The Lemon Fool

I'm holding cash in the short term (1-3yrs) in my LISA but I'm trying to maximise the return on it. I've a number of different options but I'm unsure which one would be most suitable.

Option 1: leave the money on AJBells platform earning 1.65%

Option 2: buy a money market fund, either CSH2 (Lyxor Smart Overnight Return) or ERNS (ishares £ ultrashort bond)

Option 3: move the money to Moneybox 3.5% (2.75% + 0.75% bonus for 1year) but I don't believe I'll be able to transfer it back to AJBell once I've moved it

Option 4: buy some short dated gilts

Can anyone offer any advice?

Many Thanks
moneybagz

under the mattress?

I've used CSH2 for spare ££ in my ISA/SIPP.

Money used to be gold, one pound Sovereign coins. That ended in late 1931 when a law was passed such that any Sovereigns you deposited into banks for safe keeping and interest, were returned as Pound Note paper money. Since then the UK has printed/spent Pounds, to the extend that the Pound has devalued at a 5% annualised rate, causing inflation. If you pay 20% tax on interest your savings would have to grow at a 6.25% rate just to offset inflation (Pound devaluation).

If instead you held US Dollar bills (paper currency) and gold, 50/50 yearly rebalanced then the devaluation rate lowered down to a 1% rate. But you can't hold foreign currencies inside a ISA (don't know about LISA's but suspect they're the same), so instead deposit/invest those dollars, into perhaps VUAG as that trades in Pounds and accumulates dividends, so side steps the otherwise 1.5% FX fees that brokers will charge to do currency conversions (3% round trip). Historically that also uplifted the decay of purchase power to a uplift of purchase power, +4.5% for 50/50 US stock/gold. For gold hold that outside of ISA, Sovereigns are still considered as being legal tender, are exempt VAT and CGT. But the spreads on Britannia one ounce coins that are also legal tender tend to be narrower. Once you've developed a reputation of being a honest gold buyer/seller (suggest you avoid the likes of eBay) you may also find that you can both buy and sell for zero spread - when you buy someone else might be selling and happy to sell at spot, as might you when you come to sell.

US stocks can be liquidated in T+2, as might gold coins, so a combination of both is like a saving account with a 2 day withdrawal notice period. Reducing whichever is the most up at the time you withdraw, or adding to whatever is the most down when you add/deposit, can be sufficient 'rebalancing' in itself, such that rebalancing might also be 0% cost, just part of regular activities that were being performed anyway.

Works well to have half in fiat primary reserve currency (US$) and half in non-fiat global commodity currency (gold). The two tend to balance out relatively well, more so when the US$ are invested in US stocks. Since 1972, calendar year granularity, there were two dates where you actually lost money over three years, 1985 when you ended three years later with 3% less, 2000 when you ended with 10% less. However if you hung on for another year then you at least broke even. More generally, in the median case, you ended three years with 40% more.

Thanks for the replies. I've decided to invest in CSH2, currently returning nearly 5% pa. Now seems an acceptable time to keep powder dry, ready to exploit opportunities, should they occur. On Friday, I placed a few put options on the S&P for the remainder of the year to hedge off the downside on my remaining equities.
I'm holding gold too, but in an etf..I'd like to buy coins but all my cash is sitting in SIPP/LISAs unfortunately.