On the 14th February there will be exactly 50 days until the end of the tax year and the deadline to use this financial year’s ISA allowance. Now is therefore the time to think about placing any spare cash into a tax efficient ISA wrapper.
Selftrade from the Equiniti Group has noticed many people are struggling to know what to do with their money at the moment, with 82% opting to leave their money in cash, despite rates being squeezed to near zero.*
While cash is a handy safe haven for emergencies, leaving large sums in cash no longer makes sense. A Stocks and Shares ISA is a good alternative for people thinking about dipping their toes into the world of investment, yet the prospect can be daunting.
Here, Mark Taylor, CEO of Selftrade from the Equiniti Group answers some of the most common questions for those looking to build a solid portfolio.
- 1. Do I need a large sum of money to invest in the stock-market?
“There is a common misconception that in order to invest, you need to be rich. If you choose to invest regularly, you can get started with as little as £50 a month.”
- 2. What should I put into a Stocks and Shares ISA?
“Once the Stocks and Shares ISA is set up it’s time to decide what to invest in – this can be the tricky bit.
“Without regularly following the stock market it can be extremely difficult to choose individual stocks. A simpler option is to go for exchange-traded funds (ETFs), tracker funds and/or investment trusts as transparent, low cost ways of getting exposure to a wide range of assets across the main markets of the world. By choosing these options there is less of a demand to make regular amendments to a portfolio, unless there is a significant event that alters the direction of the market."
“Collective investments such as ETFs and investment trusts enable you to access a whole market sector, region, theme, commodity or fixed income in one simple trade. Traditional mutual funds provide similar exposure but often come with higher charges.”
- 3. I’ve got four funds in my ISA, do I need more?
“There is no hard or fast rule – much depends on the nature of the funds you already hold, your investment goals and attitude to risk. If your four funds are invested in say a biotech fund, a Brazil fund, a China fund and so-on, you are probably exposed to too many risks and should consider spreading your investments more widely."
“Opting for ETFs with exposure across the main markets instead could do the trick, but equally first-timers who do not have time to review their investments regularly could even opt for one fund, such as a “multi-asset” or global equity fund.”
- 4. Income vs accumulation – how do I decide which share class to buy?
“Whether you choose between income or accumulation depends on your circumstances. Accumulation share class options will reinvest the income back into the fund, while the income share class option pays the income to you in cash. Generally speaking, unless you need the income to supplement your lifestyle, you should opt for the accumulation option. Over time the accumulation provides a compounding effect.”
- 5. How can I protect myself from market losses?
“No investment is without risk but taking some simple steps will certainly help protect you from big losses. Firstly, spread your risk – don’t put all your eggs in one basket – diversification is key.
“Recent volatility has shown that it’s almost impossible to second-guess the markets. But drip-feeding your investments on a monthly basis will protect you from sharp market movements.”
Mark Taylor added: “With saving rates at rock-bottom and world events sending markets into a spin, people are really struggling to know what to do with their money. We have seen investors on the platform shocked into inactivity by recent market conditions. As we see it, the key is regular investing, putting what you can, when you can into an ISA really helps people towards their financial goals. As we saw in 2016, investors that did nothing would have missed out on a 24% rise in the FTSE 100 and an 18% gain in the S&P 500.
“Wider economic and political events do of course have an impact on individuals’ investments; it is therefore important to keep an eye on your investments, the sectors and geographies that are doing well and diversify appropriately.”
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Notes to Editors
* Research undertaken by Opinium Research on behalf of Selftrade amongst 2,000 UK adults between 24th and 27th January.
About Selftrade and Equiniti
Selftrade is an online investment and share dealing platform which gives access to an extensive range of shares and investment products and is a go-to resource for people looking to understand, plan and make investment decisions.
Since we started over ten years ago we have built a reputation for operating on the basis of open, transparent pricing.
We offer an extensive choice of investments, with our customers benefiting from over 8,000 shares, Exchange Traded Funds, bonds, funds, investment trusts and other assets spanning both UK and international markets, all available within a Selftrade dealing account, ISA and SIPP.
Selftrade was acquired by Equiniti two years ago. Equiniti keeps things running smoothly behind the scenes and provides sophisticated technology, administration, processing and payments services to well-known brands and public sector organisations in the UK.
Our services are delivered by 4,000 employees across 24 office locations, enabling us to offer solutions that are flexible, adaptable and scalable.
We are acknowledged leaders in the pension services market and in the share registration market, where our clients include around half the FTSE 100. Our mission is to make the complex simple.