Getting ahead financially can be as easy as saving $20 a month. Looking ahead to the long-haul, picking out the right investment strategy for you should be done with a considerable amount of deliberation. How do you choose the right path for your money?
Do the research, make a plan, and get some insight from finance professionals. Saving your money in an Individual Savings Account will allow you to make a solid investment into your future. However, you’ll first have to consider what type of ISA to put your hard earned money into.
There are a few types of ISA’s available to citizens of the United Kingdom. Cash ISA’s, where you can save your money with a tax free status, often available with banks, building societies, or investment firms. There are also Lifetime and Junior ISA’s that help to plan for your future retirement and your children’s future. But what we’re interested in today, is a Stocks and Shares ISA.
Getting ahead financially provides stability, comfort, and security. But how do you know if a Stocks and Shares ISA is a good investment for you? Let’s break down what it is, and how it’s helpful in the long run.
What Are We Talking About?!
A Stocks and Shares ISA is an account where you can take your cash, and invest it in qualifying funds, companies, trusts, and bonds. Basically, instead of letting your money grow slowly in a savings account, you can make your money work for you.
Every citizen of the United Kingdom is allotted an allowance of up to £20,000 for the 2018/2019 taxable year. You can invest your allowance, grow your portfolio, and take advantage of the ISA’s tax advantages. These advantages really come into play if you’re an additional-rate taxpayer (you make more than the basic-rate limit of £34,500) or a higher-rate taxpayer.
How Does an ISA Make Me Money?
Whether you’re a skilled investor, or researching stock options for the first time, the bottom line is always making more money. Taking the risk, and there IS a risk, of playing the stock market can either make or break your initial investment. But how does an S&S ISA make me money?
- Dividends are a great way to make money with investments. Dividends are small amounts paid to a shareholder each quarter, no matter what. This can be as small as a .12% per share, but can certainly add up with the amount of shares you hold. Dividends are typically paid out, then re-invested immediately, but still making you money on your initial speculation.
- Capital gains made from a stocks and shares ISA are tax exempt. Meaning whatever money you make from your portfolio will be tax free up to the capital gains tax allowances. So if you make lower than your allowance for the year, all of the capital gains for your investments will be tax free!
- Bonds are a great way to make money in the long-term investment world. The interest grows, as the company or government uses the money, and then you are repaid your original loan plus your interest in a timely manner. Bonds are typically for investors seeking a ‘safer’ form of investment. Bonds are still risky, though.
Diversifying your portfolio is a MUST. Make sure that you don’t have all your eggs in one basket. Especially when it comes to playing the stocks and shares game! Understand how you can easily manage and diversify your portfolio to give yourself a little more cushion on the market.
But IS IT GOOD?
Knowing whether an S&S ISA is a good investment for you really boils down to the level of risk you’re willing to make. You can always revert to a Cash ISA, and safely but slowly build your account, but that takes a LOT of time. Figure out if you’re in it for the long haul, or if you’re interested in riding the market waves, and making more money, quicker.
Whether you play it slow and steady, or fast and loose, Stocks and Shares ISA’s can make your initial allowance into a significant savings account. Do the research, invest the time, and know the risks. It’s entirely up to you how you handle YOUR hard earned money!