Stocks And Shares Isa Advice

By Author: Lecia Selbo
Total Articles: 49
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The huge levels of government borrowing in the UK in the wake of the credit crunch make it inevitable that taxes will rise in the years to come. This has made tax free Individual Savings Accounts (ISAs) even more attractive to savers and investors.

From the sixth of April, 2010, the amount of money that you can save or invest tax free in an ISA will rise from 7,200GBP to 10,200GBP. You can invest up to half of this allowance in a stocks and shares ISA, and up to half in a cash ISA.

A cash ISA is like a traditional savings account, with a slightly higher interest rate owing to the fact that you do not need to pay capital gains tax on the interest. A stocks and shares ISA is different in that the money that you put in is invested in a stocks and shares fund, which can rise and fall in value depending on which shares are invested in by the fund.

There is greater potential for profit from a stocks and shares ISA, but this comes with the risk that you will lose money. As a rule of thumb, you should never bet what you cannot afford to lose, and this is as true of the stock market as it is of the casino.

If ...
... you have any credit card debts, overdrafts, or other unsecured loans, it is a good idea to clear those first before you put any money into an investment scheme, as any profits from the scheme will be completely wiped out by the interest on those loans.

Before you invest in a stocks and shares ISA, you should ask yourself whether you will be likely to need this money in the next five years or so. If the answer is yes, then you should not consider it, as the charges involved in withdrawing funds from a stocks and shares ISA coupled with the volatility of the stock market make it unsuitable for this purpose.

A stocks and shares ISA should be considered a long term investment. In order to avoid dipping into it prematurely, you should also have a reasonable chunk of money stashed away in an easy access savings account for emergencies.

If you do not have a great deal of experience with or knowledge about investments, you should see an independent, FSA authorised financial advisor before you put any of your hard earned cash into a financial product such as a stocks and shares ISA. Lecia Selbo opened a stocks and shares ISA with Legal