Which type of ISA is best for long-term investing?
A reader from Gloucester doesn't know what kind of ISA to open for a long term investment.
Andrew Norton, Halifax investments expert, tackles the problem.
Anne from Gloucester asks:
I currently have savings on deposit with my bank, but a friend recently mentioned that I could use ISAs to save tax.
If I take out an ISA does it have be invested in the stock market or can I hold some in cash?
I am saving for the long term so will shares provide the best returns? I realise I might have to take some risk but don't want to lose all my capital.
Andrew replies:
You can invest in two types of ISAs - a Cash ISA and a Stocks and Shares ISA.
You can invest up to £3,600 per tax year into the Cash ISA and the balance, up to the overall £7,200 annual allowance, into a Stocks and Shares ISA.
Remember that you can only invest in one Cash and one Stock and Shares ISA in any tax year.
You can invest for as long as you want, but there are a few points you need to bear in mind. Short-term investment in the hope of making big gains quickly is risky.
You should be looking to invest for at least five years and the longer you leave your investment, the more likely you are to see a return. The downside is that you may get back less than you invested.
You should also consider your attitude to risk when choosing an investment. Investing in shares has traditionally provided a better return over the long term than simply saving in a deposit account though you should make sure you have provisions for your short-term needs.
Investing in shares does not give you the same security of capital, easy access or steady growth as with a Bank or Building Society Account. However there are options available that can guarantee and / or protect your original capital investment and it is worth speaking to a Financial Adviser so they can assess the level of risk you're willing to take and advise you of the next steps to be taken.
If you have a question for Andrew, go to the myfinances.co.uk Ask the Investments Expert section.
Or for more information on your investment options go to investments at Halifax.
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