Not quite ready to invest at the moment, but want to use this tax-year’s allowance before you lose the opportunity at the end of the tax year on April 5th? Our cash pot feature gives you the chance to hold money in cash within a stocks and shares ISA wrapper until you’re ready to invest it. When you’re comfortable, you can invest it all at once, or drip-feed your money into the markets month-by-month. Here, we explain why drip-feeding can be a sound investment strategy and show how to set it all up.
The benefits of setting up a drip-feed
At Nutmeg, we want everyone to easily see how they can benefit from widely-accepted investing wisdom and put it into practice. You might have heard us encourage you to invest for the long term so you can benefit from the power of compound returns.
Our new drip-feed feature is based on another investing principle, called pound cost averaging. It’s all about contributing smaller amounts on a regular basis, which buys you into the markets during the various ups-and-downs, meaning you’re less exposed to short-term market movements. Direct debits also benefit from this investing principle, although a direct debit will not secure your full ISA tax year allowance in the way a cash pot is able to.
How our drip-feed feature works
Our drip-feed feature is available for our stocks and shares ISA and you can use it outside of an ISA wrapper with our general investment account. This feature is not available on our Lifetime ISA (LISA), Junior ISA (JISA) or pension right now.
It works by connecting up two Nutmeg pots with a monthly transfer. So, you’ll need two pots – one will be a cash pot, and the other will be an investment pot.
Things you need to know about our cash pots
- A cash pot is not a cash ISA and isn’t intended to be used for long-term savings – think of it as a waiting room for your cash before it gets invested
- If you’ve got a stocks and shares ISA, cash pots can be held alongside investment pots within your stocks and shares ISA wrapper
- Any money added to a cash pot held within your stocks and shares ISA wrapper will count towards your stocks and shares ISA contribution for the current tax year
If you decide a cash pot’s right for you, you can create one and put some money into it from your Nutmeg desktop dashboard. Then, you can set up a regular monthly transfer into an investment pot to drip-feed your cash through to the markets.
Here’s how to get your drip-feed going.
You’ll need to create a new cash pot if you don’t have one already. To do this, you need to log into your desktop account, and use the ‘Create cash pot’ button in the ‘Create a new pot’ section underneath your existing pots (see picture below).
Once you have followed the process and started a cash pot, it’s time to arrange the pot-to-pot transfer which can enable the drip-feed. In the ‘Pay in now’ section of your cash pot, go to the Pot Transfer tab to set up a recurring transfer into another pot (see below).
Alternatively you can leave this process until another time, and whenever you are ready simply use the ‘Invest your cash’ link under the “Ready to move your cash into investments?’ section of your cash pot on your dashboard. This will take you to the Switch out of cash options (see below).
New clients will see the option to start with 100% in cash, invest later just after the product selection step in the onboarding process.
Get started with your 2021/22 ISA allowance today
Even if you don’t feel comfortable investing right now, we don’t want you to feel as though you have to give up on investing altogether.
Secure your ISA allowance with a Nutmeg cash pot held within a stocks and shares ISA wrapper and you’re perfectly poised to move money into the markets at your own pace, when the time’s right for you.
As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A stocks and shares ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please seek financial advice