Clare Francis - Barclays Director of Savings and Investments
"Using ISAs makes things a bit simpler"
I’ve been investing using ISAs for 15 years and each year endeavour to use up as much of my annual allowance as I can afford.
A key reason I use an ISA for my investments is that the returns I receive are tax-free. It’s possible to invest outside an ISA without paying tax, making use of the annual dividend and capital gains tax allowances. However, you have to be a bit careful not to exceed them, otherwise there could be some tax to pay. If your money’s invested in an ISA you don’t have to worry about this so it makes things a bit simpler.
Because I’ve been investing for a while, I’ve built up quite a diversified portfolio. Most of my money is invested in funds of different types and across different countries.
When it comes to working out how much I can invest I first look at how much I’ve got in cash savings and what I might need that money for in the short term.
I’ve managed to invest a bit more than usual this tax year because the pandemic meant I had holidays cancelled and generally haven’t been spending as much. My investments are for my long-term future – I’m not investing for anything in particular but I have a six-year old son, so some of the money could be useful for university costs or getting him started in his career. The rest might influence when I’ll be able to afford to retire!
Mike Haslam – Head of Funds Distribution
"Don’t be put off by the size of the ISA allowance - you can start small"
My tip for investing in an ISA is not be put off by the adverts you see, telling you that you can “invest up to £20,000”. I certainly don’t have £20,000 to invest, and most investors don’t. You can start small. Think about saving monthly.
My first job in the City was with a stockbroker, processing applications for Personal Equity Plans, known as PEPs. PEPs were similar to ISAs, which replaced them in 1999 (that shows how long I’ve been in the industry!).
Back then, before the rise of the internet (yes, I really am that old) investors typically cut out an application form from a newspaper and sent it to a stockbroker along with a cheque. So there was I, earning a very basic wage, opening envelopes each containing a cheque for £9,000, the maximum permitted investment into a PEP. I could only dream of having so much money.
That put me off investing as I thought it was all about having enough money to send off a large cheque to a stockbroker every year. I didn’t know then about regular investing and that I could save with as little as £10 a month into the very same investments that these seemingly ‘rich’ individuals were also buying into. Today, it seems that monthly, or regular saving is a very simple first step into investing, especially as I can now set up a savings scheme with just a few clicks on my phone. I wish it had been that easy 25 years ago.
Rob Smith - Head of Behavioural Finance
"Starting sooner can help maximise growth"
The best investment advice remains to get started as soon as you can so that you can maximise the time your money has to grow. Yet every year we see the same rush to set-up and put money into ISA accounts right up to the deadline. Many people will have saved this money over the course of the year but it’s often the looming tax year-end on 5 April and various marketing campaigns that trigger us into action. So if you can use your allowance at the start of the tax year, or set-up monthly contributions that move savings into your ISA throughout the year it will likely help you over the long-term.
Setting up automatic investments is perhaps one of the best value for money actions investors can take. Firstly, it means that you only have to make one decision rather than many, which is always helpful when life may get in the way of you making the next investment. Secondly, it means that you will not have to decide if it is a good time to invest with each instalment. This is arguably the main benefit and is a significant reason why many would-be investors remain in cash for the long-term and miss out on potential returns. Investing over time will mean that you even out the ups and downs of the market, so if prices do fall then you can buy more, and if prices increase you still get invested rather than waiting for the market to ‘come back’ which it may never do.
If you don’t want to invest now, perhaps because you don’t know what to invest in, then opening an investment ISA account and transferring in cash is a good way to secure your allowance before it disappears. However, experience tells us it’s easy to forget and end up leaving it sitting in cash. Then you have the double whammy of your money not receiving much interest (if any) and therefore losing its real value due to inflation, plus incurring any charges for the ISA account. Investments are also subject to inflation, however the long-term expected returns of investing are more likely to be greater than cash currently. If you do park cash add a re-occurring event to your diary when you make the transfer to act as a reminder to get the cash invested.
Although it’s appealing to invest in the UK stock market, either directly through names of recognisable domestic companies or through well-known UK focused funds, don’t forget there is a whole world to invest in. It’s best to spread your investments across continents to reduce risk and maximise your chances of investing in the best growing markets. Whilst some investment in the UK may be sensible, the significant lag in returns the FTSE 100 witnessed in 2020 versus other major developed markets is a case in point. The US represents the largest investment market in the world, and even though individual company names beyond the likes of Apple and Amazon may be unfamiliar, an investment spread across sectors and industries remains sensible. This is also the case for other major stock markets in Europe and Asia.
Will Hobbs - Chief Investment Officer, Barclays Investment Solutions
"Take the plunge and stick with it"
The most important point about investing generally as well as via ISAs will sound somewhat counterintuitive to many – time in the market is way more important than timing the market. This essentially means that for all of us thinking about deploying our hard earned savings into the market, we need to try and ignore what has happened in the last day, week, month or year. We may feel more emotionally comfortable buying when the price of access has fallen a little. However, the reality is that price falls and rises, in the context of mostly efficient markets, tend to reflect new information (good or bad). Getting invested as soon as possible is the first point, with any savings that you can reasonably comfortably spare. However, the next part is sticking with it – also easier said than done. The tax advantages provided by staying invested in a stocks and shares ISA are a very helpful inducement to do just that. The more days, months and years that I can be invested in a diversified mix of assets, the more chances I’m giving myself to collect the various, unpredictable surges in human ingenuity and innovation that accrue to the owners of companies – which is us as soon as we take the plunge and invest (and stay invested).