It may also take some time for you to see the value of investing, and this can be disheartening in the early years particularly if you see the value rising and falling regularly, as most investments have in the last few years. If you invest in a Stocks and Shares investment, you need to take a longer term view and give the investment time.

Consider the level of risk you are comfortable to take with the money, and diversify the money by not investing it all in one area. This doesn’t necessarily mean choosing multiple investments, as you can achieve this through mixed investment funds and think about getting help selecting this if you have never invested before.

Review and consider the charges of the investment - the more expensive the investment solution, the more the investment needs to return to help your money grow! There will always be charges with Stocks and Shares investments, so make sure you understand these charges so you know what you are paying for.

You can transfer some of your Cash ISA to a Stocks and Shares ISA if you decide to invest, so please make sure you don’t lose the ISA status of your savings, as it is tax free.

Lastly, if you decide to invest some of your savings, you need to consider how to select a suitable provider and investment funds. You can use Boring Money's Best Buys page if you feel confident enough to select your own investments and do your own research. However if you are unsure and need advice, using a regulated financial adviser may be an option worth exploring. 

I hope this helps,

Helena

Ethical Investing

I am a beginner investor and would like to invest in a "socially responsible" Stocks & Shares ISA. I have looked into the Nutmeg and Wealthify funds, having found out about them through the Money Saving Expert website. Is there information about any other such providers on your website? And do you have any advice about how to compare the "socially responsible" criteria on the different funds?

Joy, Glamorgan

16 April 2019

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Phoebe Smith

Hi Joy,

Great to hear that you're eager start investing, and are particularly interested in ethical/socially responsible investing. 

This is an area of the investment world that has been seeing a lot of interest recently. More platforms are introducing ethical ESG (Environmental, Social and Governance) options for their customers to choose from.

 

Why invest ethically?

There are many naysayers who dislike ethical investing because they feel that, while being a nice tree-hugging hippy thing to do, your investment returns will be poorer for it. However with the UN’s Intergovernmental Panel on Climate Change warning in October 2018, that we only have 12 years to bring global warming under control and avoid a 'climate catastrophe' - the support for ethical is growing. 

As is the performance of the ethical options which already exist. If we look at three different funds ranging from ethical to not-so-ethical, we can see that ethical performance has been on the up ever since 2014. (For more detail - take a look at our full article).

  • FTSE4Good Global - which only includes socially responsible businesses
  • FTSE All Share - which tracks the entire investment market: good, bad and ugly
  • The Vice Fund - which invests in tobacco, gambling, booze and weapons

While the Vice Fund doubled investors’ money in its first five years (2002–2007), by the start of 2019 the FTSE4Good was the leading fund of these three. It even beat the benchmark set by the all-encompassing FTSE All Share.

This just goes to show the naysayers, that you don’t have to sacrifice returns anymore to invest in the future of the planet. But then again, nothing with the stock market is ever certain.

 

More info on ethical investing

As we are pretty interested in ethical investing here at Boring Money (having written a report all about it in 2018), our Best Buys page and a few of our articles might be helpful to you. Why not take a look at:

Our Best Buys page - use our 'ethical investments' filter to whittle down the list providers to just those who market their own ethical options. As of April 2019, the only providers on our Best Buys page who offer ethical options are: Vanguard, Nutmeg, Wealthify, PensionBee, Barclays Smart Investor, Wealthsimple, and Moola.

Of these ethical options, we review all seven as suitable for beginner investors. However you can filter them again, using other filters such as: 'Low cost for small portfolios (<50k)' and 'Start with £100 or less', to find the best providers for you to explore further.

 

How to compare 'socially responsible' criteria

There is a lot of confusion about what counts as 'socially responsible', ‘ethical’ or 'ESG'. Some of this is due to the fact that one person’s ethics are not always in line with another’s.

  • Negative screening - Most investors think of ethical investing as just blacklisting certain types of companies or industries from their portfolio - according to our research, consumers most want to avoid: arms, tobacco, gambling and pornography.
  • Impact investing – where money is actively funnelled towards certain projects to support positive change – is less recognised, but once offered to people it is more popular than blacklisting. Our survey respondents named healthcare, green energy and sustainable agriculture as the areas they most wanted to see their money put to positive use.

Unfortunately, because of the relative youth of ethical investing, and all the confusion over how to define 'ethical' options, there is currently no easy way to compare the ethical options out there. Beyond reading up on them and doing your homework, there's no quick way to see at a glance how one ethical investing option differs from another. You just need to comb through the details yourself, and see how these ethical options measure up to your ideas of what 'ethical investing' means.

This being said, Morningstar are working toward creating a tool which could be really helpful for investors who'd like to do this. And we are hoping to have the functionality to help readers compare ethical investing products in the future. Unfortunately though, these projects are still in development.

Meanwhile, some investment platforms such as Fidelity, do offer investors helpful info to help them find out more about the ethical funds on their platform.

Take a look at the bottom of this page, to see the top 10 most bought and sold ESG funds on the Fidelity website in February 2019: www.fidelity.co.uk/funds/esg-investing

 

Hope this helps!

Phoebe

Hi, I have a young boy who will be turning 4 this month. He is British, but I am not in touch with his mum. We broke up but I want to save some money for this innocent boy, so that when he comes of age, those small savings can help him. I live in Uganda and would be sending the money from here. Is it possible to open up an ISA for him?

Dennis, Uganda

11 April 2019

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Zoë Dagless

Dear Dennis,

In terms of technicality, as your son is aged under 16 years and is a UK resident, a guardian is able to open a Junior ISA for him.

A Junior ISA allows a child to have a tax free saving pot with a capacity to save £4,368 per year.

At age 16, the child becomes eligible to manage their Junior ISA, and then at age 18 the Junior ISA graduates to an adult ISA, and the money becomes theirs. They can then do with it what they want.

However, there are two main points which may not work in your situation:

  • The first one being that - a child cannot have multiple Junior ISAs, so you would need to check with his mother that there is not one in existence
  • And the other is that any contributions to the child's Junior ISA have to be in sterling pounds, rather than another currency.

It may be better for you to invest using a savings pot in Uganda, and then gift the money when you feel it is appropriate.

Zoe

I am 52 with money languishing in a low savings account (£20,000), as I had intended to buy a property but it never happened. Now I'm neurotic about entering into Stocks and Shares, due to seeing how many investors have exited the stock market thanks to Brexit, and with companies going bust etc. But I need to make my money work for me as my pension pot is low. My instinct is to put the money into an Instant Access ISA and drip feed this into a Stocks and Shares ISA. Would this be possible within the same allowance? I know you can take money in and out of a Cash ISA. Or if I held the whole amount in a Stocks and Shares ISA and had a direct debit of £100 per month into shares, would there be an interest rate on the amount waiting to buy? Helen

Helen , London

09 April 2019

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Lesley James

Hi Helen,

The first thing I should ask you, before answering your question, is, what other money do you have available in the event of an emergency?

It would be difficult to suggest investing all this money unless you have additional funds you can call on in a hurry. Otherwise you are left with the potential of having to either access investments when their value has fallen (consolidating any losses) or going into debt. No investment will ever perform better, than the interest you would pay on a credit card.

Assuming that is all fine though, (and at a £100 direct debit per month, drip-feeding the full amount will take quite a number of years anyway) - your hesitation over the current market is a very understandable dilemma.

However, you don’t have to look back far to see that this is the ongoing nature of investment.

Today is Brexit and US/China relations. 10 years ago it was banks. In 2000 we had the fallout from dot-com over-excitement. And I’ve missed at least four smaller panics that have happened in between.

In markets, there is a constant cycle between everyone feeling great (and markets going up) and everyone feeling afraid (and markets going down). No one can ever tell you in advance which way markets will move next week, or next month. All we do know is that, historically, the long-term market trend has been upwards.

The key to being successful, therefore, is in being prepared.

To know that downturns will happen. And to be confident that, when they do, you will ignore them and do absolutely nothing until they are over.

Having said all that, there are also ways to mitigate the impact.

  • First, choose a risk-appropriate, multi asset fund, with some bonds, perhaps even some property as well.

This could reduce the scales of your ups and downs compared with a 100% holding in shares. And, exactly as you suggest, drip feed your money in, so that it buys at a range of different prices.

Finally, though, the rules.

When you withdraw money from an ISA and wish to replenish it using the same allowance, the money must go back into the same ISA account as the withdrawal and in the same tax year. If you had a ‘current tax year’ Cash ISA and wanted to transfer it to Stocks and Shares, you would have to transfer the whole lot.

So no, drip feeding money from a Cash ISA to a Stocks and Shares ISA wouldn’t be possible under that scenario. Not this year anyway.

You could, however, drip feed it from a normal savings account.

You have an annual Personal Savings Allowance which means interest on deposit accounts can be free of tax anyway, up to £1,000 a year for basic rate taxpayers or £500 a year for higher rate. I don’t know your situation, but, at current rates, you (probably) won’t need a Cash ISA. This set up is also likely to offer the best interest rates on the amount remaining in Cash.

Or you could split your Cash across ISA and deposit savings, using the latter for the drip feed into Stocks and Shares.

(note: Highest/additional rate taxpayers do not benefit from a Personal Savings Allowance.)

To complete the picture, though, yes, you can also invest in a Stocks and Shares ISA and hold money in Cash, which can then be drip fed into the market. This is becoming a standard feature for many Stocks and Shares ISA providers.

Whether that Cash account would pay interest – and whether they will charge you fees for the privilege of holding your Cash - will be down the individual provider.

That’s a reason to shop around - and the Best Buys on this site is a decent place to start.