So is this a good time for a stocks and shares ISA?

I have commented recently on the ups and downs of the markets, suggesting there is some wisdom in sitting tight with existing investments through this volatile period.  However, if you have cash to invest, is now a good time to invest in a stocks and shares ISA?

The easy answer is YES, maybe.  We have had some spectacular falls in the stock market lately and we know, in all probability, the markets will recover to a large extent over the coming months.  So it must be tempting to see this as an opportunity to buy in at a slump, in a bear market, before prices rise again.

One example, looking at Lloyds Bank this morning, you can invest in their Ready Made Investments (click here)  and you have an easy choice of three managed funds, each based on the risk you are prepared to take.

The main difference between these funds is the proportion of stocks within the bundle.  Their higher risk  Managed Growth Fund 6 has 75% stocks and shares, combined with smaller proportions of bonds, property funds etc.  The bonds and property elements are generally more secure but less likely to bring huge gains.

So, with the FTSE100 slump, it has to be tempting, right?  Again, arguably yes.  Yesterday I talked about the benefits of making sure your investments gain from those recovery days, and again, it’s easy to dream of jumping in with your cash ahead of those recovery days.

There are some caveats though – there always are!

• What are your objectives?  Is it based on sound, wise investing over the longer term?  Or perhaps a short term flutter?  Worse still, is it greed?
• You have a choice of how to invest; either as a lump sum to a maximum of £20,000 per year in an ISA, or regular investments of up to £100 each month
• Arguably the gradual monthly investment should even out any turbulent swings
• Perhaps the biggest caveat is the current global situation of the Coronavirus. We are in a relatively new territory with the pandemic. We don’t know for sure what is to follow and we don’t have a reference point of knowing “when this happened before, it was followed by X”.  In other words, things could become far worse, before they get better
• Is it right to become preoccupied with investment returns, watching the market closely?  This could lead to higher levels of anxiety if things start to unravel!
• This type of investment shouldn’t be used as a short term place to stash the cash.  Ideally keep it going for 4 or 5 years, perhaps even longer

So as a way of wrapping up, yes, a stocks and shares ISA could be a good move but it’s important to reflect on your motives and how such an investment will fit in with a wider, longer term plan.

Related: 
Market timing: futile or shrewd?
Coronavirus – getting finances in order

As always, please remember I’m just an ordinary bloke. I highly recommend taking professional advice before any major decisions.