Aegon or somewhere else for stocks and shares ISAs - or don't risk it??

[pixieboots4]

A bit confused right now. We've had a bad few years financially - equities investments falling in value, plus my husband's business failing. We have some savings left, but we also have to factor in a few more years of private school fees for the kids (particularly once VAT hits).

We have financial advisors but I've been less than impressed by their performance over the years and I'm trying to manage more myself. Spooked by losses of recent years, with the uncertainty of market performance going forward, and the certainty of school fees, my initial instinct was initially to maximise cash ISAS and high interest savings accounts. I have put things in place to have enough 'no risk' funds to get us through to the beginning of 2026.

My question is how much to risk the rest of the available funds, and the best home for it? I currently have a stocks and shares ISA with Aegon but it has performed badly in recent years. Would it be worth leaving it alone in the hope that it recovers, or should I move it somewhere else? Hargreaves Landsdown? A fundsmith ISA? Or given that I will need to draw out funds in two year's time, is a stocks and shares ISA just too volatile to risk?

[DrFfybes]

We have financial advisors but I've been less than impressed by their performance over the years and I'm trying to manage more myself. Spooked by losses of recent years, with the uncertainty of market performance going forward,

This strikes me as odd - markets are at an all time high,
https://www.hl.co.uk/shares/shares-sear ... orld-ucits shows the price of VEVE - a share/fund that tracks the global market by investing in over 2000 companies, and it really is at its peak.

This implies that the Funds you are invested in have performed very badly, and perhaps that is something you should look into and whether your adviser has an ongoing fee to manage them for you and if so have they reviewed their selection recently.

We have financial advisors but I've been less than impressed by their performance over the years and I'm trying to manage more myself.

I learnt many years ago I was just as capable at making a poor choice of Fund as a professional, and I didn't charge myself to do it.

My question is how much to risk the rest of the available funds, and the best home for it? I currently have a stocks and shares ISA with Aegon but it has performed badly in recent years. Would it be worth leaving it alone in the hope that it recovers, or should I move it somewhere else? Hargreaves Landsdown? A fundsmith ISA? Or given that I will need to draw out funds in two year's time, is a stocks and shares ISA just too volatile to risk?

OK - now you are (in the literal sense) showing your ignorance of investing. It's not an insult, most people on here will have started out where you are, I know I did. HL are not (primarily) an investment company, they are a "Platform". This means you can hold all sorts of assets in an account with them, probably even the ones you're invested in with Aegon. Aegon have their own platform (with actually pretty low charges) however as with many platforms provided by investment companies, you can usually only hold their funds on them. HL are great if you are happy to choose what to invest in, rather than paying an adivser to make that choice for you.

What I would do firstly is look up your Funds on the HL website to see their performance (they have a good search function) and see what has happened to their value. As for how much to keep as cash or 'investments', really only you can make that choice. Given the All Time High it is pretty much guaranteed that markets will fall at some point over the next few months, but when or whether they will recover to further all time highs is for anyone to guess. Personally speaking, if I KNEW I'd need the cash in 18 months or so I would have it in Cash. We're in the middle of building works and the money has been in Cash accounts for well over a year - shame as if I'd had it in equities I'd have been a lot better off, well I would this week at least

A bit confused right now. We've had a bad few years financially - equities investments falling in value, plus my husband's business failing. We have some savings left, but we also have to factor in a few more years of private school fees for the kids (particularly once VAT hits).

This isn't the board for this, but it does sound like it might be an idea to step back and re-evaluate your income and expenditure given the change in circumstances. If you have done this and made the decisions then I'm barking up the wrong tree, but I have a friend who was in a similar position who tried/tries to ignore things and is now using his credit card to put his son through uni.

Paul

[clissold345]

...

My question is how much to risk the rest of the available funds, and the best home for it? I currently have a stocks and shares ISA with Aegon but it has performed badly in recent years. Would it be worth leaving it alone in the hope that it recovers, or should I move it somewhere else? Hargreaves Landsdown? A fundsmith ISA? Or given that I will need to draw out funds in two year's time, is a stocks and shares ISA just too volatile to risk?

How long have you had the stocks and shares ISA? How has it performed? As a comparison, the global etf VWRL has performed as follows over the last three years:

2021 +18.3
2022 -18.1
2023 +15.1

[monabri]

Having maximised your Cash ISAs..what to do with the rest...safely!!

I think you might consider short dated Gilts. These are bonds (loans) made to the UK Government.

The attractiveness of Gilts being that

1. you can select Gilts that pay a very low yield of say 0.25% (per annum (the yield is referred to as a "coupon" and is paid twice a year). So, you would have to invest an awful lot of money before tax on the Gilt remotely became an issue. (eg £100k invested in a 1 year bond - max tax of £250).

2. Where you "make the money" is not via the coupon but by buying the Gilt below it's issue price (the "par" value - usually 100pence) and then holding it to maturity. The gain is a Capital Gain but there is no tax on this particular capital gain so you effectively pay very little tax only on the coupon.

3. It is backed by the UK Government.

4. Gilts are available with maturity dates out for many years (50)

5. You are not restricted to £20k allowances such as with ISAs

6. They can be especially attractive to higher tax rate payers.


Something like TN25 or T26

https://www.hl.co.uk/shares/shares-sear ... 12025-gilt

https://www.hl.co.uk/shares/shares-sear ... 12026-gilt

You should be able to purchase through your trading platform in much the same way as buying shares in individual "stocks" or "funds".

I proposed TN25 and T26 because they mature in 2025 and 2026 - the coupon on T26 is even lower at 0.125%.

[monabri]

I currently have a stocks and shares ISA with Aegon but it has performed badly in recent years. Would it be worth leaving it alone in the hope that it recovers, or should I move it somewhere else? Hargreaves Landsdown? A fundsmith ISA? Or given that I will need to draw out funds in two year's time, is a stocks and shares ISA just too volatile to risk?

It sounds like you have invested in an Aegon fund ??? - it is hard to know for certain based on what you say. I suspect that their funds might not be readily transferred directly to a.n.other. Maybe if you could look up the name of the product (don't say how much is in there...just the name. If you have several funds ...maybe list them and their percentages.)

[mrodent]

equities investments falling in value
...
Spooked by losses of recent years, with the uncertainty of market performance going forward,

Equities (shares, funds of shares) performed spectacularly in 2023. Are you sure you mean "equities investments", not "investments"?

What didn't was bonds, particularly bond funds: in fact anyone exposed to longer-term bonds over the past 18 months has actually lived through the largest ever crash in bonds in the whole history of the market. If this had happened to equities it would have been all over the news for months now. I've generally assumed that the "omertà" about this may be due to the fact that the vast majority of FAs (financial advisers) failed completely to see it coming, and would just prefer that their current and prospective clients just, er, forget about it.

In all probability this is why your portfolio has done badly. But we can't know this unless you're prepared to reveal details, i.e. which exact funds and companies you have been invested in over the past 2 years or so.

In particular, if your advisers have put a substantial % of your holdings into funds called "LifeStrategy" or similar, these generally have a significant proportion of bonds, in fact they generally declare the proportion in their name: "LifeStrategy 60%", for example, means 60% equities, 40% bonds. Typically, financial advisers who want to have an easy life by default often dump huge financial flows (e.g. from auto-enrolment schemes) into such funds. There will be many millions in this country who are not aware of the recent bond crash, have no idea what funds their pension is invested in and, indeed, no awareness that despite paying in regularly for the past 2 years that they are actually poorer, in absolute money terms, than they were 2 years ago.

and the certainty of school fees,

Wrong. There is no certainty of school fees. 94% of children in the UK attend State schools. If it were up to me I would make that 100%. Private education services for under-18s should be illegal.

is a stocks and shares ISA just too volatile to risk?

The eternal response applies: if you are or may be in need of a quantity of money X over the next 2 years forget about it. Otherwise, don't try to time the market: put everything now into passive (index) funds of EQUITIES. All crashes/corrections are "V"-shaped. There has never been an "L"-shaped crash, with one exception: the Russian stock market in 1917. Only one thing can be guaranteed: bunging your money into savings accounts is guaranteed to erode the value of your money as the interest rate will always be less than the real rate of inflation.

[GeoffF100]

You paid a financial advisor to roll the dice for you but (like most people) were not lucky. They rake in big fees. You take all the risk. The equity market is at near its all time high. Bonds were bonkers high priced, fell and came back (pretty much) to normal now. You should be sitting on big profits. Fundsmith is a big gamble. A global tracker would be cheaper, safer and more sensible. Hargreaves Lansdown is bonkers expensive in most cases. iWeb is cheaper.

How much to risk should you take? Risk what you can afford to lose. If you need to withdraw money in two years time, do not buy equities, or any but very short dated bonds.

[GeoffF100]

There has never been an "L"-shaped crash, with one exception: the Russian stock market in 1917. Only one thing can be guaranteed: bunging your money into savings accounts is guaranteed to erode the value of your money as the interest rate will always be less than the real rate of inflation.

Not so:

https://en.wikipedia.org/wiki/List_of_s ... ar_markets

https://www.robeco.com/files/docm/docu- ... 202009.pdf

[mrodent]

You paid a financial advisor to roll the dice for you but (like most people) were not lucky. They rake in big fees. You take all the risk. The equity market is at near its all time high. Bonds were bonkers high priced, fell and came back (pretty much) to normal now. You should be sitting on big profits. Fundsmith is a big gamble. A global tracker would be cheaper, safer and more sensible. Hargreaves Lansdown is bonkers expensive in most cases. iWeb is cheaper.

How much to risk should you take? Risk what you can afford to lose. If you need to withdraw money in two years time, do not buy equities, or any but very short dated bonds.

Yep, agree with all of this. I've been piling out of FUQUIT (the marvellous MEX code for Fundsmith) for some time now. The only "active" I have left is BRK.B. On a technical note, I learnt the other day that although Hargreaves is a complete no-no for funds (yikes! 0.45% per annum), in fact if you stick with shares and ETFs their per-account fees are capped at £45 a year.

Short-dated bonds are safe, like savings accounts. But like the latter their rates are guaranteed to be less than the rate of inflation, so will erode your wealth. One thing which has been mentioned to me in this forum is Premium Bonds for higher-rate taxpayers (obviously a growing proportion of the tax-paying population). No income tax or CGT is payable on winnings from Premium Bonds. Gilts are exempt from CGT, which is useful, but you still have to pay income tax on earnings from gilts.

[mrodent]

Not so:

What's "not so"? You linked to a list of crashes, which incidentally doesn't mention the 1917 Russian stock market evaporation event.

Which of those crashes do you believe to have been L-shaped?

[Dicky99]

given that I will need to draw out funds in two year's time, is a stocks and shares ISA just too volatile to risk?

Think of the ISA as a box in which any investments are protected from capital gains tax and dividend tax.

The degree of volatility and risk you are exposed to depends on which investments you, or your financial advisor, choose to have in your box.

It's never a bad thing to take control of your own financial destiny as opposed to paying someone else to do it for you but that starts with understanding where you are now and where you want to go in future.

In terms of the former you need to look at what investments are currently in your ISA. There may be a reason why the value of your ISA hasn't recovered in line with market as some beaten down funds are still well off the highs of 2 years ago. It may be helpful to post what investments you have in your ISA here and it may become clear if there are under performance issues.

In terms of the latter it may be a good idea to read up on investment risk appetite. You'll easily find lots of information by Google search. Once you have determined what your level of risk appetite is I'm sure that the very knowledgeable people on this site will be happy to give an opinion on some suitable fund ideas to address any discrepancies between your risk appetite and what you currently have.

[DrFfybes]

Yep, agree with all of this. I've been piling out of FUQUIT (the marvellous MEX code for Fundsmith) for some time now. The only "active" I have left is BRK.B. On a technical note, I learnt the other day that although Hargreaves is a complete no-no for funds (yikes! 0.45% per annum), in fact if you stick with shares and ETFs their per-account fees are capped at £45 a year.

With HL the £45 cap applies to shares in an ISA. No charge for shares in an unsheltered account. £200 cap on share fees in a SIPP.

Paul

[mc2fool]

There has never been an "L"-shaped crash, with one exception: the Russian stock market in 1917.

Well that depends on how long you count the bottom of the "L" to be for it to qualify and also how many, if any, of the shares listed prior to the closure still existed on reopening. I'd suspect that at least the Polish, Romanian, Czech, Hungarian, Chinese and Egyptian stock markets would rank alongside the Russian one, and maybe some of the others below too.


https://www.businessinsider.com/history-of-world-stock-market-breaks-2014-3?r=US&IR=T

[GeoffF100]

Not so:

What's "not so"? You linked to a list of crashes, which incidentally doesn't mention the 1917 Russian stock market evaporation event.

Which of those crashes do you believe to have been L-shaped?

That list is bad enough, but they have missed out the worst ones. Russia in 1917 is one. There was a big crash in Germany at the end of the war. Not a wipe out though. Japan was worse. Do not forget that the last 200 years has had economic growth unparalleled in the whole of history.

[GeoffF100]

Short-dated bonds are safe, like savings accounts. But like the latter their rates are guaranteed to be less than the rate of inflation, so will erode your wealth.

No read the link above. Real interest rates have been positive for long periods, and have been positive in the long run. Recently they were negative, but now they are positive again. We do not know what will happen in the future. Both the markets and the central banks have a terrible record at predicting future inflation and interest rates. Given current equity valuations, we cannot expect good returns over the next ten years (even barring major wars etc), but, again, nobody knows.

[mc2fool]

Given current equity valuations, we cannot expect good returns over the next ten years (even barring major wars etc), but, again, nobody knows.

Which equity valuations are you referring to? While I'm certainly not making a prediction and there may be plenty of other reasons why the UK market won't give good returns over the next decade, according to this week's IC the FTSE is on a PE of 10.4 and a yield of 4%, which historically is on the cheap side. Not that it can't get cheaper of course but I'm just curious about which current valuations your conclusion is based on, given, it appears at least, that those are your single parameter.

[GeoffF100]

Given current equity valuations, we cannot expect good returns over the next ten years (even barring major wars etc), but, again, nobody knows.

Which equity valuations are you referring to? While I'm certainly not making a prediction and there may be plenty of other reasons why the UK market won't give good returns over the next decade, according to this week's IC the FTSE is on a PE of 10.4 and a yield of 4%, which historically is on the cheap side. Not that it can't get cheaper of course but I'm just curious about which current valuations your conclusion is based on, given, it appears at least, that those are your single parameter.

The CAPE ratio for the US market is one such valuation. The CAPE for UK market is better, but the market clearly thinks that is justified, which is not to say that the market is right. P/E is not a good predictor of future returns.

Vanguard's model predicted 5% p.a. nominal global equity growth over the next ten years with 4% p.a. nominal growth from global bonds. The prices of both equities and bonds have risen since then. Vanguard are salesman for both equities and bonds, so it is in their interests to be optimistic.

Historically, cash has beaten inflation by a small margin over the long term. Currently, easy access savings is paying 5.13%, with CPI inflation at 4%. The claim that cash is "guaranteed" to lose out to inflation is clearly wrong. Any claim that equities will beat cash and bonds over the next ten years is clearly on very shaky ground too. It is always a good idea to spread risk, and perhaps that is especially true right now.

[mc2fool]

Which equity valuations are you referring to? While I'm certainly not making a prediction and there may be plenty of other reasons why the UK market won't give good returns over the next decade, according to this week's IC the FTSE is on a PE of 10.4 and a yield of 4%, which historically is on the cheap side. Not that it can't get cheaper of course but I'm just curious about which current valuations your conclusion is based on, given, it appears at least, that those are your single parameter.

The CAPE ratio for the US market is one such valuation. The CAPE for UK market is better, but the market clearly thinks that is justified, which is not to say that the market is right. P/E is not a good predictor of future returns.

Vanguard's model predicted 5% p.a. nominal global equity growth over the next ten years with 4% p.a. nominal growth from global bonds. The prices of both equities and bonds have risen since then. Vanguard are salesman for both equities and bonds, so it is in their interests to be optimistic.

Historically, cash has beaten inflation by a small margin over the long term. Currently, easy access savings is paying 5.13%, with CPI inflation at 4%. The claim that cash is "guaranteed" to lose out to inflation is clearly wrong. Any claim that equities will beat cash and bonds over the next ten years is clearly on very shaky ground too. It is always a good idea to spread risk, and perhaps that is especially true right now.

Ok, just wondering what you were looking at. Actually it's CAPE that's not such a great predictor, 'cos it's "adjusted" away the raw information, and CAPE is really an invention based on the US market. While it certainly has it's flaws PE is a better in extremis one for the FTSE; single digits is a buy, over 25 is a sell (although both may take a while to prove themselves), and anything in between is anyone's guess

[Adamski]

You'll get lot of different answers here! Personally think 2 years is too short a time frame. I'd invest in 1/2 year bonds offering near 5%. If you have a longer time frame, then a Vanguard lifestrategy fund.

[GeoffF100]

Wikipedia has this to say:

"Originally derived for the US equity market, the CAPE has since been calculated for 15 other markets.[11] Research by Norbert Keimling has demonstrated that the same relation between CAPE and future equity returns exists in every equity market so far examined.[12] Research by others has also found CAPE ratios are reliable in estimating market returns over five to ten year periods in many international stock markets.[13][14][15]"

https://en.wikipedia.org/wiki/Cyclicall ... ings_ratio

Schiller has more recently devised a ratio that takes interest rates into account, but that does not appear to change the picture much at the present time. Ramin Nakisa talks about these ratios at great length on PensionCraft.

The UK market is only about 4% of the global market. My portfolio has some UK bias. UK stocks do not attract withholding tax, and overweighting them a little reduces portfolio volatility slightly. That has not greatly rewarded me so far. Much the same can be said of my emerging market exposure.