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Stock Market 2022

You need to ask yourself for what are you investing. If its for retirement then its a no brainer to invest within a SIPP. Remember the tax
advantage on the money you invest 20% for a basic tax payer and 40% for a higher rate payer. Thats a 25% and 66% gain before you have bought anything!

For money you may need before then you invest in several ISA's over the years tax free. It all mounts up if you do the sums.

Cheers,

DV

I thought the advice was generally to max out the ISA allowance then put anything left in the SIPP.

Income tax is payable on money withdrawn from a SIPP (plus there's the lifetime allowance).
An ISA is largely tax free, has no cap and can be accessed at any time.
 
I thought the advice was generally to max out the ISA allowance then put anything left in the SIPP.

Income tax is payable on money withdrawn from a SIPP (plus there's the lifetime allowance).
An ISA is largely tax free, has no cap and can be accessed at any time.
As you point out they are different vehicles. I use both.

Don't forget that money you put into an ISA has already been taxed so in effect investing £60 or £80 has cost you £100 of income so you need to grow by 66% or 25% just to regain that which was lost to income tax. For a SIPP that £60 or £80 is topped up to £100 so you have a much larger chunk right at the start. When you need the dosh from a SIPP 25% is tax free and the rest is taxed at 20% or 40% depending on how you take it.

Example. You have £100K of income to invest.

a) For an ISA you pay say 40% tax so that becomes £60K invested. If the investment grows at 7% p.a.over 20 years that grows to £240K tax free!
b) In a SIPP tax is refunded so thats the full £100K invested. Over 20 years at 7% p.a. that grows to £400K. You can take £100K tax free and the remaining £300K is taxed depending on how you take it. Taking the dosh each year at 20% tax you get £240K plus the £100K already taken so thats £340K in total.

So its £240K vs £340K returned from the same earnings and investments.

For a 20% tax payer it works out at £320K vs £340K. Still an extra £20K in the pocket not to be sneezed at once a pensioner.

I chose the £100K figure as its easy to scale down or up depending on each circumstance. The 7% average growth over the years has been achievable although no one has a xtal ball.

The above is just for example as everyone has different incomes and aims and should seek advice.

Cheers,

DV
 
The Graun Money section is hopeless in most respects to be honest.

The 'Saving' section is all cash savings accounts and the 'Pension' section is all state and civil service pensions. Sod all on investing.
 
As you point out they are different vehicles. I use both.

Don't forget that money you put into an ISA has already been taxed so in effect investing £60 or £80 has cost you £100 of income so you need to grow by 66% or 25% just to regain that which was lost to income tax. For a SIPP that £60 or £80 is topped up to £100 so you have a much larger chunk right at the start. When you need the dosh from a SIPP 25% is tax free and the rest is taxed at 20% or 40% depending on how you take it.

Example. You have £100K of income to invest.

a) For an ISA you pay say 40% tax so that becomes £60K invested. If the investment grows at 7% p.a.over 20 years that grows to £240K tax free!
b) In a SIPP tax is refunded so thats the full £100K invested. Over 20 years at 7% p.a. that grows to £400K. You can take £100K tax free and the remaining £300K is taxed depending on how you take it. Taking the dosh each year at 20% tax you get £240K plus the £100K already taken so thats £340K in total.

So its £240K vs £340K returned from the same earnings and investments.

For a 20% tax payer it works out at £320K vs £340K. Still an extra £20K in the pocket not to be sneezed at once a pensioner.

I chose the £100K figure as its easy to scale down or up depending on each circumstance. The 7% average growth over the years has been achievable although no one has a xtal ball.

The above is just for example as everyone has different incomes and aims and should seek advice.

Cheers,

DV

Good advice. One further thing to be aware of for those in mid/late career is if you are projecting to hit the SIPP LTA with that 7% or whatever per annum growth. At the LTA (or above) you can take up to 25% of the LTA tax free cash at BCE1, but the excess above the LTA left in the SIPP is taxed at 25%. Of course, any pension income from the SIPP will be taxed at the appropriate rate as well depending on how much you want to take out a year. So in that instance then preferential investment in the ISA starts to makes a bit more sense.
 
^^ as always in investing, it probably makes sense to do some of each and not put all of your eggs on one basket.
 
Good advice. One further thing to be aware of for those in mid/late career is if you are projecting to hit the SIPP LTA with that 7% or whatever per annum growth. At the LTA (or above) you can take up to 25% of the LTA tax free cash at BCE1, but the excess above the LTA left in the SIPP is taxed at 25%. Of course, any pension income from the SIPP will be taxed at the appropriate rate as well depending on how much you want to take out a year. So in that instance then preferential investment in the ISA starts to makes a bit more sense.

Though tax efficient planning is made more difficult by the LTA threshold regularly changing. From £1.8m in 2011/12 down to £1m five years later.

Unless we have a decade of astronomical returns it's not something I personally have to worry about ;-)

Personal-Lifetime-Allowance-Explained.jpeg
 
Anyone got any ideas/theories what’s going on at the moment? I notice all my stuff has taken a bit of a dive over the past few weeks. I’m not worried as I’m in for the long-haul and don’t actively manage anything, but given the dip is right now maybe a good time to say buy some more Fundsmith?
 
Anyone got any ideas/theories what’s going on at the moment? I notice all my stuff has taken a bit of a dive over the past few weeks. I’m not worried as I’m in for the long-haul and don’t actively manage anything, but given the dip is right now maybe a good time to say buy some more Fundsmith?

the markets are worried about inflation and the Fed withdrawing stimulus. as a result growth stocks especially tech stocks have taken a hammering. Some people also worry that we are in a stock market superbubble and there could be a huge crash around the corner.

So there are some risks to investing now, there could be further falls especially if inflation is not going away as quickly as people think. On the other hand, people have not done too badly over the years buying fundsmith on the dips. I intend to do so this year but am not sure there has been a big enough dip yet.
 
I’ll keep an eye on it for a few weeks - I’ve not used anything of this years ISA allowance so I’ve got until April logically!

PS I bought-into Fundsmith last year at £5.44 so I’m still way up at present at least. Just not as good as the £6.77 it was a couple of weeks ago!
 
I was reading that it looked like a lot of newish investors got cold feet and cashed out when it started to seriously drop as they were only used to seeing things generally go upwards. Worries over Fed & Ukraine for the Pro traders too.
 
the markets are worried about inflation and the Fed withdrawing stimulus. as a result growth stocks especially tech stocks have taken a hammering. Some people also worry that we are in a stock market superbubble and there could be a huge crash around the corner.

So there are some risks to investing now, there could be further falls especially if inflation is not going away as quickly as people think. On the other hand, people have not done too badly over the years buying fundsmith on the dips. I intend to do so this year but am not sure there has been a big enough dip yet.

Yes, a reminder that trying to time any market is probably a bad idea. I have no idea what the year holds. Who would have predicted double digit annual returns at the start of covid when everything was slumping? I'll stick with drip-feeding.
 
Yes, a reminder that trying to time any market is probably a bad idea. I have no idea what the year holds. Who would have predicted double digit annual returns at the start of covid when everything was slumping? I'll stick with drip-feeding.

Terry Smith, the manager of Funsdmith famously says there are only two types on investor. the first type of investor is one who cannot time the market. The second type of investor is one who knows they can't time the market.
 
and not put all of your eggs on one basket.

Bit of a balancing act, that.:D

The Graun Money section is hopeless in most respects to be honest.

The FTSE is up and down like a yoyo currently, and not by incremental moves. I find it hard to follow the reasons despite reading the D.T. daily business and financial supplement and the more savings/investment oriented one in the Saturday paper. Mind you, by the time I glean any explanatory info. the market has moved again. The Ukrainian situation and the increasing defensive sabre-rattling from the west seems to influencing things detrimentally one day but optimistically the next. Can't work it out, but if there IS an incursion, I can't see the FTSE rising too much !
 
I was reading that it looked like a lot of newish investors got cold feet and cashed out when it started to seriously drop as they were only used to seeing things generally go upwards. Worries over Fed & Ukraine for the Pro traders too.

That was always going to happen and I bet alot of new ones were into the tech stocks that took a real tumble. The house wins again, hopefully they learn but hey someone has to be rinsed to fund this market..
Same will have happened with Crypto.
 
Anyone got any ideas/theories what’s going on at the moment? I notice all my stuff has taken a bit of a dive over the past few weeks. I’m not worried as I’m in for the long-haul and don’t actively manage anything, but given the dip is right now maybe a good time to say buy some more Fundsmith?

There's been a big rotation from tech to energy and commodities. The market is very volatile right now, looks like we are entering a different regime as growth slows and liquidity tightens.

Given that equity returns in 2022 will likely be lower than the last couple of years, the risk is skewed to the downside IMO.
 
There's been a big rotation from tech to energy and commodities. The market is very volatile right now, looks like we are entering a different regime as growth slows and liquidity tightens.

Given that equity returns in 2022 will likely be lower than the last couple of years, the risk is skewed to the downside IMO.

If there is a big Liquidity 'event' ...watch out...

I need to check the stats on the % of stuff bought on margin compared to say 5 years ago but my guess it's 'lots more'. Anyone thinking the market is solid needs to reassess.

Maybe the Fed will come riding in again but there is no health/we have to shut down the economy mandate now. The economy will have already started shutting itself down due to Inflation so they would barely need to touch interest rates for the consumer lead western society to stall...I assume they are worried as hell behind closed doors.

It's hardly been the most productive 2 years in the worlds history has it?

I've kept a shed load of cash on the sidelines as buying opportunities will present themselves as volatility was baked in from the very first time the Fed went postal on stuff in 2020.
 


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