How to Protect (100% Guaranteed) Your Stocks and Shares ISA Account When the Market Is Falling
By Stephen Sutherland, author of Liquid Millionaire.Posted in the Category of ISAS, Investing, Stock Market, Investment Fund, Financial Advice on 7th July, 2010.
Tags: fidelity, isa, isa investing, isa trend investing.
One of the rules on ISAs is that Stocks and Shares ISAs cannot be transferred into a Cash ISA.
So when the market gets rocky, how do we at ISACO manage to transfer from a Stocks and Shares ISA into a cash based fund?
Would you like to know what secret strategy do we and our clients adopt to fully protect (100% guaranteed) our ISA accounts when the market is just about to go into freefall?
You would?
Great, because here’s how:
Whenever the market changes from a long-term uptrend (a bull market) to what you believe could turn out to be a long-term downtrend (a bear market), you simply switch out of your equity based investment fund into a cash-based fund.
Yes, but “how?” I hear you say.
What you do is to make a switch. Understanding the difference between switching out of an equity based ISA and selling an equity based ISA is a very important point.
In other words, you don’t place a sell order. Instead you place a switch order. And what you do is switch from the investment fund or funds you are invested in into a cash-based fund such as the Fidelity ISA Cash Park.
Any money invested into the ISA Cash Park or disinvested from ISA funds into the ISA Cash Park remains inside the tax wrapper.
So, once you have moved all your ISA account into the Cash Park, you then wait in there until the market is deemed healthy again. This is when you believe the long-term downtrend (bear market ended) has changed back to an uptrend (new bull market).
Once you believe the bear market in question is over, you can then make a switch back into an equity based investment fund.
This is the investment strategy many pro ISA investors use to help them beat the indices over the long-term. It helps them to beat the market during bear markets and fully protect their portfolios when the stock market totally collapses.
The thing is, many people that hear about this new way to win with ISAs do not believe it’s possible to get out at the right time.
When this happens, I show them evidence that it is really possible. I explain that it’s not easy to do but I assure them that it is possible if you know what you are doing – or that you have the right help by your side.
Take a look at this chart below and see what you think.
As you can see, in the two most recent bear markets, we at ISACO have fortunately managed to outperform both the Nasdaq Composite (US technology index) and the FTSE 100.
Notice that in the technology crash of 2000-2003, The Nasdaq Composite lost 50.8%, the FTSE 100 gave away 35.5% but HIRE CAR managed to make a gain of 26%.
But also notice that we don’t always make a gain in bear markets. In the most recent bear market of 2008-2009 which we’ve called the credit crunch crash, we made a loss of 5.8%.
But do you see that our loss was not as severe as the Nasdaq Composite’s 14.4% dip and the FTSE 100’s 16.1%?
And let’s not forget that both these market periods were arguably two of the worst bear markets in the stock markets entire history.
What this tells you is that when you invest in the stock market, as long as you play the long-term game, however horrific a bear market may seem, as long as you know when to get into the market and when to get out, and have access to a screening tool like HIRE CAR™ that tells you the investment funds to be invested in, it really is possible to beat the market.
As I said before, I’m not saying it’s easy to do, but it is possible.
As long as you can outperform the market over the long-term (the objective of every fund manager), your tax-free accounts should really blossom.
In Friday’s blog I’m going to tell you more about Fidelity’s ISA Cash Park because if this is new information to you, I’m fairly certain that you are going to be pretty excited right now.
Until next time my friend.
If you would like to know more about the ISA Cash Park and request a FREE Telephone Consultation (£1,997 value) or obtain a FREE copy of my book Liquid Millionaire, get in touch.
You can email us or call 0870 757 8554 if you prefer.
In both cases you are under no obligation to do anything, buy anything or sign up for anything.
