New to Stocks and Shares ISA- Profit Query

[Dobbysocks]

I’m new to stocks and shares ISAs this year. Having used my cash isa to save for most of my adult life over the last 15 years.

I’ve kept an emergency fund in the cash isa and transferred the rest into a trading 212 stocks and shares. (£24k)

I have been investing £500 per month and can afford to continue doing so. But I’ve seen very little gain due to the volatility as a result of events in the Middle East.

I know all the basics of keep it in, keep investing, don’t crystallise the loss by moving when it’s down.

But my question is do you not start to ‘see’ the gains until around 5 years since investing. Or do you see some gains along the way, market dependant?

I’ve got another £37k in premium bonds and wondering whether to move these over too. (I’m currently on £1000 profit in 2026 on premium bonds vs £60 in my stocks and shares isa) But feel atm I may as well leave them where they are seeing as they’re gaining in the meantime.

I started investing in S&S ISA 12 years ago. Don’t be knee-jerk reaction about market volatility. Ride it out. I’ve netted on average 11.5% growth per year. You’d never get that in premium bonds. Stick with it.

I have about 10% of my total pot in PBs. They make sense for me (temporarily) for tax/cash ladder reasons, but MonkeyMargot is right about them underperforming the stock market. If you exclude them from the calculations I gave above, the 5-year return jumps from 46% to 59%.

I think the 5 year thing is misleading. Stocks go up and down - it's not a good idea to have to sell when they are down because you desperately need the cash. So if 5 years is a big event that you need all the cash for like a house purchase - you need to consider how you minimise risk as you approach the event. Our event is retirement - but we- have other cash to carry us through a dip - so the impact for us is minimised. I'm up 0.9% since the highest point before the Iran war - that's still better than any other rate I can get from a bank. But I don't "need" the money so I can live with the risk.

It would be more helpful to quote percentages rather than absolute sums. If you have £5million invested - £15k is peanuts in terms of movement, whereas if you have £100k - were talking serious movement in your portfolio.

Yes true. It was indeed a lot of movement -very close to that second figure.

Investing is all about time (not timing) and spread. Your 500 a month strategy is good. It's pound cost averaging. It will buy more 'shares' when they are cheaper and fewer when they are more expensive, without you ever looking at prices. If you put the same total amount in as a lump sum, you might be hitting a high or a low instead of a more certain average. You might want to consider a bit more cash this year though, as the limit goes down next April? And spread your holdings across different sectors, maybe some uncorrelated. That way, not only do you not need to micro-monitor performance, you have a choice of what to liquidate if you ever need to.

... or instead of more cash, front-load the S&S a bit to increase time in the market. Nothing wrong with Premium Bonds either - boring, bullet-proof and tax free.

@Dobbysocks the only time the price of you S&S really matter is when you need to sell them.

Checking daily will drive you insane. This blog may help put it into perspective https://rebeldonegans.com/net-worth-fell-market-volatility/

My advice is pick a day in the month e.g. 15th, and once a month on that date check your investments. If you can just forget about it and check once or twice a year. Dripping in money each month helps flatten out the volatility.

I didn’t know the £20k tax free limit was dropping next April- thank you!

It is only cash ISA limit that drops to £12k tax free to encourage more investment in S&S ISAs- phew!

It's pointless checking everyday. My S&S ISA has lost thousands since Trump started his shenanigans/market manipulation, but it will go up again. Ive got some funds, but also a lot of individually held stocks, which I rely on for income. Already received £350 in dividends this month alone. These all add additional rates of return to my portfolio.

Yes, it was news to me too. Though I believe the cash limit doesn't apply to over-65s like me. It seems unfair altogether though. What about helping people to save when they can't afford either the risk or the time of S&S?

Yes it’s a tax hike in sheep’s clothing.

It’s not dropping for it all. Cash ISA is a max of 12k. It’s still 20k overall if you save both in a cash ISA and stocks and shares.

The thing is there are very few people who could max out 20k a year in a cash isa anyway. You’d need to be saving circa £1600 a month to get anywhere near maxing it out, even the new cash limit still affords you £1000 a month. Again, few people can max that out.

Pound cost averaging has a psychological advantage, but studies show a lump sum almost always beats drip feeding over the longer term (I think the Vanguard study showed lump sum was better around 60% of the time measured over 6 months, but more than 90% of the time over 18 months; in 20-year studies it approaches 100%).

For most people they are saving from monthly income so don’t have £20k at the start of each tax year. Investing monthly in a S&S ISA over many years is the optimum most people can afford.

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Agreed but I think @Kirschcherries was responding to my OP as I mentioned that I have a sum in premium bonds too and was debating whether to move some over to my S&S ISA.

@Dobbysocks sorry missed that element, in that case @ProfessorBinturong is correct.

Yes, I noticed that. Have you decided on an overall balance of cash and shares to suit you? @ProfessorBinturong has made me rethink the idea of pound-cost averaging. It does not work as I thought, as lump sum investing has been found to outperform it. However, investment spread is important and, I think, proven. Depending how complicated you want it, you can diversify your holdings across funds, sectors, providers, asset classes and vehicles to spread your risk. Mine is spread across cash savings, antiques, individual bonds and shares, Premium Bonds, old index-liked certificates, jewellery, dozens of funds, P2P and crypto.

What are you going to use it for OP?

I'm holding off investing my entire year's pension in one go, due to the current political environment - I just have got the nerve to dive straight in and place a massive punt on Trump.

A mixture of house move savings and longer term retirement fund. (Move hopefully on 5-10 years time. Retirement still 30 years away. If the ages don’t change again!)