INVESTMENTS & SAVINGS
Learn more about investing. Life doesn’t stand still, so your investment approach shouldn’t either.
Putting aside money for your future and getting it to work for you. Making the most of savings has become more difficult in the world of low interest on savings. But there are still ways to make your money work harder for you.
Investing for life’s journey. Planning for future wealth and a comfortable retirement.
Whatever age you are, wherever you are on life’s journey, it’s human nature to live in the moment and cope with whatever challenges life throws at you. Selecting the most appropriate investments to align with your values and life goals requires undertaking the right planning to accumulate wealth over the long term.
Although people may have very different goals depending on what life stage they are at, their goals can be broadly categorised into essential needs, lifestyle wants and legacy aspirations. Getting investment advice can be one of the most beneficial things you can do for your personal finances and long-term financial wellbeing.
Our top 12 tips for avoiding investment mistakes.
Neglecting to start or continue
Failing to obtain professional advice
Not having clear investment goals
Failing to diversify enough
Focusing on the wrong kind of performance
Focusing too much on taxes
Taking too much, too little, or the wrong risk
Letting emotions get in the way
Reacting to the media
Trying to be a market-timing genius
Forgetting about inflation
Not reviewing investments regularly
Have you tried our Financial Healthcheck tool?
Find out how you stack up in the 6 key areas of personal finances
Making the right choices to invest for your future can seem complex. But with the right investment strategy in place you can ensure you are able to make informed decisions to secure the financial future you want.
Six principles of investing
Whatever stage of life you’ve reached and whatever plans you may have for the future, you want your money to earn the best return possible without taking undue risk. That’s why it’s important to invest in a way that’s right for you and that will meet your goals. Creating and maintaining the right investment strategy plays a vital role in securing your financial future. How much control do you want over your investments? Investing can seem daunting but you don’t have to do it all on your own.
1. Have a plan and stick to it
Your wealth should work in all the ways you want it to. Whatever your goals are in life, careful planning and successful investing of your wealth can help you get there. The first thing to consider is to establish your investment objectives based on your future goals. It is one thing to have a target, but a sound financial plan can make the difference between simply hoping for the best and actually achieving your investment goals. You need to review your investments regularly to ensure they remain on track, stay focused on your plan and make sure you don’t get distracted by short-term market uncertainty
2. Cash isn’t always king
Putting your money in cash can seem appealing as a safe and secure option – but inflation is likely to eat away at your savings. For most people with longer-term investment plans, cash needs to be supplemented with investment in other asset classes that can beat the perils of inflation and offer better capital growth potential. If you’re investing – especially for major goals years away, such as retirement – you can’t afford to ignore the corrosive effect rising prices can have on the value of your assets. Different asset classes provide varying degrees of protection against inflation
3. Diversify and always consider your investments as a whole
If we could see into the future, there would be no need to diversify our investments. We could merely choose a date when we needed our money back, then select the investment that would provide the highest return to that date. One of the easiest ways to manage investment risk and improve your probability of success is to have a variety of investments. You can diversify your portfolio across different asset classes, geographical markets and industries. A diversified portfolio, including a range of different assets, will help to iron out the ups and downs and avoid exposing your portfolio to undue risk.
4. Start investing early if you can
Starting early is one of the best ways to build wealth. Investing for a longer period of time is widely considered more effective than waiting until you have a large amount of savings or cash flow to invest. This is due to the power of compounding. Compounding is the snowball effect that occurs when the money you earn investing generates even more earnings. Essentially, you grow not only the original amount you invested, but also any accumulated interest, dividends and capital gains. The longer you are invested, the more time there is for your investment returns to compound
5. Don’t abandon your plans
Some investors suffer from what behaviourists call ‘activity bias’: the urge to ‘just do something’ in a crisis, whether the action will be helpful or not. When investments are falling in value, it can be tempting to abandon your plans and sell them – but this can be damaging because you won’t be able to benefit from any recovery in asset prices. Markets go through cycles, and it’s important to accept that there will be good and bad years. Short-term dips in the market tend to be smoothed out over the long term, increasing the potential for healthy returns
6. Tailored investment advice
Every single investor’s needs are different and, while the points above are good general tips, there’s no substitute for an investment approach that’s tailored specifically for you. Once we know an investor’s risk tolerance and their investment goals, we can put in place a global portfolio of equities, fixed income, cash, and, when appropriate, alternative investments. The goal is to invest with a long-term view and maximise after-tax returns. It may just be the best investment you ever make.
Individual Saving Account (ISA) questions and answers.
If you have cash savings or are investing, there is no reason not to use an ISA tax-efficient wrapper. The end of the tax year is the 5 April, meaning that if you’re planning to use a year’s ISA allowance you need to do it before 6th April. There’s no rollover from one tax year to the next. We’ve answered some typical questions we get asked about how best to use the ISA allowance to help make the most of the opportunities.
+ What is an Individual Savings Account (ISA)?
An ISA is a ‘tax-efficient wrapper’ designed to go around an investment. Types of ISA include a Cash ISA and Stocks & Shares ISA. A Cash ISA is like a normal deposit account, except that you pay no tax on the interest you earn. Stock & Shares ISAs allow you to invest in equities, bonds or commercial property without paying personal tax on your proceeds.
+ Can I have more than one ISA?
You have a total tax-efficient allowance of £20,000 for this tax year. This means that the sum of money you invest across all your ISAs this tax year (Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, or any combination of the three) cannot exceed £20,000. However, it’s important to bear in mind that you have the flexibility to split your tax-free allowance across as many ISAs and ISA types as you wish. For example, you may invest £10,000 in a Stocks & Shares ISA and the remaining £10,000 in a Cash ISA. This is a useful option for those who want to use their investment for different purposes and over varying periods of time.
+ When will I be able to access the money I save in an ISA?
Some ISAs do tie your money up for a significant period of time. However, others are pretty flexible. If you’re after flexibility, variable rate Cash ISAs don’t tend to have a minimum commitment. This means you can keep your money in one of these ISAs for as long – or as short – a time as you like. This type of ISA also allows you to take some of the money out of the ISA and put it back in without affecting its tax-efficient status. On the other hand, fixed-rate Cash ISAs will typically require you to tie your money up for a set amount of time. If you decide to cut the term short, you usually have to pay a penalty. But ISAs that tie your money up for longer do tend to have higher interest rates. Stocks & Shares ISAs don’t usually have a minimum commitment, which means you can take your money out at any point. That said, your money has to be converted back into cash before it can be withdrawn.
+ What is a Help to Buy ISA?
A Help to Buy ISA is a Government scheme designed to help you save for a mortgage deposit to buy a home. The ISA is for first-time buyers saving to buy a property up to the value of £250,000 outside London or £450,000 inside London. The Government will add 25% to the savings, up to a maximum of £3,000 on savings of £12,000. If you pay into a Help to Buy ISA in the current tax year, you cannot also pay into another Cash ISA. The scheme closed to new accounts at midnight on 30 November 2019. If you have already opened a Help to Buy ISA (or did so before 30 November 2019), you will be able to continue saving into your account until November 2029.
+ Could I take advantage of a Lifetime ISA?
You’re able to open a Lifetime ISA if you’re aged between 18 and 39. You can use a Lifetime ISA to buy your first home or save for later life. You can put in up to £4,000 each year until you’re 50. The Government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
+ What is an Innovative Finance ISA?
An Innovative Finance ISA allows individuals to use some or all of their annual ISA allowance to lend funds through the Peer to Peer lending market. Peer to Peer lending allows individuals and companies to borrow money directly from lenders. Your capital and interest may be at risk in an Innovative Finance ISA and your investment is not covered under the Financial Services Compensation Scheme.
+ What is a Junior ISA?
This is a savings and investment vehicle for children up to the age of 18. It is a tax-efficient way to save or invest as it is free from any Income Tax, tax on dividends and Capital Gains Tax on the proceeds. The Junior ISA subscription limit is currently £9,000 for the tax year 2020/21.
+ Is Capital Gains Tax (CGT) payable on my ISA investment gains?
You don't have to pay any CGT on profits. You make a profit when you sell an investment for more than you purchased it for. If you invest outside an ISA, excluding residential property, any profits made above the annual CGT allowance for individuals (£12,300 in 2020/21 tax year) would be subject to CGT. For basic rate taxpayers, CGT is 10% or more. For higher and additional rate taxpayers, CGT is 20%.
+ I already have ISAs with several different providers. Can I consolidate them?
Yes you can, and you won’t lose the tax-efficient ‘wrapper’ status. Many previously attractive savings accounts cease to have a good rate of interest, and naturally, some Stocks & Shares ISAs don’t perform as well as investors would have hoped. Consolidating your ISAs may also substantially reduce your paperwork. We’ll be happy to talk you through the advantages and disadvantages of doing it.
