How To Use Shares ISA To Your Advantage In The Current Market

Every year you can invest £20,000 into an ISA. Of course, you don’t have to put the entire amount in. But, the more you save the better your financial position will be when you decide to retire.

There are actually four types of ISA, cash, innovative, lifetime, and shares. But, your yearly allowance can only be applied to one ISA per year. In short, you must choose one ISA to invest in per year.

While it may be tempting to keep it simple and invest in a cash ISA, you can generate substantially more funds by investing in a good shares ISA. Here’s how you do it to your advantage.

Remember The Advantage

The first thing to remember is that funds invested in a shares ISA are protected from income tax, capital gains tax, and even a dividend tax. In short, you don’t need to pay tax on any profits your ISA makes.

That means the money you save will be yours in the future without any strings attached.

The only charge you’re likely to face is stamp duty of 0.5%. This only applies to transactions over £10,000 in value.

Review Regularly

If you want to make the most of your money then putting funds into a shares ISA isn’t enough. You need to think about the various investment opportunities and decide which one is right for you.

It’s possible to invest in shares yourself or to use a platform that allocates the funds for you.

Inexperienced investors are likely to benefit from using a managed platform. However, if you’re prepared to do a little homework, you can make significant gains by using a DIY ISA.

The idea is that you choose your own shares portfolio and you can change this throughout the term of the ISA. While this approach is higher risk, it does offer a greater opportunity to boost returns.

However, to make the most of this opportunity you’ll need to monitor current market events and make predictions on what is likely to happen next.

The best approach is trial and error with part of your investment pot. This will allow you to get a feel for share trading and position your ISA investment to get the best possible returns.

Getting Started

You can start trading with your bank. However, it’s generally better to choose a dedicated broker as they will provide more access to the markets and generally have a better range of options.

Once you’ve created the shares ISA you can place a sum of money into it. This can be a large lump sum up to your limit or you can add a little at a time. Just remember, you can’t put more than £20,000 into your shares ISA in one year.

It is important not to panic if the market crashes and you’ve read it wrong. It may wipe out most of your ISA but, if you wait, over the long term you are likely to see the account recover. You can reduce the chances of this happening by spreading the risk when investing. That means investing in multiple different shares.