The 10 Commandments of Stocks and Shares ISA Investing
By Stephen Sutherland, author of Liquid Millionaire.Posted in the Category of ISAS, Investing, Stock Market, Investment Fund, Wealth Building on 29th October, 2010.
Tags: compounding, isa, isa investing, isa millionaires, stock market, stocks and shares isa, tax shelter.
Stocks and Shares ISA Investing
The annual ISA allowance will be increased from £10,200 to £10,680 on April 5 next year.
It was great to hear the amount of money people can save tax-free is set to rise by nearly £500 next year.
But how can you use this ISA news to help you profit?
Successful ISA investing is just like baking a cake. You need all the right ingredients to make it work. Below are my 10 commandments of ISA investing. These are the rules my clients and I follow and by adhering to them religiously, they have fortunately helped me build a six figure ISA account.
The 10 Commandments of Stocks and Shares ISA Investing
1. Make a Clear Goal – The journey begins with making a commitment. Make the all important, never go back decision – that one day you will be financially free. Decide you will do whatever it takes to achieve your goal. Many people in the UK have proven that becoming an “ISA Millionaire” is possible. Gain absolute clarity on your future ideal lifestyle and how much cash you’d need to fund your lifestyle. Set a realistic deadline.
2. Invest at the Right Time and Get Active – Learn how to read and analyse stock market behavior using price and volume data. This will allow you to invest when the stock market is in an uptrend and move out of the market into an ISA Cash Park when the market is in a downtrend. Because three out of four investment funds move in the same direction as the stock market, by investing with the uptrends, you significantly increase your probability of success.
3. Take Full Advantage of Strong Market Environments – Learn how to find the best performing investment funds managed by fund managers with outstanding track records. Look also at the fund manager’s short-term performance. Ideally, your fund manager will have outperformed the market indexes over the long-term and will also be outperforming the market indexes in the short-term. Morningstar.co.uk is a free site ideal for searching for investment funds.
4. Protect and Preserve in Weak Markets – Switch into a cash-based investment fund (an example is Fidelity’s ISA Cash Park) when the market is unhealthy to help you protect your capital. When the downtrend is over and a new uptrend begins, simply start scanning for quality investment funds that are “on the move.”
5. Use Tax Shelters – By religiously using your ISA allowance, you continually protect your investment from the taxman. This means you don’t pay capital gains tax when you switch back and forth from being invested to not being invested. This preserves the incredible power of compounding.
6. Fight for Every Percentage Point – Keep commission and switching costs low by using a fund supermarket such as Fidelity’s Funds Network. If you don’t use a fund supermarket and buy through an IFA or bank, you could end up paying excessive commission fees.
7. Invest the Maximum Allowance Every Single Year – Right from the start, focus on investing your full £21,360 (if you are investing with your partner) each and every year. Add aggressively for the full duration of your plan irrespective of what the market is doing. Ideally, aim to add sometime between April 6th and April 13th every year. Adding is the key to your success. Aim to put in £10,680 for you and £10,680 for your partner each year but don’t worry if you are unable to put that much in. Just do your very best and try to improve it year on year.
8. Stay the Course – Think long-term. Think ten, twenty or even thirty years or more. Never cash in your chips early or you may live with serious regret. Be patient. NEVER touch this money for anything. To win, your ISA account must become untouchable UNTIL the time that is has grown so large that you can start to draw down on that account to help pay for your chosen lifestyle.
9. Continuous Education is the Key – Continuing to educate yourself can increase your value, which in turn helps you to be worth more to the market place, which in turn helps you easily and effortlessly sock away the maximum allowance each and every year.
10.On Reaching Your Target, Set up an Automatic Withdrawal Plan– When you finally reach your target, you set up an automatic withdrawal plan to pay for your chosen lifestyle. This means that if by then you have mastered the skill of growing your money at 12% per year, by withdrawing 5% your large chunk of capital will continue to grow at approximately 7% every year. This means as well as enjoying your chosen lifestyle, you also become richer each year.
And so there you have it, the ten commandments of stocks and shares ISA investing.
If you would like to get more detail about what you’ve just heard, you can request a FREE Telephone Consultation (£1,997 value) by simply contacting us.
As well as booking your free consultation, you can also obtain a FREE copy of my book Liquid Millionaire.
The number of telephone consultations (and free book giveaways) available is always limited so I suggest you get in touch right now.
You can email us or call 0870 757 8554 if you prefer.
In both cases you are under no obligation to do anything, buy anything or sign up for anything.
Until the next time my friend.
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