Five minutes a week that makes you smarter and calmer about your own money — plus a look at what I’m actually doing with mine…
Last Wednesday the Chancellor cancelled the Cash ISA cut.
In November last year, the government said that from April 2027 the most you could put into a Cash ISA each year would fall from £20,000 to £12,000 unless you're over 65.
Plenty of you found this letter because of that cut. Now it isn't happening. The limit stays at £20,000.
I think that's a mistake. The cut was the push a lot of savers needed to stop leaving their money in cash and start investing it. That push has now gone.
So this week's letter is the push instead: what your cash is really earning, and what the same money could do in a cheap tracker.
WHERE WE STAND
S&P 500: 7,541. Last week it fell half a per cent, its third weekly fall in a row. The equal-weight S&P 500, where every company counts the same, rose 0.8%. The Russell 2000, America's small companies, rose 1.3%.
On Monday the index slipped another half a per cent, and the equal-weight version rose 0.7%. For two weeks running, the index has fallen while the average company in it has risen.
THE MARKET THIS WEEK
What happened
Alphabet, Google's owner, fell about 12% on Thursday, its worst day since it listed in 2004. Its spending on AI data centres meant it paid out more cash than it took in for the second quarter running. Amazon is in the same position. America's tech-heavy Nasdaq had its worst month since March last year.
The Fed held interest rates on Wednesday, but two of its twelve voters wanted a rise.
What I think it means
A handful of giants are spending more on AI than their businesses bring in, and the market has started asking whether it will pay off. The rest of the index isn't carrying that problem though.
Profits across the S&P 500 are up about 30% on a year ago, and the ordinary companies are the ones that rose last week.
That is the shift I set our portfolios up for: less reliance on the few giants at the top, more on the companies making a profit today, rather than in the future.
Every position I hold, and why, is on my portfolio page.
What's coming up
Today: the US midterm elections. Since 1946, US shares have been higher twelve months after every midterm election bar one (whichever party won), by about 14% on average. The exception was 1986, and that was the 1987 crash, not the election.
Thursday at noon: the Bank of England is expected to raise interest rates from 3.75% to 4%, its first rise in more than three years. UK inflation jumped to 3.5% in September, mostly on the price of fuel.
ONE THING WORTH UNDERSTANDING: WHAT YOUR CASH IS REALLY EARNING
Cash feels safe because the number on your statement only ever goes up. Let me explain why it can still be losing you money.
The average easy-access savings account pays about 2.5% a year. Prices are rising at 3.5% a year. So £20,000 in that account earns about £500 in interest while the things it can buy go up by about £700.
That's about £190 of buying power gone in a year.
You think you’re being prudent and safe, but all you’re really doing is losing money!
A more meaningful example: let’s say you put £20,000 away for twenty years.
In a good Cash ISA at 4% a year, it becomes about £44,000.
In a cheap S&P 500 tracker growing at the market's long-run average of 10% a year, less the tiny costs, it becomes about £133,000.
That's £89,000 you miss out on, from just one year's ISA allowance!
The deadline has gone. The reason to move hasn't.
Most of us still do the opposite. In 2024–25 Britons put £95.6 billion into Cash ISAs and £37.2 billion into stocks and shares ISAs.
The tracker won't go up in a straight line. Some years it falls, sometimes hard. That's why money you'll need in the next year or two belongs in cash.
If you've got more than that sitting in a Cash ISA, open a stocks and shares ISA and transfer some across. Ask the new provider to do the transfer for you. Don't take the money out yourself, or it loses its tax-free status.
THE GETTING STARTED CALL
Many of you are paying a financial adviser, and wondering whether you should be…
If that's you, I do an hour on Zoom for exactly that. We go through your last statement together and find everything you're paying, and what it's costing your future wealth.
Then I show you how I run my own money and why it's simpler than anyone in the industry wants you to believe. By the end you'll know whether leaving is right for you, and if it is, what to do first.
If it isn't, you'll know that too and can stop worrying about it.
It's £250, one-off, which is less than a month's adviser fees on a £250,000 pot. There's nothing to buy at the end of it, and if you finish the hour still not knowing what to do, I'll give you the £250 back.
If you want one, click here to email me and I'll send you the details.
NEW HERE?
If you joined this month: I'm a UK investor who fired his financial adviser and has run his own ISAs and SIPP ever since, doing much better than they ever did. The case for starting is simple. A low-cost S&P 500 tracker, bought regularly and left alone, will do better than most financial advisers. To learn more, start here.
Every position I hold, and why, is on my portfolio page.
See you next week.
Tim
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I am not a financial adviser. Nothing here is personal financial advice. Please do your own research before making any investment decisions.