Question
As we approach the end of one ISA season and the beginning of another, as always we are told by the Fund Managers to use it or lose it. At the same time they tell us the economic global recovery is good and that the UK recovery is ongoing with the majority predicting an end of year FTSE of 6500. ( I think you went for 5500).
My question is:- With revolutions going on in the Middle East States is now the time to hold back and just wait and see what transpires?
Whilst I appreciate that ISA investments should be for 3, 5 and 10 year terms nobody wants to invest £10,100 in March for it to become £8,000 a month or so later due to unrest in the Arab world.
The financial "experts" are the first to sell up at the slightest hint of problems leaving the rest of us wondering what hit us.
They say a week is a long time in Politics, I feel it can be a great deal shorter in Economics.Answer
This is always a difficult question to answer. You're quite right, there seems little point in investing £10,000 if it might fall to £8,000 within months, even though it could recover to more than £10,000 in future. Much better to wait for markets to fall then buy at a lower price.
The problem, as ever, is market timing. No-one can accurately predict when and by how much markets will fall. You could wait and find markets rise, or maybe they'll fall off a cliff allowing you to snap up some bargains.
I've been fairly pessimistic about the UK stockmarket over the last 3 years, taking less exposure than usual (mostly via equity income funds). My caution saved me from big losses during 2008, but has cost me since then as the market bounced back by more than I expected. I'm still cautious and believe there could be some painful falls ahead - but whether I'm right or not is another matter!
For what it's worth I'd be inclined to hold off investing for a few months and see how the UK economy and other global issues pan out. But bear in mind I might be wrong - my guess is probably no better than anyone else's - it's ultimately a decision you need to make yourself.
There is another issue to consider. if you can afford to use your ISA allowance each year and stand to benefit from the tax advantages then is it worth securing the allowance anyway? Provided ISAs (or an equivalent tax break) remain in place long term, which seems likely, then you might feel relaxed about missing one year's allowance. But if you're worried about losing a potentially valuable tax benefit then whether to secure this is another decision.
If you want to use your ISA allowance you could opt for a cash ISA (allowing you to use £5,100 of the overall £10,200 annual allowance), as this can be moved into a stocks and shares ISA at a later date if you wish. Alternatively, some ISA managers allow you to invest a lump sum now and drip feed it into the market over a period of time (sometimes called 'phased investment'). This allows you to use your allowance without having to invest everything markets now.
As we approach the end of one ISA season and the beginning of another, as always we are told by the Fund Managers to use it or lose it. At the same time they tell us the economic global recovery is good and that the UK recovery is ongoing with the majority predicting an end of year FTSE of 6500. ( I think you went for 5500).
My question is:- With revolutions going on in the Middle East States is now the time to hold back and just wait and see what transpires?
Whilst I appreciate that ISA investments should be for 3, 5 and 10 year terms nobody wants to invest £10,100 in March for it to become £8,000 a month or so later due to unrest in the Arab world.
The financial "experts" are the first to sell up at the slightest hint of problems leaving the rest of us wondering what hit us.
They say a week is a long time in Politics, I feel it can be a great deal shorter in Economics.Answer
This is always a difficult question to answer. You're quite right, there seems little point in investing £10,000 if it might fall to £8,000 within months, even though it could recover to more than £10,000 in future. Much better to wait for markets to fall then buy at a lower price.
The problem, as ever, is market timing. No-one can accurately predict when and by how much markets will fall. You could wait and find markets rise, or maybe they'll fall off a cliff allowing you to snap up some bargains.
I've been fairly pessimistic about the UK stockmarket over the last 3 years, taking less exposure than usual (mostly via equity income funds). My caution saved me from big losses during 2008, but has cost me since then as the market bounced back by more than I expected. I'm still cautious and believe there could be some painful falls ahead - but whether I'm right or not is another matter!
For what it's worth I'd be inclined to hold off investing for a few months and see how the UK economy and other global issues pan out. But bear in mind I might be wrong - my guess is probably no better than anyone else's - it's ultimately a decision you need to make yourself.
There is another issue to consider. if you can afford to use your ISA allowance each year and stand to benefit from the tax advantages then is it worth securing the allowance anyway? Provided ISAs (or an equivalent tax break) remain in place long term, which seems likely, then you might feel relaxed about missing one year's allowance. But if you're worried about losing a potentially valuable tax benefit then whether to secure this is another decision.
If you want to use your ISA allowance you could opt for a cash ISA (allowing you to use £5,100 of the overall £10,200 annual allowance), as this can be moved into a stocks and shares ISA at a later date if you wish. Alternatively, some ISA managers allow you to invest a lump sum now and drip feed it into the market over a period of time (sometimes called 'phased investment'). This allows you to use your allowance without having to invest everything markets now.
Read this Q and A at http://www.candidmoney.com/questions/question382.aspx
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