Finding a Good IFA to Manage Your Stocks and Shares ISA
Saving money is a sensible thing to do, and independent wealth management experts Moneyfarm can help you to choose the right savings platform so that your money is safe (according to your attitude towards risk), and it grows above the rate of inflation.
Every adult in the UK now has a tax free allowance of £20,000 per annum that can be put into one ISA or several ISAs. This £20,000 figure represents the annual total that can be invested across the board – it is not per ISA. However, it is nonetheless a very significant sum of money that you can keep out of the taxman’s hands, so it’s important to take advantage of it if you are able.
Not only is this tax-free allowance available on the sum you invest. Any interest that your ISA earns will also be tax-free, which makes it even more advantageous.
The icing on the cake is the fact that the interest your ISA offers is compound interest. In other words, it gets added to your original investment. Interest is then applied to the whole amount (the original investment plus the interest accrued to date), year by year.
There is a variety of ISAs that are currently on offer. The one you choose will depend on several things, including how much you want your investment to grow and the amount of risk that you are prepared to take.
The two main types of ISA
In essence, the ISAs currently available fall into two categories – cash, or stocks and shares. There are several types of cash ISAs and several types of stocks and share ISAs. For example, a Junior ISA can be cash or stocks and shares, as can a Lifetime ISA. It’s worth checking out all of the different types of ISAs to see which one is more appropriate for your individual circumstances and attitude to risk
With ISAs that are of the cash type, there is no real risk. They are in effect, tax-free savings accounts.
With ISAs where funds are used to buy stocks and shares however, it is different. This type of ISA is an investment, and with any investment, there is a certain amount of risk involved. This is why it is usually recommended to be prepared to leave your investment untouched for at least five years. In other words, do not make any withdrawals. This allows time for any significant swings in the stocks and shares marketplace to even out.
Risk and interest
Savings are like insurances. In fact, in a way, ISAs are a form of insurance, in as much as you are saving via them to ensure you have money available to you at some time in the future. As with any insurance, the greater the risk, the more it costs; and with savings vehicles, the less the risk, the higher the cost regarding lost interest.
Herein lays the problem that all savers must face. You can keep your cash safe in a cash ISA, but it will only earn interest at the rate of approximately 1% if the ISA is easy-access, or 1.95% if it is fixed-term.
Stocks and share ISAs on the other hand, showed an average growth of 15.8% in the year 2016/2017 according to the Money-Facts website. Don’t forget that this is compound interest, so the growth year on year of the original investment stands to be significantly larger than a cash ISA or cash savings account.
Get a stocks and shares ISA tailored to your appetite for risk
If you do decide to risk taking out a stocks and shares ISA, talk to a good FCSC approved IFA (Independent Financial Advisor) first – someone like Moneyfarm. You can discuss your details, your ambition as regards saving, and your attitude to risk with them, all under no obligation, and they will recommend tailoring a savings portfolio to suit you.
Safeguarding against risk
If you like the idea and potential of a stocks and shares ISA always bear in mind that stocks and shares prices go down as well as up; although if you are can leave your investment to weather any storms, portfolio values usually bounce back and begin growing again. By taking this approach, you can reasonably safeguard your investment.
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