Important information: The value of investments can go down as well as up, so you may get back less than you invest.
Three ways you can look after your ISA savings
There’s every chance that with the new ways of working many of us are experiencing at the moment, that you have also developed a new system of spending.
Changes in the way you are using your money could be down to a number of things - you might find that you are saving thanks to little or no travel costs, not eating out and no daily barista-brewed coffees.
On the other hand, you may have found that some of these savings have been gobbled up with increased food costs at home, spending more on subscription TV services and splashing out on Amazon deliveries.
Either way, it’s worth reviewing your new expenses and asking yourself if you are spending unnecessarily. Could you be using your money more wisely?
1. Be ISA wise
Maintaining the savings habit is a good way to stay on track with your goals, and you can also take some benefit from the ups and downs of the market.
There’s every chance that you’ve seen the value of your investments take a battering lately,with markets up and down - so the natural reaction may be to have some resistance to continuing or even increasing your savings in your Stocks and Shares ISA.
There is a silver lining here. When markets fall you pay a lower price meaning you buy more shares or units for your money. This is known as ‘pound cost averaging’ because the different prices you pay when investing regularly through the ups and downs of the market will be averaged out. If you buy when prices are low, you could reap all the rewards when they rise again. Regular savings are a good way to help you try and achieve this too. Although it is worth remembering that past performance is not an indicator of future returns.
2. Think about getting active
During this turbulent time, it’s easy (and understandable) to feel and act like a rabbit caught in the headlights. Taking a long hard look at your investment savings seems almost impossible at a time when the social, political and economic fabric of our world is changing. But dealing with market uncertainty is as much about thinking through the world after the volatility has passed as it is reacting to the here and now.
If you’re struggling to do this yourself, it can help to choose an investment where an expert does it for you. This is known as ‘active management’ and it lies at the heart of many of the funds in our investment range. An expert fund manager has a much broader perspective of the market and is backed by research resources that can help them search for opportunities in any conditions.
Leigh Himsworth, manager of the Fidelity UK Opportunities Fund, is a good example of an investor identifying opportunities among all the uncertainty. In the early days of the pandemic, when many investors (and people in general) might have been panicking, he immediately bought more shares in all the UK supermarkets. Beyond stocking up on loo rolls, he made the call that many of these companies might benefit from a longer-lasting advantage than the one they were gifted by panic buying. He realised that the billions of pounds a year that was spent on eating out in the UK was likely to be re-directed towards the big grocery stores.
3. Check what’s in your ISA.
The most infuriating thing about the ‘new normal’? The notion that we all now have ‘a lot more time on our hands’. Cue emails about making time to read books and download meditation apps. For the many of us facing a balancing act of childcare, home schooling, cleaning the house, cooking three meals a day and navigating the mute/unmute button on work conference calls, there is very little ‘extra time’.
That said, it is true that self-isolation has been a time of reflection and reassessment about what really matters and getting on top of your finances. Now is as good a time as any to take a long hard look at your savings and check where your investments are. Maybe a rebalance of geographies or sectors is in order. The golden rule of diversification remains- making sure you don’t have all your eggs in one basket.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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