Putting money away is always a good idea, giving you something to fall back on and helping to build up savings for things you really want.
But if you want to give your money even more potential, it could be worth thinking about investing in a Stocks and Shares ISA. Keep reading to find out why.
You could make the most of tax-free investments
Each tax year, thanks to the government, you have an annual ISA allowance that you can use to save and invest without paying tax on the gains your money makes – whether that's interest on your cash savings or dividends from investments.
In the 2024/25 tax year, you could squirrel away up to £20,000 in ISAs (Individual Savings Accounts) tax-efficiently. You could pay this money into one type (such as a Stocks and Shares ISA), or spread it over the four different types you can open as an adult.
The beauty of this is that all the gains your money makes remain yours (although you may still have to pay fees to your ISA provider, so make sure you check these).
And the sooner you start putting money away in ISAs, the more years you have to take advantage of this allowance as you'll get a new one each year.
However, it's important to note that it doesn’t roll over if you have any left at the end of the tax year. Every 6th April, your ISA allowance runs out and a new one begins – which is great news if you maxed out your ISA last tax year.
You can still access your money
While investing is thought of as something you do for the long-term (because the longer you invest, the more time you have to ride out market dips), you never know what’s around the corner. And if you come up against a big expense that you can't put off paying, then there’s nothing worse than having to pay a penalty to withdraw your money.
With a Wealthify Stocks and Shares ISA, that’s not a problem. You can withdraw your money when you need it, with no charges to access your money.
However, it’s important to note that taking money out of your Stocks and Shares ISA means that your investments will be sold down, and there’s a risk you could end up with less money than you initially put in if you sell them when they've gone down in value. However, if you remain invested, then there is a chance they could go back up – and be worth more – in future.
Also, by withdrawing money, you’ll be waving goodbye to potential growth, so make sure you consider all of this before you do anything.
So, if you’re going to invest through an ISA, it could be worth shopping around to find a provider that matches your requirements. One thing to keep in mind is that some might have fees attached to their withdrawals, so make sure you check beforehand.
You’re not tied to a single ISA provider
Another good thing about ISAs is that you’re not tied to a singular provider – you don't have to keep it with the same one for life. So, if their performance isn’t what you were expecting, or their standard of customer service drops, then it’s easy to transfer your ISA out to another one.
While the definition of an ISA is fairly rigid, providers' offerings do tend to differ. So, some things you might want to check are their fees (for management and withdrawals), minimum investment amounts, access to funds, types of investments, ease of use, and customer service.
It’s worth noting that you can only pay into one of each type of ISA (like a Stocks & Shares ISA) open at any time. But, if you wanted to give your money more potential, you are able to transfer a Cash ISA into a Stocks and Shares ISA (for example) and carry over any previous years’ allowance.
Start with as little as you want
There’s a common misconception that you need to have thousands in order to invest, but that’s simply not true. For example, with Wealthify, you can be a serious investor with just £1 as that's the minimum investment required for our Stocks and Shares ISA, Junior ISA, and General Investment Account. And if you wanted to invest for your future, you can open a Wealthify Personal Pension with £50.
Feel like trying it out with £100? No problem. Ready to put your whole £20,000 allowance in? That’s fine too.
But not all ISA providers are the same. Some could have higher minimum starting costs, ranging from £50 all the way up into the thousands, while others may require larger contributions to be made each time if you want to add to your pot.
Choose how you want to invest
Investing isn’t all about adventurous high-risk, high-reward investments. You could take a much more cautious approach that focuses on minimising losses as much as possible (though you can't eliminate them completely), or a confident, balanced approach that may cause you to see bigger ups and downs in value, and looks to achieve good growth over time.
It’s all about finding out what’s right for you and investing in a style that suits your needs.
With a Wealthify Stocks and Shares ISA you get to choose the level of risk you want to take with your investments, from Cautious to Adventurous or somewhere in between.
Our ISA investment projection tool can give you an idea of what to expect based on your investment, length of time and investment style. So, for example, if you were to invest on our Confident Plan with an initial amount of £500 and added an extra £100 a month, after 10 years you could have £15,589.1
But if you were to continue paying in £100 a month for another 10 years, your investments could be worth £35,871.2
Do good with your money through ethical investments
Being able to make a difference with your money by supporting businesses that do good might seem like a struggle, but with a Stocks and Shares ISA, you are able to do just that.
What’s more, it doesn’t need to be a difficult thing to do either. With Wealthify, investing in companies that align with your values could be as easy as flipping a toggle from 'original' to 'ethical'.
With Wealthify's ethical investments, we aim to avoid 'bad' industries, like tobacco, gambling, weapons, and adult entertainment. But because we use actively managed ethical investments, having an Ethical Plan with us could do so much more.
By actively managing these investments, fund managers can use their influence to do good by putting pressure on companies to make positive environmental and social changes and supporting those who are already committed to doing so.
Give your money more potential
Cash ISAs (which allow you to earn interest on your savings) have had a rough ride in the last decade or so. Interest rates hit rock bottom during the 2008 financial crisis, and it’s been a long and slow road to recovery since then.
Although interest rates have risen a number of times in 2022 and 2023 in a bid to combat high levels of inflation, many Cash ISAs might still not be offering interest rates that keep up with this.
So, if the interest rate you're getting from your Cash ISA is less than the current level of inflation, then you could essentially be losing money over time. Let us explain why.
Inflation increases the price of things over time, and a clear example of this is the price of bread. Back in January 1971, a white sliced loaf would typically cost just 10p, but in January 2023, it would set you back around £1.39.4
The beauty of investing is that the aim is to give your money the potential to beat inflation. Obviously, there’s always a risk you could lose money and end up with less than you initially invested as markets go up and down, and you could withdraw while you're at a loss if you don't give your investments the time to potentially recover. But over the long-term, investing could provide you with higher returns as they won't be tied to fixed interest rates, like cash savings.
Ready to get started? You can open a Wealthify ISA in just a few taps. Simply choose how much money you want to invest, pick an investment style that suits your needs, and our team of experts will do the rest – including building your Investment Plan and managing it for you on an on-going basis.
References:
1: This is the projected value for a Confident Plan (Medium Risk Plan) with an Original theme. This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £12,950. If markets perform better, your return could be £18,858. Values correct as of 24/07/2023.
2: This is the projected value for a Confident Plan (Medium Risk Plan) with an Original theme. This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £26,905. If markets perform better, your return could be £49,109. Values correct as of 24/07/2023.
Past performance isn’t a reliable indicator of future performance.
With investing your capital is at risk and you may get back less than you put in.
Tax treatment will depend on your individual circumstances and may be subject to change in the future.
