Making a Million Using Stocks and Shares ISAs - Part 12 of 26
By Stephen Sutherland, author of Liquid Millionaire.Posted in the Category of ISAS, Investing, Stock Market, Investment Fund on 5th March, 2010.
Tags: cash based fund, cash isas, investment fund, isa, isa trend investing, liquid millionaire, million, stocks and shares isas.
Over the last few months, I’ve been writing an ISA Trend Investing Guide that shows you how you could make a million using ISAs.
Over the next few weeks/months, I’ll be giving you an exclusive sneak preview before the main newspapers get their hands on it because I suspect that some time in the future, you’ll be seeing a copy inside your favourite weekend broadsheet.
In my previous blog I concluded the 7 lessons about how the stock market works by covering Lesson 7: In bear markets, you switch (not sell) from your high quality investment fund into a cash based fund.
Today we’ll be moving onto some more juicy stuff about ISAs and comparing the differences between Cash ISAs and Stocks and Shares ISAs.
Cash or Shares?
Whether you opt for a Stocks and Shares ISA, Cash ISA, or both will largely depend on your investment objectives and time horizon.
Over the long-term, equities tend to outperform cash and bonds, but they also tend to be more volatile so if you are investing for less than five years, or are a cautious investor, financial advisers often recommend that you stick with cash as its value cannot fall (although you do need to ensure that the interest rate is higher than inflation).
Cash ISAs
The annual Stocks and Shares ISA allowance from April 6th 2010 is £10,200. And up to £5,100 may be put in cash.
Cash ISAs work just like normal savings, except the interest isn’t taxed.
If you ever decide to withdraw money from your Cash ISA, it can’t be returned.
At the beginning of each new tax year (April 6th), everyone aged 16 or over gets a new ISA allowance. If you don’t use it, you lose it. Yet if you do put the cash in, you can keep it in there, tax-free for as long as you like.
You can only have a Cash ISA with one provider in any tax year – you can’t split it. However you can hold Cash ISAs from different years with different providers.
Stocks and Shares ISAs
Stocks and Shares ISAs are different from Cash ISAs – which are just tax-free savings accounts.
A Stocks and Shares ISA lets you put money into a range of investments, such as unit trusts, open-ended investment companies (OEICs – similar to unit trusts) and investment trusts, as well as government and corporate bonds. This means your investment can go down as well as up.
You can also buy individual shares and put them into an ISA – this is known as a Self-Select Stocks and Shares ISA.
Just as with Cash ISAs, if you ever decide to withdraw money from your Stocks and Shares ISA, it can’t be returned.
At the beginning of each new tax year (April 6th), everyone aged 18 or over gets a new ISA allowance. Again, just as with Cash ISAs, if you don’t use your allowance, you lose it.
The chart below highlights what would have happened if a couple – using their full yearly allowances – had invested in a Stocks and Shares ISA versus a couple investing their full annual allowances in a Cash ISA.
Next week I’m going to move onto a new way of investing using ISAs; ISA Trend Investing.
ISA Trend Investing is what helped one of my clients (Bob Liddell from Glasgow) to make a tax-free gain of £101,500 in just 9 months.
Until next time my friend.
Find Out More
If you would like to find out more about how you can make a million pounds through using an ISA and help make you a liquid millionaire then please contact a member of my team for a chat. You have my word there will be no sales, no jargon, just the facts.
Your friend,
Stephen Sutherland
The UK’s Leading Authority in ISA Trend Investing and Author of Liquid Millionaire
Please Note: As always, let me remind you that I am not a financial adviser and therefore not authorised to give advice on what investments to buy or sell.
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