Hi, a friend recommended I joint this platform and open an ISA, I’ve been doing some reading but could do with a dummies guide to how this works. I assume that in essence it’s buying shares and selling them for more money with the added incentive of being tax free to £20k? And is it a short term or long term thing, one of my first transactions was a purchase which I sold within the hour for 5 percent profit, but I’ve also bought shares in Tesla and Boeing which I think may rise within a week or two. Sorry if this is such a newbie post!
As a newbie, I’d suggest staying away from short-term trading and instead focusing on long-term investing. You can buy an ETF like VWRP, add to it each month then put your feet up while you outperform most people who are buying individual stocks.
I’d looked at these, silly question but how does doing that actually make money?
You can only deposit up to the current ISA limit (£20k) each tax year, however you dont pay any tax on capital gains (profits) on any trade. So if you make £1 or £1 million its tax free.
Time in the market beats timing the market.
It all depends on your goals.
Number 1 should be to have an emergency fund.
Number 2 If you are young and dont have your own property yet and intend to stay in the UK, then a LISA might be better for you. Every year you add 4k, the government will add 1k, and you can use it as a means to save up towards your first home.
Number 3 should be to max out your company pension matching.
Number 4 spare funds that you need easy access to, should be in an easy access interest account.
Number 5 Investment ISA - long term investing - most people cant beat a cheap global equity tracker fund like HMWO or VWRP, so why bother. Just buy with any spare change you have and look back at the returns in the long run. If you want to dabble in shares, then perhaps start with 5-10% of your funds and see how you go. If you do manage to beat an index, then that 5-10% will grow quickly.
Also check out all the offers out there - if you are new to 212, you can get 1% back on your first 20k invested in an ISA.
Above is just my view/opinion, please dont take as advice
The best advice, in my opinion, in your sitation is to stay completely away from stocks and shares and put your money in a cash ISA, guaranteed profit and no risk.
It may be a shameless plug, but we made a YouTube video covering exactly this concept - Why even perfect market timing doesn’t produce the best returns - YouTube
We’ll also upload an in-depth ISA video I think Pricenator will find helpful.
Some great replies guys and thank you, excuse me for asking but my mind is very linear what I fail to understand is if for example I buy £1000 of shares in say an ETF how will that £1000 actually grow (or potentially shrink)?
With your £1000 you can buy shares/fractions of shares in the ETF. They have a cost when you buy, and then that will fluctuate daily based on the value of the underlying holdings that the ETF buys. Below is a link to one of the ETFs I suggested, change the graph to Max, and you will see the share price movement since 2010. The value can go up and/or down, but generally the longer you remain invested in the market, the better.
Pay attention to what happened in say March 2020 - this is where you need to remain calm. If you saw the value of your investment sharply drop, and then sell your holding, you would miss the recovery.
Thanks so much, so although there are inevitable peaks and troughs the trend over the long term is for growth therefore the £1000 grows with it? And as someone suggested above investing further amounts each month is the way forward, presumably in the same ETF? Thanks, that’s really useful.
Indeed, the wonders of Dollar Cost Averaging.
By investing a fixed amount monthly, sometimes you will buy when the asset is a little more expensive, sometimes when it’s a little cheaper; but because a fixed $ amount will get you more shares when it’s cheaper, and less when it’s more expensive, your actual average buying price is less than the average price of the asset, which automatically grants you returns better than the average returns.