Cash or shares? It's your ISA

Much as I have tried to avoid mentioning individual savings accounts (ISAs) this week, because I figure that if I'm getting bored of them, you must be too, it can't be helped. From your letters I can see that many of you are confused and don't know what to do.

Much as I have tried to avoid mentioning individual savings accounts (ISAs) this week, because I figure that if I'm getting bored of them, you must be too, it can't be helped. From your letters I can see that many of you are confused and don't know what to do.

You have until midnight on 5 April to use up this year's tax allowance if you haven't done so already (that's up to £7,000 worth of tax-free savings). But the problem is that the stock market is at a two-year low.

Under "normal" market conditions, my advice would be to invest your money in equities if you don't have to get your hands on the cash for the next five to 10 years. You should also be able to afford to lose it; not that there is any chance of you losing the whole lot, really, but the point is that it shouldn't be money you need to pay the mortgage or household bills. Nor should it be the reserve cash you would be wise to build up (generally, a few months' worth of rent or mortgage payments) in case of emergencies. Such money should be held in a high-interest, easy-access deposit account, such as Nationwide's e-Savings, which pays 6.7 per cent interest on £1 upwards.

However, these are not "normal" times. Rightly or wrongly, we have become used to a booming stock market. The signs are that for the next few months at least - and possibly a lot longer - that isn't going to be the case. It's looking rather gloomy out there.

Of course, buying when the market is low is usually a good idea, because you'll get cheaper investments. But there is a risk that the market has not yet reached its lowest point and could fall further. Timing your moves in and out of markets is a mug's game and not to be recommended. What you have to ask yourself is whether you can afford to lose that money in the short term. Don't commit money you will need to get your hands on any time soon, and invest anyway.

Alternatively, you may want to hold off shares for a while. Anecdotal evidence suggests that while equity ISA sales will be down this year, sales of mini cash ISAs are booming. Everyone seems to be going for the cash option this time around.

The downside is that you can only invest up to £3,000 in a mini cash ISA and you aren't likely to see returns as great as those you could possibly achieve on the stock market. But then, of course, you won't see the losses either. Mini cash ISAs are a bit like savings accounts but the returns are tax-free. And unlike tax-exempt special savings accounts (Tessas), which they were designed to replace, they allow you to access your money at any time - unless of course, you go for one that requires notice. Popular choices among friends and colleagues are Smile, First Direct and Northern Rock, depending on whether you prefer to use the internet or telephone.

 

* m.bien@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before