With the start of the financial year fast approaching, this is the best time to look into your Investments Savings Accounts (ISAs). Every year on the 6th of April, you get to see for yourself how hard your money is working for you, as a new financial year is rolled out.
Whether you are a veteran ISAs investor or you are just starting off, this guide will help you to understand the intricacies of ISAs. Likewise, you will get to learn on the ways on how to make the most of your investment in ISAs.
The beauty with ISAs investments is that you are exempted from income tax or capital gains tax on the interest earned.
Wide Variety of investment options
With ISAs, you could save in different ways. These are Cash ISAs, Stock & ISAs, Innovative Finance ISAs and Buy lifetime ISAs. You are literally spoilt for choice. To understand how best you can invest in ISAs, we’ll individually look into these four options.
Here, you get the opportunity to enjoy services like the standard savings account in banks. These services are the two options of either having a quick-access cash savings account or the fixed-rate deposit account. Now, in the quick-access account, you can withdraw your money as fast as when you need it. On the other hand, the fixed-rate deposit account locks your savings for an agreed period of time before you can access it.
If you want to make the most out of your investment ISA, then you could choose to invest in a fixed-rate deposit account. This presents higher interests compared to quick-access deposits. Additionally, premature withdrawals from the fixed-rate deposits could attract penalties.
Stocks and Shares ISAs
This is another option of making ISAs work for you. Also, it is quite simple and you do not have to be a stockbroker to understand how this works. Depending on the market forces, you could earn enormous amounts of money on your seed capital. Similarly, you could lose even more when the stock market takes a nose dive.
Innovative Finance ISAs: This investment option allows individuals to lend money to companies in a tax-free environment. You can decide to cash in when the loan matures.
Help to Buy and Lifetime ISAs: Here, first-time buyers have the chance to save into a government-supported Help to Buy arrangement. This provides a £50 bonus on every £200 invested. Now, if you are 18-39 years of age, you could choose the more elaborate plans to allow you save up for a home or for retirement. These options allow you to deposit amounts of up to £4,000 in a year, meaning the profit margins are higher.
To maximize gains, you could spread your money across these investments options. This allows your interest rates elsewhere to help offset areas where you may have experienced low returns or even losses.
Lump sum vs Monthly drip feeding option?
While a lump sum may attract more dividends for a longer period of time, skeptics would love to invest on a monthly basis to curb on the inflation storms that may rage within the year. Sometimes, you could end up earning more with a lump sum, other times you may just succeed with your monthly investment option.
At this time of the year, investors stand a higher chance of getting the right investment decision. Instead of waiting until April to choose a popular investment option, you could take this earliest opportunity to assess the market. After that, you could make your best bet.
This may be a hybrid of the various ISAs investment options or even a single option. Similarly, you could decide to go the lump sum way or settle for a monthly drip feeding throughout the year.