With less than a month to go before the new ISA limit increases to £15,000 per person, more and more providers will be trying to lure customers and their savings.
Here we have outlined 7 common pitfalls that ISA savers should avoid:
Not checking up on charges
Investing though a tracker fund is going to be a lot cheaper than using a fund where a manager actively picks shares – as much as half a percentage point a year – which can have a significant effect on your returns over time.
Backing last year's winners
Going with the funds that came top of the charts last year is always tempting, but that is also an easy way to make a bad investment. Investors should invest across a range of markets and fund types to diversify and reduce their risk, which will ultimately lead to more consistent returns.
Save in cash only
As from 1st July, the ISA allowance can be invested wholly in Cash, or Stocks & Shares ISAs previously built up to move to cash. However, the less than stellar interest rates on cash ISAs make stocks & shares look more attractive for those seeking better returns.
Invest in one go
The common mistake is to invest at the end of the tax year. Why not drip feed the investment during the year. This has a twofold effect. The first is compounding the cumulative effect on savings earlier; secondly, making regular payments means you are less likely to try to time the market.
Chase headline rates
Some providers hope to capitalise on consumer apathy in order to make money in the long run. They do so by luring customers with high headline interest rates that usually apply for a limited time only and revert to much lower rates once the offer period has run out.
If you decide to move your ISA to another provider, you must ask your new ISA provider/Financial Adviser to make the transfer. If you close the existing account or withdraw cash from it, you will lose your tax benefits and will not be able to reopen the closed account.
Be afraid to seek advice
Research tells us only 36% of consumers would be confident in investing in a stocks & shares ISA, while 38% only, would be confident in tax planning without the help of a professional adviser. An Independent Financial Adviser, like Investment Solutions, will be able to impartially advise.
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