Stocks & Shares ISA Allowance
Did you know for 2010/11 you can invest up to £10,200 per year in a stocks and shares ISA, for tax-advantaged growth in the stock markets?
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While the stocks and shares ISA is a little more risky than his conservative sister the cash ISA, it does offer the possibility of more attractive returns over the long term. This is because experience shows that stock market investments generally outperform cash, if left alone for at least 10, and preferably 15 years.
We have all heard the investor’s mantra that the value of investments can fall as well as rise. Stock market investments can indeed fluctuate in value in the short term, sometimes quite dramatically. This becomes a problem for stocks and shares ISA investors only if there is a sudden and urgent need to access their cash, which robs them of their flexibility to choose the timing of their exit from the market. It is therefore important to ensure that you can leave your cash invested in the stocks and shares ISA for the medium to longer term.
The stocks and shares ISA is particularly attractive in times of very low interest rates, as low interest rates are usually reflected in lacklustre returns from cash savings accounts. For this reason, with the Bank of England base rate of interest at an all-time low of just 0.5% (May 2010), the stocks and shares ISA really comes into its own. In fact, recent research revealed that of those people planning to open ISA accounts during 2010, over 80% were planning to opt for the stocks and shares ISA, as opposed to the cash ISA.
Another factor which favours the stocks and shares ISA, in comparison to the cash ISA or other cash savings accounts, is the ongoing effect of inflation on cash savings. Again, due to the disappointing returns from cash savings at times when interest rates are very low, funds in a cash-based savings account can actually fail to keep step with inflation, so that the real value of the cash sum invested is falling. With its potential for higher growth in the long term, again, the stocks and shares ISA really comes into its own.
Savers who have both a cash ISA and a stocks and shares ISA may transfer savings across from their cash ISA into their stocks and shares ISA, but not in the opposite direction.
Stocks and Shares ISAs / Maxi ISAs
The stocks and shares ISA should not be confused with the Maxi ISA, which enabled you to place your maximum ISA allowance in either a shares ISA or a mixed ISA (shares, cash and insurance). The Maxi ISA has been taken off the market and been replaced with stocks & shares ISAs.
When considering ISA investments, it is important to take into account your risk tolerance, the length of time you are prepared to invest, and the level of reward you are looking for from your savings.
Use our Risk Profiler to check your risk tolerance now or make an Investment Enquiry
As with all investments, regular consultations with a quality financial adviser are essential for success.
