If you’re looking at investing, you're searching for opportunities that will develop over time and create a healthy return. Investments across most asset types’ have seen a high boost in popularity since the global pandemic.
The finance app Trading 212 now has 15 million users, and online trading platform Robinhood reported that in the first quarter of 2021 alone, 9.5 million customers traded with them.
Whether it's digital investments or physical investments such as a business or real estate, here are 5 steps to get you started with investing…
Workplace Investment Schemes
Workplace schemes used to refer to your pension, yet now larger companies can offer other methods of investment. These accounts are aimed at providing a tax-advantaged way of saving for your retirement.
Save As You Earn (SAYE) can be offered after you have worked at a company for a certain length of time. You can save up to £500 per month with the scheme. At the end of the scheme, a tax-free bonus is added to your savings.
Workplace ISAs started out as an easy way to contribute to a stocks and shares ISA directly from your net salary, giving another tax-free savings product option on top of company pensions.
Share Incentive Plans (SIPs) are another tax efficient way to buy or receive shares in the company you work for. These are designed so you don't pay tax or National Insurance contributions on the shares you buy, if you keep them for 5 years.
Understand The Fees
Each fund you invest in comes with a set of fees, which can range from 0.5% to 2%. The difference between these percentages can make a big impact on your portfolio growth, as a fee of 1.5% could equate to thousands of pounds over a few years.
Be sure to check the key investor information document, which many funds must now provide.
The Advantages of Stocks and Shares ISAs
Stocks and shares ISAs offer potential for better returns compared to cash ISAs, which makes them more attractive investment options. Any growth from that ISA would also be tax free, meaning that any shares you sell, and subsequent profit you make would be exempt from capital gains tax.
If you are already comfortable with cash ISAs, the stocks and shares version may be a great start to investing. The ISA allowance for the 2020-2021 tax year is £20,000. Therefore, if you put £12,000 in a cash ISA, you will be able to put £8,000 towards your stocks and shares ISA.
Keep Risk Tolerance in Mind
When making any investment, you must assume that you might lose your money. There are no guarantees and the market can rise and fall.
Understanding your risk tolerance and setting firm boundaries can help you navigate how you invest your money. Researching your investments is a key element of risk tolerance and will help you make informed decisions.
Factor in Tax
One final step would be to remember the taxes involved when planning your investments. As mentioned, different investments offer different tax options, but they require planning.
If you're not sure about what tax may apply to your investments or you would like to discuss your financial planning further, get in touch with a member of our team today who will be happy to talk you through any questions.