Is An Investment ISA a Good Idea?
If you're new to investing you will have come across the term "Investment ISA" or "Stocks and Shares ISA" which are ISA accounts designed specifically designed to maximise tax-free returns on your investments. But are these a good idea?
An Investment ISA (also known as a Stocks and Shares ISA) is a great way to start for both first-time investors and seasoned investors alike.
An Individual Savings Account (ISA) is a tax-efficient way of making your savings work for you in the best way possible. There are lots of different kinds of ISAs, but for the sake of this blog we will be focussing on Investment ISAs (also known as a Stocks and Shares ISA).
So…how do they work?
An Investment ISA does what it says on the tin: your money will be put to work in an investment (as the name would suggest).
Those investments should put your money into various stocks and shares, which should garner returns for you.
And - because it is an ISA, Government legislation means that any returns earned on your investments are tax-free.
You can choose between having an actively managed fund or a passively managed fund, depending on your preference.
What are the benefits of an Investment ISA?
Here are a few reasons why we think that getting an Investment ISA is a good idea:
The main benefit to an Investment ISA is that it is tax-free.
If you're wanting to get into Investments, then you should really consider opening an ISA as it is the most tax-efficient way of investing.
Each year, every British adult has a set amount legislated by the Government which allows each individual to put £20,000 into an ISA. You could choose to either put this total amount into an Investment ISA, or spread it across the other kinds of ISAs.
There is also a lot of variety with an Investment ISA - there is a wide variety of platforms, and within them, lots of different funds which you can choose from. A few example of different types of Investment ISAs include:
They're also widely available from many different platforms. You can get an Investment ISA from:
- Building societies
- Financial Services Companies
- Credit Unions
- Friendly societies
- Peer to peer lending services
- Crowdfunding companies
...because it is an investment, the stock market could go down as well as up, so you could end up losing money on your investment.
There are some Investment ISAs which are much lower risk than others, but these tend to produce lower yields. It’s important to evaluate your attitude towards risk before opening an Investment ISA.
If you are very risk-averse, then you might want to consider opening a Cash ISA instead. These tend to have lower returns, however are far lower risk.