FTSE?

[ffutures]

I'm looking at buying a 6-year ISA which pays 40% if the average value of the FTSE over the 6 months at the end of the period is higher than it is at the beginning - if it's lower I'd only get 2%.

FTSE Graphs I've looked at show a general upward trend, a drop at the end of last year presumably caused by the bank crash, and what looks like the start of another rise.

My thought on this is to put about half the money I'm investing this time round into something that has a guaranteed interest rate, and the rest into this one since there's the risk of a low payout. Anyone got any suggestions, or any reason why the FTSE one isn't a safe investment?

Later Having taken on board what people have said here, I've decided to go for an index-linked ISA which has a minimum 18% payout. I have enough in easily-liquified savings that I'm not too bothered about that side of things, my main aim here is to maximize my savings for after I retire. The 40% thing is too much of a gamble.

Comments

[autopope.livejournal.com]

I am not a financial professional and this is not advice.

However, if I was in your shoes I'd be very wary of any 6-year ISA in general, and one that's betting on the markets rising in particular.

Firstly, we're clearly moving into a period of rapid change, and if you're locked in for six years you don't have the option of cutting your losses if things go wrong.

Secondly, the people running the ISA are clearly betting that the markets will not be higher in six years' time than they are now. Worst case is, we're moving into a period of high inflation and stagnating growth; if that happens, you end up locked in for six years and make 2% on your investment (a return of 0.3% per annum) -- far worse than just leaving it in your bank current account. (From their point of view, though, they've got the use of your money for six years to invest in something more sensible than the stock market. So they trouser whatever profits they can make, leaving you with sod-all.)

Have you looked at Premium Bonds as an investment?

[ffutures.livejournal.com]

Yes - they don't do as well as an interest-bearing current account if you look at average yield on original investment.

http://www.thisismoney.co.uk/help-and-advice/advice-banks/article.html?in_advicepage_id=98&in_article_id=395458&in_page_id=90

[gonzo21.livejournal.com]

Yeah, my mum has had premium bonds for... 15-20 years, I think a couple of grands worth, and she's never won anything.

[ffutures.livejournal.com]

I've won two lots of £200 in about 35 years - Think I currently have about £1000 in bonds.

[gonzo21.livejournal.com]

It's a source of some annoyance to her, she got £5 in bonds when she was... 15 I think. And hasn't won a single thing, ever.

I do not give financial advice

[alexmc.livejournal.com]

I dont really understand what you are asking us?

Is it a FTSE100 tracker? FTSE250?


An index tracker ISA is basically the same as you buying shares in the companies in the index - except that
a) You pay someone else to do the legwork - figure out how many shares to buy and to hold them for you.
b) there are tax benefits.

So imagine if you bought a single share in each of the FTSE 100 companies. Would you have made money in six years? probably? Is it possible you've lost money? Well possible, yes, a lot more than 2%.
Imagine that they went up at the same rate as the normal savings rate would you have won or lost? Well - you would have lost because you would have been paying fees to the fund management company for six years - fees which come out of the money you put into the ISA.



---------------------------

I have just one ISA which is an All Index tracker. Basically that means that it grows with the stock market - but when the stock market dives (as it did after the dot com bubble bursting) then the value drops as well. However I kept it for many years and it recovered its value eventually.

If it is an index tracker then the fees *should* be lower than one where the fund manager has to pay "experts". It should also be considered a long term investment. You are hoping that the stock market will grow - and it generally does despite short term blips. The problem is that we dont know when the blips will be or if they will coincide with when we want the money.

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Re: I do not give financial advice

[ffutures.livejournal.com]

The return isn't based on the actual value of the index, it's an all or nothing thing depending on whether it has gone up or not.

To quote:

The level of the FTSE100 Index is calculated at the start and at the end of the term. If at maturity

• The index has gone up by any amount (i.e. by one point or more), you will get your capital back plus either an amazing:
  18% for 3.5% term option
  40% for 6 year term option
• The index goes down or stays the same you will get back your capital plus an additional 2% protecting you against any downturns in the market.

The final measurement is subject to averaging the daily index readings for the last 6 months of the investment.

It's an Abbey National Guaranteed Capital Plus ISA if you want to check it out in more detail.

Re: I do not give financial advice

[alexmc.livejournal.com]

I cant say whether that would suit you but I wouldnt touch it with a barge pole

Re: I do not give financial advice

[ffutures.livejournal.com]

Thanks - the more I look at this, the more I'm inclined to agree, it looks like it was aimed to appeal to people like me who don't know much about investments. I'll have to see what else is on offer.

[very-true-thing.livejournal.com]

I have limited experience here (have been a member of a fairly successful investment club but never played about with anything other than straight share trading).

The only time over the 20 years (1982 to 2002) to buy this product when it would have not made the 40% payout would have been ~1997-2001.

2% of capital after 6 years is a very real loss due to inflation.

However, for almost every one of those 16 years when you would have made the 40% payout, you would have made more than 40% over six years by simply investing in a tracker.

If it was 10 years I'd say go for a tracker instead. I would also definitely avoid the 3.5 year version. The 6 year version is almost attractive but my instinct is to say no.

[ffutures.livejournal.com]

Thanks, that's useful to know.

[vicarage.livejournal.com]

it seems a daft gambling scheme, which only pays 5% compound ish if it works, with a risk of loosing badly if it doesnn't, and locks uup your money for 6 years too. Much better to go for an ordinary index trracker isa