How to Invest in a Stocks and Shares ISA

There is an ISA myth that needs to be debunked. The belief in this myth is holding you back from building wealth. What is this myth? It’s the false belief that investing in stocks and shares ISAs is only for people with lots of money.

Nothing could be further from the truth. Investing is opened to everyone, so anyone can start investing with relatively little. In fact, you can open an investment account with just £50 per month.

Economic uncertainty and low interest rates mean bad news for savers, so it’s important to think outside the box to help your money grow.

While it’s true that low rates equal low returns on traditional savings accounts, there are financial treasures out there, if you know where to look.

An increasingly popular way of growing savings is to take out an ISA. These can give great returns – particularly if you’re willing to invest in a stocks and shares ISA.

This guide tells you everything you need to know about stocks and shares ISAs, helping you make the best choices for your precious savings.

What is an ISA?

ISA stands for Individual Savings Account. They are a type of savings account which let you save without paying tax on any of interest you earn. Anyone over the age of 18 can open an ISA and there is a limit of £20,000 set on how much you can save each tax year 2018-2019 (April to April).

There are a variety of ISAs available, including

  • Cash ISA,
  • Lifetime ISA,
  • Help to Buy ISA
  • Junior ISA
  • Innovative finance ISA and
  • Stocks and Shares ISA

Here we take a closer look at Stocks and Shares ISAs.

What are a Stocks and Shares ISAs?

Different to cash ISAs, which are simply a form of tax-free savings account with minimum risk, stocks and shares ISAs invest your money in the stock market, making it work harder.

How do Stocks and Shares ISAs work?

Stocks and shares ISAs let you put your money into a range of investments such as unit trusts, funds, government and corporate bonds and individual company shares.

They are managed by banks, online platforms and fund management companies. Stocks and shares ISAs offer an easy way to start dabbling in the stock market, so they are great for beginner investors.

If you want to get your head around investing jargon, check out our posts Investment Terms for Beginners and Investing Tips for Beginners to help you get started.

Cash ISAs vs Stocks and Shares ISAs

Cash ISAs work pretty much like savings accounts, except you won’t pay any tax on the interest you make, regardless of what you earn.

They are a safe bet for anyone who wants to pack  some emergency fund between £1 and £20,000 (currently) per tax year with minimal risk.

You can open an instant access cash ISA (where you have anytime access to your cash) or a fixed term cash ISA, which pays out at the end of a fixed time period.

Stocks and shares ISAs invest your money (up to £20,000 per year) in stocks, shares, bonds, trusts, and funds. Again, any gains you make are tax free.

The key difference is that with a stocks and shares ISA your money is invested. So, you may make greater returns than with a Cash ISA, depending on how the investments you have chosen are doing.

Be warned! Although there is always a possibility you can make a better return on your stocks and shares ISA than with a cash ISA, you also take the risk of getting less than you put in if your investments aren’t doing so well.

A good way of avoiding loss is to plan to invest in a stocks and shares ISA long term (minimum 5 years, as a rule of thumb), so your investments have the chance to ride out any bumps in the road.

You only lose money when you cash out in the short-term

If you are jumpy about investing, you don’t have to put all your ISA allowance (£20,000) into a stocks and shares ISA, you can split your money between a cash ISA, Lifetime ISA or innovative finance ISA and a stocks and shares ISA.

A good way of avoiding loss is to plan to invest in a stocks and shares ISA long term.Click To Tweet

Whether you choose a Cash ISA or a Stocks and Shares ISA is down to how comfortable you are with risk.

In general, it’s best to have both cash and stocks and shares ISAs. It’s good to have some nest egg for emergency and save others in Stocks and Shares ISA.

But remember, if you are not investing, you are losing a tremendous opportunity to grow your money. And investing is one of the best ways to beat inflation.

Check out our top tips to getting the best out of your investment experience. These tips will get you on the right path toward reaching your money goals and becoming a successful investor.

If you are not investing, you are losing a tremendous opportunity to grow your money. Click To Tweet

How to Invest in Stocks and Shares ISA

There are lots of providers out there – from banks to digital fund management companies – who can help you invest your money in a stocks and shares ISA.

Fidelity International offer an easy-to-manage, tax efficient Stocks and Shares ISA which allows you to invest in a wide range of funds, ETFs (Exchange Traded Funds) and investment trusts for a low-cost service fee.

With Fidelity you also get access to expert guidance and market insights on your investment choices and a secure online account where you can watch your money grow.

You can start a regular savings plan from as little as £50 or make a lump sum payment from £1,000 and the easy set-up process takes 10 minutes. You can find out more about a Fidelity Stocks and Shares ISA here.

And you could get more than just a great return on your investment, as Fidelity are currently offering new investors the chance to win £1,000 of Amazon vouchers in their stocks and shares ISA prize draw if you invest by the 30th September 2019.

Opening a stocks and shares ISA is a great way to start investing and building your wealth over time. Ready start investing, click here to get started with Fidelity Stocks and Shares ISA.

Remember the Money Nuggets mantra – financial knowledge and education is power. Investing money isn’t the big scary, confusing monster we think it is. And it won’t be for you either, if you arm yourself with knowledge.

No matter how much you have to invest, once you start, you won’t look back.

Over to you – are you thinking about investing in a stocks and shares ISA? Or have you already taken the plunge? Share your experiences here, we’d love to hear from you!

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