Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
IT’S the start of the new tax year. And for ‘early bird’ investors, it’s the time of the year they think about their investments. Some even invest their £20,000 ISA allowance at once.
The most important benefit of investing early is not trying to time the market, but giving your investment time. Simply put - your money is in the market for longer, which means there’s more time for your investment to grow.
But it does come with a psychological dilemma. Early bird investing is great if you can motivate yourself to invest a large sum of money all at once, however, many of us will struggle with this.
And when you factor in the recent market volatility, rising interest rates and the ongoing cost-of-living crisis, investing a large sum may not work for everyone.
A happy midway is to set up a regular savings plan. Monthly savings make investing a lot more manageable and less daunting. It means you can use up your annual allowance as it’s spread over the tax year.
With regular contributions, you’re likely to capture both market highs and lows - so you reduce the risk of getting your timing wrong (although this is not guaranteed).
A regular savings plan also gives you greater flexibility. Like the early bird, you don’t need to think about your investments after you’ve set up your plan - you’re safe in the knowledge that you’re automatically topping up your ISA each month.
If you’d like, you can change your plan throughout the year, topping it up, or switching your allocations.
It’s also important to make use of your other allowances too.
Consider topping up your pension with a Fidelity Self Invested Personal Pension (SIPP).
And since the recent Spring Budget, there’s been an increase in pension limits - good news for savers.
In the 2023/24 tax year, you can invest up to £60,000 (or your annual earnings figure if this is less) in your pension per year - up £20,000 compared to the previous tax year. Later this year, the lifetime allowance will also be removed - though the maximum tax-free cash will remain at the current level at £268,275.
Like your ISA, you can set up a monthly savings plan for your SIPP, from as little as £20 a month.
Another way to invest is through a Junior ISA (JISA) on behalf of your children or grandchildren. The 2023/24 allowance for JISA contributions is £9,000.
Whether you intend to invest more or less than the full ISA allowance this year, ultimately, it comes down to know what works best for you. You may want to be an early bird lump sum investor, but if that’s not you - you may prefer to invest smaller amounts, monthly.
Either way, it’s better than leaving it to the last minute.
Open an ISA
Open a SIPP
Find out more about saving regularly
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. Withdrawals from a Junior ISA will not be possible until the child reaches age 18. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). 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 one of Fidelity’s advisers or an authorised financial adviser of your choice.
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