Can only afford to invest for c.2 years - still possible?

[brightlikeme]

I have just turned 23, and am looking to purchase a mortgage within the next 2 or so years. In 2 years’ time, I will be happy with the deposit I’ve been building in my LISA.

However, I’m currently just shoving my income in my NatWest current account, and would much rather try my hand at investing it.

Ideally, I would like to choose a range of actively managed funds, monitor them every now and then and play around with them a little if and when I need to. However, given my short time horizon, I don’t think this is suitable for me, because it seems that 5 years is the minimum you would want to hold these investments for.

If I choose relatively low-risk funds, and ensure I diversify well, is it possible to mitigate the risk enough so that I can still realise gains, but also consider risk, within such a short time period? Or should investing this way only be seen as a long-term goal, and it’s better I just stick to bonds or a tracker approach?

Thanks in advance!

 

[buildingapologetics]

@brightlikeme You're being sensible with what you're currently doing.
Generally you should invest with the intention to not withdraw for at least 5 years, so if you need the money in 2 years then don't invest in a tracker. General consensus on here is to put your cash in premium bonds as the best low-risk approach but it'll probably return the same as what you're experiencing with your current account.

 

[brightlikeme]

@buildingapologetics That’s good to know at least. It is very appealing to me but the last thing I want is to have to put off a house purchase because the markets are on the floor.

I could always take a deeper look into the costs involved with a house purchase and estimate how much I’m likely to need. The deposit will be covered and so I’ll have to just deal with all of the fees and then any furnishings or renovations that will be needed. If I’m likely to have some spare then I may invest anyway for the practice, knowing that I can leave that money in the markets and rely on the rest of my savings that have been put in premium bonds or just in my current account.

I was looking at investing £500 per month, but I could drop it to say £200/£250 and I should be OK to leave that there.

Thank you for the reassurance!

!thanks

 

[buildingapologetics]

@brightlikeme

That’s good to know at least. It is very appealing to me but the last thing I want is to have to put off a house purchase because the markets are on the floor.

I feel for you, when I was nearing buying a house I would have been a little gutted (probably not the right word) not being able to invest my money. But as you say if the markets tank then you'll either have to realise a loss or wait until it recovers which could be years.

 

[brightlikeme]

@buildingapologetics Yeah it’s a shame but I have to be realistic; once I’m on the property ladder and I’m (hopefully) comfortably affording my mortgage then I can look to invest with the long-term in mind. Wouldn’t want to deny my partner the chance to move out because of a few risky decisions aha

 

[abikv13]

@buildingapologetics I think £5k or above would be better in bonds, below better in a savings account.

 

[jordan12]

@brightlikeme I’m reality any investment (including trackers and bonds) still carry significant risk.

I’d think about it more in this way: if the market tanks just before you need the money, would you be happy to delay the house purchase till the market recovered?

 

[peggyelaine]

@brightlikeme Can somebody explain to me about LISA please trying to open 1 and deposit the 4K before April dead line to purchase house 2023! So standard banks don’t offer LISA or is it the same thing as cash ISA ?

 

[mes_1970]

@peggyelaine It's different to a cash ISA, and you're right, banks don't offer them. You'll need to go somewhere like Moneybox, Nutmeg, HL, or AJ Bell.

 

[brightlikeme]

@peggyelaine Skipton Building Society is who I use. Very simple and easy to set up, and yeah you pay £4000 each tax year and you’ll get a bonus of £1000 from HMRC. Also earn interest too although it’s only around 0.35%, but it’s better than nothing.

 

[ijustwanthim]

@brightlikeme Moneybox have 0.6% interest with a 0.35% bonus for the first year, ive moved mine from skipton to there

 

[brightlikeme]

@ijustwanthim Oh really, that is good! I’ll probably just stick with Skipton given that I’ll hopefully be withdrawing it within the next 2 years, but thanks that’s good to know

 

[ijustwanthim]

@brightlikeme No problem! Good luck with it all

 

[brightlikeme]

@ijustwanthim Thanks, you too!

 

[mollyj]

@brightlikeme Hi there, thanks for the mention. We're happy to help with any LISA related questions!