Quantcast

Could I invest now and take it out in two years or so?

recovery5.png

"I know everyone says that you should invest for five years but that is a long time for me. I was wondering whether to open a Stocks and Shares ISA up to £20,000 this year, probably with Hargreaves Lansdown, say for just two years and then perhaps cash it in. Would this be worth doing?"

 

Your question is pretty hard to answer – if I may you are looking to have your cake and to eat it. Cash rates as you say are rubbish and have just got even worse. I suspect once things have calmed down we will see inflation come back harder and so the increase and rise in the cost of living will almost certainly be higher than interest rates. So the buying power of cash will get weaker and weaker.
Savings Champion is a decent website that shows you the best rates for 1 -2 year bonds at the moment. It will be – to use a technical term – stuff all.

You are also right that investments should be seen as a 5 year game at least.

I don’t know why you are talking about a 2 year timeframe – are there circumstances which dictate this or are you just cautious and prefer to keep things relatively short-term? If there is no reason to think so short-term, can you have an amount which is in longer-term savings? My parents are similar ages and they have some shorter term stuff in cash and then some longer-term stuff in shares. Fingers crossed they’ll be around for a long time yet!

Sometimes it is helpful to think about how much you have (State Pension, cash savings, any final salary scheme pension etc) and then to think about your money in a short-term pot (easy access cash), a medium term pot (2 years-ish) and then longer-term (5 years+).
There is no point in investing for 2 years – as we have seen this month things an go pear-shaped and if you then are a forced seller at these times, you’re in trouble. Today – for those with 5 years + timeframes, we may not like the headlines but we don’t need to sell. I’m comfortable that things will come back although I suspect it will take time.

I think if the anxiety of stock markets would be too much for you, and if it really is 2 years – then stay in cash and Savings Champion will help. But if you can set aside a pot of 5 years + money then could some of this go into stock markets? You can open up one stocks and shares ISA in one tax year as well as a cash ISA – up to £20,000 across both?

The FTSE 100 and global markets are low right now so most people would objectively say it is a good time to buy in. If you do, as a novice investor I would stick to something called a ‘multi-asset’ fund which is a collection of investment moxed together for you by experts. You pick between about 5 risk profiles from the most cash like to the spiciest. Have a look at the Vanguard Life Strategy funds on their website – the “20% equity” one is the calmest – will never do great but will be cushioned from the worst – and the “100% equity” one is the spiciest which I’d suggest you should avoid as it will give you a hernia!

Hope that is all helpful and good luck. Give us a shout out if you are stuck or need help at home too by the way – with our community I am sure we can find someone near you to help. Don’t mean to sound patronising either – just trying to help!

Holly

 

New question answered daily

• Send your question to info@boringmoney.co.uk

• Holly will pick a new question to answer every day

• Answers posted on our site, and on Instagram and Facebook

We're crowdfunding!

Crowdfunding 2020

We're looking for investors to join us, fund our big ideas, and share in the spoils of the UK's only customer-rated, fee-calculating comparison site for investments and pensions.

Learn about our crowdfund

Want to know more?

Keep Calm Webinars - banner.png

Holly provides straightforward answers to your investing questions | New videos posted every day

Stock market meltdown: straight-talking answers to difficult questions

mary glies.png

Holly's Blog: Boring Money meets Gogglebox - what are YOU saying?

Hard to know which way is up this week as we all adjust to a life of relative isolation and stock markets like psychotic yo-yos…

Boring Money meets Gogglebox - what are YOU saying?

Sign up to Holly's Blog

Join the thousands of people who get our weekly musings on money, great products, top tips and a dollop of opinion. 

Sign up to Holly's Blog

Comments

No Comments Yet

Leave Comment

Related Questions

Got a Question?

Sign up for Holly's blog

Stay up to date

Our free weekly blog with Holly's
no-nonsense opinions, tips & food for thought.
If you change your mind, you can unsubscribe at any time. We'll never share your details and you can unsubscribe any time.