Making the most out of your ISA
Investing in an ISA is a good idea if you plan on steadily investing money into your account. An ISA does no good if you only put money in once and then leave it. Most ISA accounts do not pay enough in interest to give much growth over the long term unless you reinvest.
You can invest money in equity ISAs or in cash ISAs. To find a cash Isa many people do an online search to check which one gives the best rate of return. There are several things that can be done to maximize an adult ISA and make the most of your savings.
Be aware that bonus rates may be only temporary. Four out of the top five cash ISAs reduce their bonus amount after 12 months and many investors are left with interest rates that only amount to 0.1 %. To avoid getting caught by this, write a reminder to yourself on your calendar so you know when the bonus period ends. At this time you may want to switch to a different account if there are better rates available.
If you are planning on investing in an equity ISA over the internet, you should know that you can only use a debit card to complete the transaction. Credit cards are not accepted because you need cleared funds in order to apply for one of these accounts. You also need to provide an email address and a national insurance number.
If you buy a unit trust, there may be initial charges. These charges can be avoided if you open your account online. This is because most accounts offered online are from discount brokers who have low overhead costs and can afford to waive this fee for you. When you make your equity ISA application and are not sure which fund to choose you can simply mark the “cash park” choice and then take your time to decide.
Plan on putting money into your account every month so that it can grow at a steady rate. If you put a lump sum in and then forget about it, not only are you not injecting new cash into the account, but you are also missing the advantages of dollar cost averaging.
Dollar cost averaging simply means that you are buying shares at different prices depending on what the market is doing. You are able to buy more shares when prices are low, as opposed to when they are high. This investment strategy has long been recommended by financial experts.
If your ISAs are no longer earning interest at a competitive rate, you should think about switching to a different account. Most cash ISAs accept transfers from your old account. Make sure the ISA you are interested in accepts transfers and then fill out your details on a balance transfer form. If possible try to find an ISA provider that pays interest straightaway from when your transfer form is received by them.