What is a Stocks and Shares ISA?
Are you interested in investing, but not keen by the ‘risk’ of losing your money? This article will help you to understand how a Stocks & Shares ISA work.
What are ISAs?
ISA stands for ‘Individual Savings Account’. ISAs were first introduced by the government in 1999 to encourage UK citizens to save or invest for the future. Initially being offered in mini and maxi versions, ISAs have evolved greatly over the years and now come in various shapes and sizes.
Why would I want to risk my money?
Ultra-low-interest rates have been considered the norm for a number of years, which means that traditional savings accounts can only offer minimal returns. When inflation is considered, savings plans can lose you money in real terms. Therefore, investing in a stocks and shares ISA can offer a better chance for an investor to see their money grow.
How can this make me Money?
When you buy a stocks and shares ISA, you are investing your money. What you are investing in depends on the fund or funds you select as part of your plan. if your funds perform well, you will very likely make money, if they perform badly, you may lose money.
But how can I see the past performance of a plan
Providers should offer a list of the past performance of funds in the ‘Key Investor Information Document’ which you definitely should read prior to committing to a plan. These are usually supplied as a PDF and will hold all of the information you require, including risk levels and charges. However, as is always clearly pointed out in any documentation, Past performance should not be considered as a guide to future performance.
Where do we start?
ISA providers these days offer a wide range of options, and it can be confusing for any first-time investor to know where to begin. However, it’s also now easier than ever to get started, with many ISA providers offering plans starting from as little as £10 per month.
It’s crucial that you fully understand that stocks and shares ISAs are indeed investments – which means you should be prepared to commit to at least five years of investment. If you withdraw your money before then, there’s a high chance that you could lose money. The longer you leave your money alone, the more chance it will have to ride out the inevitable ups and downs of the stock market and show a return on your investment.