As we near the end of the tax year, Peter Gale, Senior Wealth Manager at AAG, give us his thoughts on how to get the best from your ISA.
“We hear about ISA millionaires but so many people just don’t make enough of their ISAs. Whilst, Cash ISAs alone won’t make you an ISA millionaire, they are still a good place to start with your financial plans. There is such a disparity across Cash ISAs in particular, that it certainly pays to keep moving your money to ensure you are ahead of the game and continually getting the best returns.”
ISA’s shouldn’t be used for short term financial plans explains Peter, “The longer you invest in stocks and shares ISAs, the less impact stock market cycles will have on your returns. We’ve seen a lot of volatility in the markets this year alone, so you need to have some level of patience to wait the cycles out.”
“It’s time in the market that counts. Missing a few days of a rising stock price can significantly impact your money, so it’s usually better to stay invested if you can.”
“Volatility only leads to a loss if you encash your investment when the values have dropped. If you are investing for the long term, you won’t need access to that money so are able to wait it out until the share price begins to rise.”
At that point, as long as you have a clear plan, you may want to consider reviewing your strategy.
Having a robust plan is important, because if you don’t know what you want to achieve with your investment, you won’t be able to choose where to invest your money. “If you have clear objectives, you will be able to choose which type of funds you want to invest in.”
As part of this is understanding your attitude to risk and how diverse you want your investment to be. “Whilst you don’t want all of your eggs in one basket, you similarly don’t want to diversify so much that you don’t benefit from the impact. This is where a professional financial advisor can really pay dividends as they can talk you through the fund choices, and be strategic – bringing it back round to your objectives” Peter continues.
“A professional will also understand the trends in the investment market. Helping you to see beyond the hype and ensure that you are investing in the right funds for the right reasons.” Peter continues, “all too often, we see people wanting to invest in a fund because of its past performance. But you shouldn’t chase a past performance, as it may not repeat that performance again in the future.”