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ISAs were originally created to provide an opportunity for people to save money. Simply invest as much as you can afford each year and select the risk level you’re prepared to accept.
The concept was introduced in 1999 and all ISAs have favourable tax status. They have been used by millions to save for retirement and even as a source of emergency funds. Choose a reputable bank and they’ll take care of everything for you.
But, until recently, they have been the preserve of private individuals looking to create savings and financial security in the future. This is no longer the case as an increasing number of serious financial investors turn to ISAs. They are a valuable part of any portfolio.
Safe Haven
An ISA is an effective way to build funds. But, it’s never going to give you the returns that you can enjoy investing in stocks and shares directly.
However, as the world, and consequently economic markets, has become an increasingly volatile space, an ISA can be the right solution. It protects funds you don’t want to risk and allows them to grow a little.
Of course, the volatility of markets means you could make a huge return on your investment, but you could also lose it all. That’s why having a safe haven is a smart investment decision.
Can Be Controlled
Originally you invested your funds in an ISA and selected the risk level. The provider then took care of everything else for you and hopefully increased your funds. As a private investor, you will need more control. Fortunately, most providers now allow you to choose your own stocks and shares and even move the fund around as often as you like.
It increases the risks but allows you to improve the income return without risking all of it.
Use It Or Lose It
Every individual is entitled to an ISA and can invest up to £20,000 per year in it. Once invested it is not subject to capital gains and inheritance tax. That automatically improves your investment returns. If you don’t invest each year there is no carry-over option. You simply lose the opportunity to increase the value of your ISA. As a serious investor, this doesn’t make sense. The ISA effectively gives you something for nothing. That’s why it needs to be included in your investment portfolio.
A Balancing Act
Because you have control over your ISA funds you have more freedom to generate returns without risking everything. In short, you can choose how much to put in high-risk stocks and shares and how much is better off in low-risk.
It should be noted that you still need to monitor markets and move funds around accordingly to make the most of your ISA. Despite what many people think, this is not an invest and leave it program. It’s best to monitor, adjust, and reap the rewards.
You can do this alongside your other investment options, effectively increasing your chances of success.
