Stocks and shares ISAs are a great way to invest in funds, regardless of whether you are looking for income or growth.
All capital gains are tax-free and income is very tax efficient. The exception for tax on income is the fact that the 10 per cent tax applied to dividend cannot be reclaimed.
One of the main considerations for an investor is to take into account levels of risk involved with a particular fund, as well as whether you are making an investment to provide long term growth or looking to invest for income.
When investing for income, you should remember that income paid from investment funds is variable and can be paid out at various different times in the year. Some funds pay monthly income, while others may pay quarterly income or pay income twice a year.
Another consideration if you are investing for income is to reinvest any income the fund generates, as building up the amount you’re investing has a compounding effect, boosting the level of potential return over time.
Stock markets are volatile by nature; the level of an index or share can fluctuate significantly over short periods. This means you can invest in a market at high or low levels within the overall trend, which can impact on the performance of your investment.
If you wish to minimise the risk associated with market timing it makes sense to make monthly ISA contributions to spread out any market volatility, but whether you make annual or monthly contributions every investor should take advantage of the tax opportunities offered by ISAs.
See the ISA section for ISA investment ideas »
No news, feature article or comment should be seen as a personal recommendation to invest.
The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors.
If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
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