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Low interest rates on savings

Even if retirement is close , then there is an argument that you are still investing for the long term since:
1) Annuities aren't really a thing now so you're not going to be exiting the market in one big lump the day after your retirement party
2) you will be drawing down from the investment for rest of life - so at least a part of it is (hopefully for your longevity) long term

Kabbes - you know this stuff. Make sense?
 
March 2020 turned out to be a great time to buy, but plenty of people at the time quite reasonably thought otherwise.
 
And I'm bleeding out as well at the moment on my stuff: although hopefully we will look back and laugh (!!) in a few years
 
nick said:
Even if retirement is close , then there is an argument that you are still investing for the long term since:
1) Annuities aren't really a thing now so you're not going to be exiting the market in one big lump the day after your retirement party
2) you will be drawing down from the investment for rest of life - so at least a part of it is (hopefully for your longevity) long term

Kabbes - you know this stuff. Make sense?
Click to expand...
It’s certainly what I tell myself…
 
kabbes said:
March 2020 turned out to be a great time to buy, but plenty of people at the time quite reasonably thought otherwise.
Click to expand...
I bought CCH in March 2020.
At one point it was 45% up with 6% returned via dividends.
Now it's 2.3% down.

But other stuff that was down whilst that was up is doing well right now and making up the difference.

This is why diversifying investments is so important I guess.
 
Don't bother asking yourself if "now" will seem to have been a great time to have bought in retrospect - you'll never know the answer.

All you can decide is whether you want to invest at all. If the answer is yes, then you've decided that investing is better than not investing. Therefore when you have money available to invest, it's always better to invest it than not invest it.

As long as you keep enough income/cash reserved for your living expenditure (including any unexpected events or planned near-term purchases), then you don't need to worry about market movements.

If your asset allocation is appropriate for your risk profile, then you should feel equally sanguine about markets rising as you should about market falls (which allow you to re-balance and/or invest new money more cheaply).
 
platinumsage said:
Don't bother asking yourself if "now" will seem to have been a great time to have bought in retrospect - you'll never know the answer.

All you can decide is whether you want to invest at all. If the answer is yes, then you've decided that investing is better than not investing. Therefore when you have money available to invest, it's always better to invest it than not invest it.

As long as you keep enough income/cash reserved for your living expenditure (including any unexpected events or planned near-term purchases), then you don't need to worry about market movements.

If your asset allocation is appropriate for your risk profile, then you should feel equally sanguine about markets rising as you should about market falls (which allow you to re-balance and/or invest new money more cheaply).
Click to expand...
There’s nothing I disagree with there and it is certainly my own philosophy. However, I am very nervous about making blank statements in respect of what other people should do with their money (plus I am professionally prohibited in any case from giving investment advice). I would say that regardless of what I or platinumsage would do, you “out there” need to make your own decisions. To do this, it is worth trying to understand the nature of what you are getting into, including the risks associated with not investing. You also need to decide for yourselves which of two broad maxims you agree with:
1. “The market has already priced in all known information. Without me having some privileged extra knowledge, this time is no better or worse than any other for buying or selling”; versus
2. “I think the market has become over/under-optimistic, and so this is a good time to sell/buy”.

Both maxims have reasons to support them. On the one hand, there is a track record of index funds on average doing no worse than managed funds, and there is a big question as to why Joe Schmo in his house is going to know better than a zillion analysts at investment banks. On the other hand, some funds do seem to outperform the index (even allowing for survivor bias), and behavioural economics will tell you that the mass overresponds to both good and bad news.
 
The problem with creating an equivalence between 1 and 2 is that 1 just works, and it's how the vast majority of people obtain pensions by having contributions deducted from their monthly pay packet and invested in index funds for them.

2 is a fantastic way for the average investor to whittle away their assets, by staying out of the market when things seem a bit bad, perhaps buying back in at some point before changing their mind again. Behaving like this is like visiting a casino - you might get lucky a few times but the longer you do it for the more likely you are to realise the house always wins long term.

As to funds outperforming the index, again this is great way for average investors to underperform the market - buying into funds that have a track record of outperforming only to see them start under-performing and eventually switching into some other fund.
 
I was always (perhaps unjustifiably) confident that the pandemic would not have a lasting impact on capital’s ability to make profit, so always felt that pandemic market crash would be short lived. This time round it feels way more binary and thus hard to predict. If the Russian attack collapses fast enough (or wins fast enough, theoretically), I suspect that the impact will be relatively contained and current reductions will reverse very quickly. If it turns into a worldwide proxy war that drags out for years, though, with Russia camped in Ukraine, sanctions escalating and new worldwide alliances formed, the current drop could simply form the new baseline. In short, the ability of capital to make profit may genuinely now be 10-20% less than it was a few months ago.

Either way, however, I’m betting that shares are a better hedge against inflation than any other form of value store is. Inflation is the thing that is going to hurt, but the value of a company is tied to the volume of its sales, and the price of things going up means that these sales go up (as in, they inflate along with everything else). Sometimes, it’s not just about whether your investment has gone up but whether it has dropped less than the alternatives. If the world has lost its value, everything loses out. However, whilst cash may be king during the drop itself, it loses in real terms quite quickly thereafter in high inflationary environments.
 
Interesting. But yes in the absence of any better options I will be continuing with the regular investing. There's downsides to everything and I have other savings (cash, house), so it still seems like a reasonable idea to have a few baskets for my eggs. This is still money I don't technically need but as the number in the account goes up the idea that I might lose it becomes less attractive!

It's been about 5 years since I started this little experiment and so far it's survived Brexit and a pandemic so I'm feeling hopeful for the long term.
 
My personal decision is to try to diversify as much as possible: make sure I save up some cash, have a work pension, lucky enough to have a mortgage on a property, and make some smallish regular investment in a range of index funds to try to diversify across countries/industries, shares and bonds.

Some of the online investment forums (e.g. reddit) do sometimes have the feeling of a cult, completely buying into mantras like: "It's great - I'm going all in on vanguard. This is a great time to buy. If the stock market crashes, we'll all have bigger problems anyway".
 
I guess my main mitigation is to try to ensure I have some cash handy to try to ensure I'm not forced to sell shares at a low price in a cash flow crisis situation
 
I have an ethical stocks and shares ISA with a fair bit in it and it's probs gone down recently, but by the end or last year it had achieved 12.4% return over the past 3 years apparently. Pretty amazing. Things go down as well as up but over medium-long term should be ok.

I wouldnt advise this kinda saving unless you do have a grand or two in short term savings tho just in case (I don't and im skint but hey.. do what I say not what I do!)

IMO the best thing is to get someone to give advice and do this stuff for you if youre looking at anything other than short term cash savings. Take some pressure off yourself.
 
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teuchter said:
At the moment I can be bothered with the faffing necessary to gain an extra 0.3% or whatever.
Click to expand...

Makes no sense but ok.

So you put your money in a notice account, adding extra faffing.

But then can’t be bothered to put it somewhere for more than half more.
 
B.I.G said:
Makes no sense but ok.

So you put your money in a notice account, adding extra faffing.

But then can’t be bothered to put it somewhere for more than half more.
Click to expand...
It's an account that I originally opened about 5 years ago, when it had a good interest rate.

Since then, the interest rate has been hacked away, and so I have moved most of what was originally in it, into places with better interest rates.

As it's already set up, I can keep it running with zero faff, and it serves as somewhere I can put cash that I want relatively easy access to, but at a somewhat better rate than my current account.

Even if I had £10k in there (I don't), swapping the a 0.95% interest rate for, say, a 1.3% one, would earn me all of £30 in a year.

I'd rather lose that £30, than an hour or two of my life messing around setting up a new account with yet another bank, thanks. It makes sense to me.
 
teuchter said:
It's an account that I originally opened about 5 years ago, when it had a good interest rate.

Since then, the interest rate has been hacked away, and so I have moved most of what was originally in it, into places with better interest rates.

As it's already set up, I can keep it running with zero faff, and it serves as somewhere I can put cash that I want relatively easy access to, but at a somewhat better rate than my current account.

Even if I had £10k in there (I don't), swapping the a 0.95% interest rate for, say, a 1.3% one, would earn me all of £30 in a year.

I'd rather lose that £30, than an hour or two of my life messing around setting up a new account with yet another bank, thanks. It makes sense to me.
Click to expand...

I can only go on what you say but as you have other accounts with better rates, not sure how it takes an hour or two to transfer the money.

If you didn’t care about the extra £30, not sure what caused you managed to setup these other higher interest accounts in the first place.

And you could open up an account earning 1.5% in less than 5 minutes.

Glad it makes sense to you though.
 
B.I.G said:
If you didn’t care about the extra £30, not sure what caused you managed to setup these other higher interest accounts in the first place.
Click to expand...
If you think really hard about it, maybe you can manage to come up with some possible explanations.
 
Well I've just done my annual interest rate / bank account shuffle. Almost as fun as doing tax returns.

My belief that opening a new account doesn't in reality take 5 minutes was confirmed.

Everything is now quite different from just a year ago, when the best you could get was around 0.5%. Now, there are a few options around the 2% mark.

For me, this returns me to a situation where money can potentially be earning more interest in a savings account than it would be avoiding paying if I used it to pay off a portion of a mortgage.

Question about ISAs:
As I understand it (largely based on what they currently say on moneysaving expert) a cash ISA is a bit of a waste of time unless you really have a lot of money to save and/or are a high earner, because the interest on savings accounts is unlikely to go above your tax free allowance, and ISA savings accounts seem to have lower interest rates than regular ones (why is that, anyway?)
But you can also use your ISA allowance for stocks & shares investments. In that case, again, unless you have a lot of money, whatever your investments "earn" you is likely to be well within your tax allowance anyway, so there is no big (immediate) advantage. On the other hand, it doesn't seem like there is any disadvantage, so if you were looking to invest, and you have some ISA allowance to use up, then you might as well do an ISA S&S. Is that right?
What if you've got something in a non-ISA S&S investment though - does it make sense to transfer it into an ISA? The advantage I can see is that further down the line, with yet unknown changes in tax rules and personal circumstances, it would be better. Initially I assumed it would just be a matter, if you've got a general and an ISA account with the same platform, of moving the actual investments from the wrapper of one account to the other, but that doesn't seem to be the case. It seems you have to sell and then re-buy, which presumably means some losses due to fees but also the risk of something bad happening to the value during the changeover.
 
teuchter said:
Well I've just done my annual interest rate / bank account shuffle. Almost as fun as doing tax returns.

My belief that opening a new account doesn't in reality take 5 minutes was confirmed.

Everything is now quite different from just a year ago, when the best you could get was around 0.5%. Now, there are a few options around the 2% mark.

For me, this returns me to a situation where money can potentially be earning more interest in a savings account than it would be avoiding paying if I used it to pay off a portion of a mortgage.

Question about ISAs:
As I understand it (largely based on what they currently say on moneysaving expert) a cash ISA is a bit of a waste of time unless you really have a lot of money to save and/or are a high earner, because the interest on savings accounts is unlikely to go above your tax free allowance, and ISA savings accounts seem to have lower interest rates than regular ones (why is that, anyway?)
But you can also use your ISA allowance for stocks & shares investments. In that case, again, unless you have a lot of money, whatever your investments "earn" you is likely to be well within your tax allowance anyway, so there is no big (immediate) advantage. On the other hand, it doesn't seem like there is any disadvantage, so if you were looking to invest, and you have some ISA allowance to use up, then you might as well do an ISA S&S. Is that right?
What if you've got something in a non-ISA S&S investment though - does it make sense to transfer it into an ISA? The advantage I can see is that further down the line, with yet unknown changes in tax rules and personal circumstances, it would be better. Initially I assumed it would just be a matter, if you've got a general and an ISA account with the same platform, of moving the actual investments from the wrapper of one account to the other, but that doesn't seem to be the case. It seems you have to sell and then re-buy, which presumably means some losses due to fees but also the risk of something bad happening to the value during the changeover.
Click to expand...

What account did you open that took longer than 5 minutes?
 
B.I.G said:
What account did you open that took longer than 5 minutes?
Click to expand...
It doesn't matter what account - if your purpose is to transfer from an existing one to a new one, then the process needs to involve some research, and some thinking about strategy, for example do I want to open a fixed term account in exchange for a higher interest rate, and if so, how long a fixed term, and how much cash am I happy with being locked away for that period of time and so on. And more widely, reminding myself of what the status of various existing accounts is, including their current interest rates some of which have changed very recently. And for me, faffing about with multiple passwords for things that I don't look at regularly. And reminding myself of what my mortgage rate is and when it's currently due to run out. And that's all before the actual admin process of opening an account, which if you're lucky you might fill in the online forms for in 5 minutes, but the actual process of moving money out of an old account and into the new one meant moving it to my current account first, and then out again, doesn't all happen instantly, and in fact required a phone call to the bank where I was on hold for about 20 minutes, was then on the line for longer, and then had to wait about an hour for a text message that was a security check and actually allowed the transfer to be made. I'd say the real amount of time taken is at least 2 or 3 hours.

This is all filed under "potential waste of precious life time" along with haggling with phone providers or switching utility companies and all this kind of stuff that is "worth" it sometimes, compared to the amount of money you'd otherwise lose, but not always.
 
I got a bit lost in understanding what specific questions you’re looking for answers to, teuchter?
 
teuchter said:
Question about ISAs:
As I understand it (largely based on what they currently say on moneysaving expert) a cash ISA is a bit of a waste of time unless you really have a lot of money to save and/or are a high earner, because the interest on savings accounts is unlikely to go above your tax free allowance, and ISA savings accounts seem to have lower interest rates than regular ones (why is that, anyway?)
But you can also use your ISA allowance for stocks & shares investments. In that case, again, unless you have a lot of money, whatever your investments "earn" you is likely to be well within your tax allowance anyway, so there is no big (immediate) advantage. On the other hand, it doesn't seem like there is any disadvantage, so if you were looking to invest, and you have some ISA allowance to use up, then you might as well do an ISA S&S. Is that right?
What if you've got something in a non-ISA S&S investment though - does it make sense to transfer it into an ISA? The advantage I can see is that further down the line, with yet unknown changes in tax rules and personal circumstances, it would be better. Initially I assumed it would just be a matter, if you've got a general and an ISA account with the same platform, of moving the actual investments from the wrapper of one account to the other, but that doesn't seem to be the case. It seems you have to sell and then re-buy, which presumably means some losses due to fees but also the risk of something bad happening to the value during the changeover.
Click to expand...

Cash ISA: don't rely too much on the Personal Savings Allowance or Personal Allowance. You may think you're dealing with small sums now, but they can accumulate over time, and interest rates could well go up. e.g. £3000 earning 2% is £60, but £3000 a year for 20 years is £60,000 plus interest. If rates are then 6% you'd get £3600+ per year tax free from an ISA, but pay £720 tax every year if relying only on the £1000 Personal Savings Allowance (which could be abolished by then).

S&S should always be in an ISA or pension. If you have S&S without a tax wrapper in a General Investment Account you'd have income tax, dividend tax and capital gains tax to calculate and report, with all sorts of fun stuff like equalization payments and Section 104 pools to take into account. With an S&S ISA or pension you can ignore all that.
 
For what it's worth (1.5%) I've just opened an account with Chase (which I believe to be those lovely JP Morgan people; where's the sarcasm typeface?). I think that's market leading at the moment. They also give 1% cashback on spending on the debit card. Furthermore they round up any of that spending and put the difference into a different pot on which they pay 5%. There's no requirement to move salary or direct debits or owt.

This wasn't meant to sound like an advert but it's turned out like that, because so far, I like it.
 
Into Chase (mainly because a neighbour / friend was heavily involved in setting it up, so we opened an account to support them)
Genuinely only took a few minutes to set up (scan a driving licence / passport and shoot a video for memory)
They've just opened an instant access deposit account at 1.5%
there is a round up function that moves the "spare change" from purchases into a pool paying 5% (it will never amount to much, but free money is free money).
And yes - cashback
The app is ok

They have only just set up the facility to do DD's and current yyou have to "send" money to the account, rather than "pull it" from the Chase app, but suspect that will come one day
No ability to pay in cash or cheques, and no cheque book - but not a problem for me
 
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