If you have a lump sum of savings which you are hoping to invest, then you may have already looked at stocks and shares ISAs. Whilst many people go it alone with these, there are now plenty of services out there which will enable you to reap the benefits of a stocks and shares ISA without any prior background knowledge or experience.
As an example, stocks and shares ISAs from Wealthify will allow you to choose what you want to invest, ask you how you would like to invest it, and they do the rest. You can then withdraw your savings whenever you wish.
Here are a few things that you should consider when looking at stocks and shares ISAs.
Is a stocks and shares ISA right for you?
It may sound simple, but actually there are pros and cons to consider with an ISA such as this one. Before you go for a stocks and shares ISA, you must understand that as with any investment there is a risk attached, and therefore there is a potential that you may get back less than you originally put in.
To get a good return on investment, it is also important to understand that you will need to leave your savings in your stocks and shares ISA for a good amount of time before withdrawing. Investments can go up and down over a short period of time, so investing should be viewed as a long-term saving strategy. You are able to withdraw at any time of course, but you won’t start to see the full benefits until a longer period of time has elapsed.
What type of investor are you?
This question will ascertain your position on the risk versus reward scale. Are you happy to risk a loss for the opportunity to make big gains? Or would you prefer a safer bet that will have a smaller pay off?
If you can’t risk a backwards step at all, then a stocks and shares ISA likely isn’t for you, however if you’re willing to risk at least a small amount of your savings then you can begin to decide whether you are going to be cautious or more adventurous. A cautious approach is one that is likely going to require a bit of patience in order to see good gains, whereas an adventurous one has the potential to be a bit quicker, but also the potential to incur a reasonable loss.
How much are you going to invest and how often?
A full ISA allowance in the UK is £20,000, however you can decide whether you would prefer to put in one lump sum, or whether it is something that you build up via monthly payments.
If you go for the lump sum, then you can still add to this at any point as long as you stay within the annual allowance. If you’re not in a financial position to put in a lump sum, then you can instead build up your investment month-by-month and work up towards your allowance – you can start with anything from as lows as £1.