I'm fairly new to investing and I was pondering the ins and outs of my NISA account as my mind wandered during a recent hike… I started theory-crafting regarding market timings.
I understand (and agree with) the general wisdom that 'time in the market beats timing the market. i.e. When passive investing via mutual funds like the popular eMaxis All Country, history tells us that it makes sense to invest as soon as you have the excess funds available, rather than waiting for a market dip.
But (and hear me out)… I got to thinking about the difference between NISA and a regular taxed investment account. The main difference being that NISA has a fixed lifetime limit, and whats more, that limit is determined by the amount of cash that is invested in it.
So by buying shares when they are cheaper (trying to time the market) you can 'fit' more shares of a given mutual fund into your tax free account.
With that in mind, and given the pervasive sentiment that we could be in an AI bubble, mag7 are overpriced etc…
1. Do you think there could be any wisdom in investing available funds in a regular taxed account as soon as possible (time in the market), but waiting for a downturn/crash to sell from the taxed account and purchase in NISA (thus possibly 'packing' more shares into the limited 'space' available in your tax free account)?
And on a related note, assuming you have already filled your NISA lifetime allowance (but can still sell and rebuy within your annual allowance)…
2. If you sell funds from your NISA, how do they calculate the amount of your lifetime (cash) allowance that is to be restored? Do they look at the cash price you paid for the shares when you bought them? Would it be possible to sell shares that were bought at a time of higher prices, and replace them with shares bought at lower prices (effectively packing more shares of a given fund into your tax free account, and rendering Q1 irrellevent).
Or am I completely misunderstanding the whole concept. Some of these systems can be somewhat unintuitive for me! What do you think?
by Hearthian-Wanderer