Explained: stocks & shares ISAs 2016 - by Ben Barlow

Thursday, 12 May 2016
Stocks & shares ISAs have the potential to earn you more money than through a standard cash ISA. However, the level of associated risk is higher. For this reason, a stocks & shares ISA isn’t for everyone. Unlike with a cash ISA, you should only invest if prepared to take the risk that the value of your stocks may go down as well as up.

In order to decide whether a stocks & shares ISA is right for you, we’ve put together this handy guide that contains all that you need to know.

How can I get help?

If you don’t know a lot about investing, it may be worth seeking independent advice. Most financial advisers offer a free consultation period. Beyond this, seeking regular financial advice can become pricey, with the cost being derived as a percentage of your assets or as a set figure in pounds and pence.

If you’re looking for financial help, it’s well worth shopping around in order to get the best possible deal. Also ensure that you’re finding someone who is the perfect fit for you, as you’ll need to trust their advice.

How much can I invest?

Your ISA allowance is £15,240 for the 2016/17 tax year, although this is set to increase to £20,000 in 2017/18.

Any contributions you make into a cash ISA also count towards this allowance. So, if you placed £5,240 into a cash ISA, you could only deposit £10,000 into a stocks & shares variant.

You can only have one cash ISA provider and one stocks & shares ISA provider in each tax year. If you wish to change provider and make additional contributions, you first need to transfer your ISA.

What can I invest in?

You can invest in a number of things, such as:
  • Corporate and Government bonds: Here you lend your money to a company or the Government in return for interest.
  • Shares: Here you invest in an individual company. If the price of the company goes up, the price of your investment does, too.
  • Funds: These include bonds, shares, a mixture of the two, or cash.

How can I lower the risk?

When you’re investing money, there’s always a level of risk involved. It’s important that you fully understand the differing levels of risk before you begin trading.

Your attitude towards risk will vary depending on a number of different factors, and it may even alter as time progresses. You can learn more about it in this great guide.

To conclude, a stocks & shares ISA can be a great saving tool but you’ll have to first learn about the investment risk involved.