With just 75 days left to make use of the ISA allowance before 6 April 2017 and with the low interest rate environment persisting, many would-be investors are looking for more than the modest-to-poor returns offered by Cash ISAs.
For any first time investors considering Stocks & Shares ISAs Selftrade from Equiniti has provided an overview of some of the common mishaps people fall foul of when investing in Stocks & Shares ISAs, and how they can be avoided to maximise returns:
- Forgetting to use your allowance- if you don’t use your ISA allowance (£15,240) by the end of the tax year it will be lost forever- there is no carrying it over to the following year.
- Ignoring shares- When the markets are volatile it is easy to convince yourself that your money would be safer in a simple Cash ISA, but shares have been demonstrated to deliver much better returns over the long-term
- Failing to review your ISA frequently enough- Don’t put your cash in an ISA and forget about it. It is worth reviewing your Stocks & Shares ISA at least once a year to ensure it continues to deliver as required
- Don’t put all your eggs in one basket- Diversification is the cornerstone of any good ISA portfolio. A common mistake is having too much of your portfolio exposed to one asset class or sector. Funds help to achieve diversification
- Leaving it to the last minute- Just because the ISA deadline falls on April 5 does not mean you should delay investment decisions until the day itself. It is worth giving careful thought to how you want to allocate funds within an ISA throughout the year
Selftrade’s own research tells us that investors are torn when thinking about their investments for the year ahead.* 34% of investors are confident about the performance of their investments in 2017, yet a similar number (35%) are concerned. When asked about the biggest threats to performance, global economic slowdown is seen as the leading issue (27%), followed by Brexit (20%) and US politics (11%). It is therefore important people think sensibly about where to put their money and do their research.
Mark Taylor, CEO of Selftrade from Equiniti, comments:
“People are really struggling to know what to do with their money at the moment, and 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 your ISA irons out the ups and downs in the price of a fund or a share over time; essentially you end up buying a greater number of shares when the price is lower."
“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.”
Selftrade recommend people place somewhere between 10 and 20 holdings in their Stocks & Shares ISA to keep things manageable and to limit costs. There are a number of criteria you should consider when selecting these investments:
- Your reason for investing and the sum you desire at the end of the process
- Your time horizon
- The average annual return you are therefore seeking
- The amount of risk you are prepared to take
Taking a step back and thinking through investment decisions is the key to investing with confidence.
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Notes to editors
* Data collected from over 4,500 investors in December 2016.
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.