Stephen Sutherland Blog

Making a Million Using Stocks and Shares ISAs - Part 12 of 14

2010-03-05T07:20:19+00:00

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.

We endeavour to deliver quality information, ideas and personal opinions on stocks, funds and the general market. However, the information, ideas and personal opinions provided are intended to be a general guide to financial management only. Our products are intended to be a general guide to financial management. ISACO Limited and its employees are not agents, brokers, stockbrokers, broker dealers or registered financial advisors. ISACO Limited do not accept any responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in its products. ISACO Limited does not recommend particular stocks or investment funds or any other security or any other investment of any kind. If particular stocks or investment funds are mentioned, they are mentioned only for illustrative and educational purposes. Whilst ISACO Limited comments on the services and advice offered by other companies and individuals, none of the companies or individuals have authorised, sponsored, endorsed or approved this publication. ISACO Limited has not received any remuneration in return for including any company or product featured in our products. You should seek advice from a registered financial professional prior to implementing any investment program or financial plan. ISACO Limited, their agents and employees, do not guarantee any results or investment returns based on the information in this program. Past performance is no indication or guarantee of future results and the value of any investment you make can go down as well as up. The products present information and opinions believed to be reliable, but the accuracy cannot be guaranteed and ISACO Limited is not responsible for any errors or omissions. ISACO Limited accept no liability for such inaccurate or incomplete information.

Making a Million Using Stocks and Shares ISAs - Part 11 of 14

2010-03-03T07:23:28+00:00

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.

In last week’s blogs, continued to share with you the 7 lessons about how the stock market works and in my previous blog I covered Lesson 6: Watch the price and volume action.

This week, you’ll learn the seventh and final lesson before moving onto some more juicy stuff about ISAs.

Let’s commence.

Lesson 7: In bear markets, you switch (not sell) from your high quality investment fund into a cash based fund

When you notice that the market trend has changed from up to down, you bank your profits by switching out of your high quality investment fund and into a cash based fund such as Fidelity’s ISA Cash Park. This helps to protect against future losses because of the trend change. This is when you then simply sit, wait and be patient.

Bear markets don’t last as long as bull markets and so you should be parked in a cash-based fund for no longer than 9-18 months.

Why do you do this?

The reason is simple. Because you learned earlier that three out of four stocks (and funds) move in the same direction as the market, and because you’ve learned that markets work in cycles (bull market - bear market - bull market - bear market and so on), it means that ideally in bear markets (down markets) you want to move out of equities and into the safety of cash.

Many UK investors don’t realise that it is possible to do this.

Some mistakenly think that once you are invested in a fund, you have to stay in that fund. That’s nonsense.

Some wrongly think that to switch into a cash-based fund would adversely affect their ISA allowance. That’s also warped thinking.

To do this correctly, you have to remember that when you are dealing on your ISA account, it’s not about selling – it’s about switching.

You see, if you sell, then you lose all your annual ISA allowances that you’ve built up over the years. But when you switch, your ISA allowances remain intact.
Fidelity offer a way of temporarily parking your ISA investments into a cash fund. This can be extremely useful if you believe that the market trend is downwards, and is going to continue to head lower in the future.

By parking your money in cash on a temporary basis, it means that even if the market crashes, your money will be safe. In fact, even though equity (stocks and shares) ISAs could be dropping like stones, a cash park will actually be rising in value.

In Friday’s blog I’ll be moving onto some more juicy stuff about ISAs and starting by comparing the differences between Cash ISAs and Stocks and Shares ISAs.

Find Out More

In the mean time if you would like to find out more about how you can make a million pounds through using an ISA, please click here for a FREE sneak preview of my book, Liquid Millionaire.

Happy reading!

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.

Making a Million Using Stocks and Shares ISAs - Part 10 of 14

2010-02-27T07:19:34+00:00

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.

In my previous blog I continued to share with you the 7 lessons about how the stock market works and covered Lesson 5: 75% of the market’s movement comes from institutional investors.

Today, I’m going to be explaining Lesson 6: Watch the price and volume action.

Lesson 6: Watch the price and volume action

One of the best ways of reading the market is to look at charts. A stock chart is a graph that displays the price and volume history of a given security or index over a period of days, months or even years.

Price and volume charts help you to see what the professionals are doing so that you can follow in their footsteps. Whether they are buying or selling, through a chart you can see what they are doing by simply looking at the price and volume action. Price action is how a stock or index changes in price. Volume action tells you the number of shares that have been traded.

For example, if volume is far above its average and the price action is up, the professionals are buying. On the other hand, if the volume is far above average and the price action is down, it means that the professionals are selling. Lack of volume combined with prices moving up indicates little demand from the professionals. This is viewed as unhealthy action.

Lack of volume combined with prices moving down means that the professionals are reluctant to sell. This type of action is viewed as healthy action. By watching the market every day, and keeping a close eye on price and volume action, you can determine exactly what the professionals are doing with their money so that you can do the same.

Below are four images. They show the difference between healthy price and volume action and unhealthy price and volume action.

Healthy Price and Volume Action

Unhealthy Price and Volume Action

It is also important for you to understand that it takes a lot of buying or selling to confirm that the trend of the market has changed.

For example, if the trend of the stock market is up, it takes a lot of selling to change the trend from up to down. By measuring how much selling is going on over certain time periods, you can determine when the trend is about to change or has changed and you can then act accordingly ie; switching some or all of your holding into a cash based fund such as the Fidelity ISA Cash Park.

Reading the market’s health gives you inside knowledge of future market direction and if the market’s health has become sickly, it tells you that if you stay invested, your investments have a high probability of dropping in value.

It is helpful to be aware that it’s impossible to time getting out at the very top of the market or getting in right at the very bottom.

Next week I’m going to close off the seven lessons and then move onto some more juicy stuff about ISAs.

Until next time my friend.

Find Out More

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.

Making a Million Using Stocks and Shares ISAs - Part 9 of 14

2010-02-25T07:43:40+00:00

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.

In last week’s blogs, I started to share with you the 7 lessons about how the stock market works and in my previous blog I covered Lesson 3: Three out of every four stocks (and funds) move in the same direction as the market and Lesson 4: The stock market can be timed.

This week you are going to learn Lesson 5: 75% of the market’s movement comes from institutional investors and Lesson 6: Watch the price and volume action.

Let’s continue.

Lesson 5: 75% of the market’s movement comes from institutional investors

The big professional investors have the largest influence on the market’s future direction. Institutional investors can be fund managers, banks, building societies or insurance companies. And if these 800 pound gorilla investors are buying, you can jump on to their coat-tails. And if they are selling, you can quickly switch out on to the sidelines.

Here is how it works.

Picture the market as a big tree. Let’s imagine the professional investors being woodcutters. If the professionals are selling heavily (you can see them selling their stocks by looking at charts) it is like them taking a cut out of a tree and this of course makes the tree or market weaker.

If they take too many swipes at the tree in a short space of time, what is going to happen?

That’s right, the tree will fall over. So when the tree or market gets weak because of excessive selling or cutting it sends you a red flag to say get out of the market. On the other hand, when the professional investors are buying heavily and in a short period of time, this makes the market healthy and extremely strong – and this is the time when you do want to be invested.

In Saturday’s blog I’ll be continuing to share with you the 7 lessons about how the stock market works with Lesson 6: Watch the price and volume action.

Find Out More

In the mean time if you would like to find out more about how you can make a million pounds through using an ISA, please click here for a FREE sneak preview of my book, Liquid Millionaire.

Happy reading!

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.

Making a Million Using Stocks and Shares ISAs - Part 8 of 14

2010-02-19T07:13:38+00:00

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.

In my previous blog I started to share with you 7 lessons about how the stock market works and presented Lesson 1: Markets keep going higher and Lesson 2: The market works in cycles.

Today, I’m going to sharing with you 2 more lessons about how the stock market works.

Lesson 3: Three out of every four stocks (and funds) move in the same direction as the market

Because three out of four stocks move in the same direction as the market, the performance of the funds you choose to be protected by your Stocks and Shares ISA will be directly linked to the market’s direction. That’s because investment funds own a large portfolio of stocks. And so if the market is trending up, three out of every four funds will move up.

But if the market is trending down, three out of four funds are going to move down. And if the market is trending sideways three out of four funds are going to move in which direction?

Yes, you are correct – sideways.

When the market takes a heavy fall, investors who do not know how the market works will probably blame either the fund manager or their advisers for their losses.

But what they really should be doing is noticing and understanding the link between their fund value dropping and the market heading downwards.

You see most investors do not know that three out of four stocks will always move in the same direction as the market.

That means even if you own a fund that is managed by one of the best fund managers in the world, if the market takes a dive, that fund you are invested in will also be likely to take a dive.

Lesson 4: The stock market can be timed

Opinions are divided on whether the stock market can be timed or not. At ISACO, we strongly believe that markets can be timed – although it is not easy to time markets accurately.

So where do you start?

First of all you need to understand how to read and analyse the stock market’s health.

To do this, you have to observe and study the major indexes carefully. Here they are:

• The Nasdaq Composite
• The S&P 600
• The S&P 500
• The Dow Jones Industrial Average

As well as watching these four indexes, it’s crucial to watch the behaviour of leading stocks and leading sectors.

By studying these four indexes plus the action of leading stocks and leading sectors – each and every day, you can come to realise meaningful changes in the daily behaviour at key turning points like market tops and bottoms and learn how to capitalise on them.

Next week I’m going to continue to share with you the 7 lessons on how the stock market really works.

And learning these lessons could really help you accelerate towards your goals.

Until next time my friend.

Find Out More

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.

Making a Million Using Stocks and Shares ISAs - Part 7 of 14

2010-02-17T07:20:56+00:00

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.

In last week’s blogs, I shared with you how investment funds can make you “liquid” rich and in my previous blog I explained What do we mean when we say “Beating the Market”?.

I also said I would start sharing with you this week 7 lessons about how the stock market works.

As promised, here they are.

Fundamentals about how the stock market works

First of all, it’s good for you to be aware that some advisers will make out that the market is very complex – however, the way it works is probably simpler than you think.

In this section you are going to learn seven lessons explaining the fundamentals about how the stock market works, and how the stock market is tied to investing using Stocks and Shares ISAs.

Lesson 1: Markets keep going higher

Most Britons have heard of the FTSE 100 but fewer have heard of the S&P 500. The FTSE 100 is an index in the UK that has the top 100 companies trading in it. The S&P 500 is the United States equivalent and, you guessed it, this one has 500 companies trading in it.

What long-term trend has this index formed? Is it up, down or sideways?

Yes, that’s right, it’s in an uptrend.

Can you see the grey vertical shaded areas on the chart?

These grey shaded areas are representing the down periods in the market. They are known as bear markets. And the white areas on this chart are the times when the market rose. These periods are called bull markets.

What do you see happening after each bear or down market?

That’s right. The market goes up. Would you agree that after every bear market, the index always eventually moves into new high ground?

Good.

Lesson 2: The market works in cycles

Did you know that historically, bull markets or up markets have lasted between two and four years?

Bear or down markets tend not to last as long. Bear markets tend to last between nine and eighteen months and therefore are much shorter than bull markets. Because bull markets last longer, the stock market forms an uptrend. It’s like a staircase effect where you have three stairs up and then one stair down.

In Friday’s blog I’ll be continuing to share with you the 7 lessons about how the stock market works with Lesson 3: Three out of every four stocks (and funds) move in the same direction as the market and Lesson 4: The stock market can be timed.

Find Out More

In the mean time if you would like to find out more about how you can make a million pounds through using an ISA, please click here for a FREE sneak preview of my book, Liquid Millionaire.

Happy reading!

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.

Making a Million Using Stocks and Shares ISAs - Part 6 of 14

2010-02-13T07:35:00+00:00

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.

In my previous blog I started to share with you how investment funds can make you “liquid” rich.

Today, I’m going to explain why making it a goal to beat the market is so important.

What do we mean when we say ‘Beating the Market’?

• If the stock market averages 3% per year over the next 10 years, your system wants to average more than 3%.

• If the stock market averages 8% per year over the next 10 years, your system wants to average more than 8%.

• If the stock market averages 13% per year over the next 10 years, your system wants to average more than 13%.

Beating the market means simply staying ahead of the indexes over the long term.

And so if the stock market averaged 10% per year over the next ten years, and your ISA account averaged 12 or 14% per year, that’s what you’d call a success.

The term beating the market means being able to beat / outperform the main stock market indexes such as the FTSE 100, the S&P 500 or the Nasdaq Composite.

Did you know that some stock indexes perform better over the long-term* than others?

Yes it’s true. For example:

But how has the Nasdaq Composite performed versus the FTSE 100? As you can see on this next chart, the Nasdaq has more than doubled its performance.

Aiming to beating the Nasdaq would therefore be a much harder goal than trying to beat the Dow, the S&P 500 or the FTSE 100 – but as I’m sure you’ll agree, it is a worthy goal for an adventurous investor.

Beating a strong market index like the Nasdaq Composite is not easy to do. In fact most fund managers find it hard to beat the FTSE 100 and the S&P 500.

But some investors have proven that it can be done. That means that if others have done it, it’s possible for you to do it too.

In summary, you must have a benchmark to measure against to help you gauge how well you are doing with your investing. If you don’t measure, you can’t manage. It’s that simple.

At ISACO, we use the Nasdaq Composite as our benchmark. We are fortunate to have an investment fund screening tool called HIRE CAR™ that has so far managed to stay ahead of both the FTSE 100 and the Nasdaq Composite.

Next week I’m going to start to share with you 7 lessons about how the stock market works. And learning those lessons could really help you accelerate towards your goals. Until next time my friend.

Find Out More

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.

Making a Million Using Stocks and Shares ISAs - Part 5 of 14

2010-02-11T07:22:05+00:00

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.

In my four previous blogs, I introduced how ISAs are one of the UK’s best-kept secrets with content from the guide’s introduction. In my previous blog I explained who can buy an ISA as well as where to get an ISA.

I also stated that from this week, I would start to share with you how investment funds can make you “liquid” rich.

Let’s begin.

To help you become liquid rich use an investment fund

To invest in a Stocks and Shares ISA, you have to pick an investment.

Remember that an ISA is not an investment, but is the name of a wrapper that goes around an investment sheltering it from the Inland Revenue.

Once again, think about a sweet in a wrapper. The investment is the sweet and the ISA is the wrapper.

Your job is to find an Alex Ferguson of the fund world

In case you are unsure, an investment fund is a pooled investment vehicle that allows investors like you and me to invest in the stock market.

They are controlled and managed by a professional investor who is called a fund manager. These fund managers buy stocks (companies) that they believe are going to rise in value. If they choose well, the fund’s value will do well and all the people invested in the fund will be rewarded with an increase in their investment portfolio.

Investment funds are the investment vehicles that have the power to grow your account at greater returns than you’d get from investing in a cash ISA.

But they can also fall in value too.

Investment fund managers are like football managers.

That means to increase the probability of you picking a good fund that is likely to perform well in the future, you first of all have to find a fund that is currently being managed by a fund manager with an excellent track record.

To help you become liquid rich, make it your goal to beat the market

Your chief aim is to beat the market. And it’s possible to do that using investment funds.

In Friday’s blog I’ll be explaining what do we mean when we say ‘Beating the Market’?

Find Out More

In the mean time if you would like to find out more about how you can make a million pounds through using an ISA, please click here for a FREE sneak preview of my book, Liquid Millionaire.

Happy reading!

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.

Making a Million Using Stocks and Shares ISAs - Part 4 of 14

2010-02-05T07:17:12+00:00

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.

In my previous blog I explained there are Two types of ISAs: Cash ISAs or Stocks and Shares ISAs and how flexible they can be in helping you make larger Tax Free returns.

Today, I’m going to be detailing who can buy an ISA as well as where to get an ISA.

Who can buy an ISA?

Did you know that there is no limit to how much your tax-free pot can grow?

Yes, it’s true. If you start with say, £1000 and eventually over time it grows into, let’s say, £1 million, all of that £1 million would be tax-free.

Where to get an ISA

You can get an ISA by going to an ISA manager. These include:

• Banks and building societies

• National Savings and Investments

• Financial advisers

• Some supermarkets and retailers

• Fund supermarkets – such as Fidelity’s FundsNetwork™

Next week I’m going to start to share with you how investment funds can make you “liquid” rich.

Find Out More

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.

Making a Million Using Stocks and Shares ISAs - Part 3 of 14

2010-02-03T07:29:17+00:00

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.

In my two previous blogs, I introduced how ISAs are one of the UK’s best-kept secrets with some content from the guide’s introduction. In my previous blog I illustrated how much tax you will save by investing through an ISA.

Today, I’m going to explain there are Two types of ISAs: Cash ISAs or Stocks and Shares ISAs and how flexible they can be in helping you make larger Tax-Free returns.

Two Types of ISAs: Cash ISAs or Stocks and Shares ISAs

ISAs are fantastic. As mentioned in the introduction, we believe that ISAs are one of the UK’s best-kept secrets.

Unfortunately most of the financial information about ISAs is either too complex or too boring to engage people’s interest.

How they work and how useful they can be for growing long-term wealth is simply not common knowledge.

First of all there are simply two types of ISAs; Cash ISAs and Stock and Shares ISAs.

Are you aware that if you are willing to take more risk, it is possible to make greater returns – possibly even double digit - instead of 3% or 4%?

Yes, by simply transferring your Cash ISAs into Stocks and Shares ISAs, you could end up making larger returns. But remember that when you expose your money to the stock market, the value of your investment can go down as well as up.

But if you are more adventurous and you feel confident that you know what you are doing, it is possible to transfer your existing Cash ISAs to a Stocks and Shares ISA.

To put it another way, if you have built up a stock pile of Cash ISAs over the years, they can now be rolled into a Stocks and Shares ISA. This is great news for anybody who has a desire to get their money working harder for them.

Many people think that when they take out a Stocks and Shares ISA with a bank, their ISA has to remain with that same bank for life. A few people mistakenly think that they are locked in and can’t move their ISA. Both these myths are utter nonsense.

With your ISAs, you have the power to control where your money is being parked or invested. And you can change your mind at any time.

Did you know that an ISA is not an investment, but is the name of a wrapper that goes around an investment sheltering it from the Inland Revenue?

Think about a sweet in a wrapper. The investment is the sweet and the ISA is the wrapper.

In Friday’s blog I’ll be detailing who can buy an ISA as well as where to get an ISA.

Find Out More

In the mean time if you would like to find out more about how you can make a million pounds through using an ISA, please click here for a FREE sneak preview of my book, Liquid Millionaire.

Happy reading!

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.