First foray into the FTSE...

Walletwatch

After having restricted myself to the security of savings accounts and regular savers for so long, I am now prepared to make my first investment foray into the FTSE, and FTSE based funds. This is partly influenced from reading the first two books of Rich Dad, Poor Dad, though I do not fully subscribe to whatever is said in the book (but then, that is another discussion altogether) Can somebody help me out (I am a beginner, but a fast learner ;-) with how to start going about investments. Am I right in saying that I need to start with an investment ISA?

By the time I finish my initial groundwork, I may well be late for this year's ISA cutoff, so maybe I'll start next year.. Am I right in saying though, that I can invest upto £3000 in a mini-investment ISA this year (already have a mini-cash ISA with £3000 in it), and £4000 from next year on?

What specifically is exempt from tax on an investment ISA? My guess is it would be the dividend income one receives from these stocks / funds?

Is the capital appreciation exemption of £8500 (8200 this year) over and above the exemption on gains from this ISA amount?

Is there a specific set of stocks / funds that I can wrap under the ISA allowance, or is it anything and everything?

Can you guide me to the best ISA on offer for investments?

Also, what are your ideas on the best stocks / funds to wrap this around? On this, I obviously understand and acknowledge the fact that what you give me will only be suggestions, and not financial advice. Will make up my mind on my own, of course, with some help from this forum, hopefully.

Finally, if I am wrong, and an ISA is not necessarily the best place to start, can you give me some ideas on what is a good place to begin?

Sorry for such basic questions, but to be honest, while I've been a banker all my professional life, and am very much at home with my banking accounts, have never ventured into the stock market till date !!!

budgetflyer

You can set up a virtual portfolio at

https://www.fool.co.uk

That way you can manage some shares kid on whithout risking any money

There are lots of tips and buying strategies there also.

I also found his books quite inspiring :-)

lipidicman

I am looking at a 130% of the FTSE type thing from the Woolwich

Its 6 years and capital protected. The 6 years means it is CGT (or tax free in a Stocks and Shares ISA!) under 5 years would make it income or minicash

The only downside is it is IFA only, though dunstonh on here is very helpful

I would need around a 25% rise in the FTSE to beat 5.35% net in A&L, so this seems reasonable

cheerfulcat

Hello, Walletwatch,

You can make your Maxi ISA contribution for this year - it can sit in cash while you decide what to do with it ( though your interest will be taxed ). For a basic rate tax payer the only tax advantage left is that you are not liable to CGT, but it's still worth using any tax shelters you can get. If you are a higher rate payer, the dividends are free of tax as well. The exemption is as well as your personal CGT allowance.

You can put lots of things in a maxi ISA; bonds, shares quoted on major stockmarkets, collective funds, some derivatives...I'll try to find a list.

The best provider for a self select ISA depends on what you want to put into it. They all offer different things. I use comdirect and Hargreaves Lansdown.

The most important thing is education. The very best site on the web for investor education is the Motley Fool. Have a look round there. There is also Incademy, which is very handy

http://incademy.com/pages/home.htm?ginPtrCode=10002

Also, there are many books which are very useful. A good starting point is Alvin Hall's Winning with Shares, as well as the Motley Fool's UK Investment Guide. That should start you off :-)

HTH

Cheerfulcat

dunstonh

A capital protected FTSE ISA could be an option for lump sums although they are not available for regular payements.

If you did want to utilise this years ISA allowance, you could invest into a corporate bond/gilt/fixed interest fund (which is considered low risk) and when you are ready to move into the markets, you can then switch the holding into the funds you have chosen. As long as you have a fund supermarket that doesnt charge for switching (the main ones dont), then you avoid any costs.

plumb1_2

Why have a Share ISA and pay charges,if your yearly profits are below £7k

cheerfulcat

plumb1 wrote:

Why have a Share ISA and pay charges,if your yearly profits are below £7k

The charges for a self select maxi ISA are negligible; comdirect charges £25 a year regardless of the size of your investment. Even if you are buying funds rather than shares,if you go to a discount broker most or all of the initial commission will be waived.

Apart from anything else, investing within an ISA saves having to calculate CGT. Bear in mind that even if you are within your CGT allowance, if you sell more than 4x the allowance you still have to declare the disposal, if it's outside of an ISA.

Cheerfulcat

dunstonh

plumb1 wrote:

Why have a Share ISA and pay charges,if your yearly profits are below £7k

What alternative do you suggest then? OEIC? Unit Trust? IT? If the ISA allowance is available, then it should be first point of call. There is no charge difference between an ISA and an OEIC, for example, as the ISA is just the wrapper.

cloud_dog

In many ways I agree with Plumb1 - I dont think you automatically have to consider a ISA wrapper as your first port of call. Having said that most of my investments are under an ISA wrapper but not all.

I would suggest that first of all you consider and identify what type / where you want to be invested; you then look to see if the ISA advantge is worth it or not.

An example (but not one I would recommend for a novice invester) is investing with Investment Trusts. They often have extremely good and low cost monthly investment options, with a lot of flexibility for investment type, location, and class of share. You cannot hold these under a normal ISA Fund - by this I mean a FundNetwork / CoFund / Multi-Manager type of product. To be held in an ISA wrapper you would need to purchase them as individual ISA investment with the specific IT company (for that tax year) or do it via a 'dealing' account (IT are quoted in the same way as stocks / shares).

All I am saying (I feel a song comming on) is that the ISA wrapper provides long term Income Tax / CGT benefits but is not your only option. When I started off (PEP years) I didn't use them just invested small monthly amounts in about three IT's building up the investment. I then managed the transition to other investments (inside or outside of tax efficient wrappers).

Flexibility is key.

Cloud_dog

blinko

What alternative do you suggest then? OEIC? Unit Trust? IT? If the ISA allowance is available, then it should be first point of call. There is no charge difference between an ISA and an OEIC, for example, as the ISA is just the wrapper.

as much as i agree with dunstoh and as much as i agree with this statement, it must be noted that you have a annual £8200 allowance on capital gains tax (eg bought share at 1k and now worth 2k you hhave 7.2k allowance left)it might b cheaper where providers charge for ISA's to hold it outside of an ISA until you think you will go through the 8.2k limit

although i would definately say look at your goals long term short term etc and then judge wether the fee is worth it.

eg comdirect are very good and cheap but £25 annual fee on an ISA with an initial investment would automatically cut 2.5% off your invesment then brokerage charges in and out would cut another 2.5% so for your first year it would cost you 5% and then 2.5% annually ! but naturally if you were to invest £10,000 this would be cut to 0.5% and 0.25% retrospectivly.

alternateively if you are just wanting to invest in UT oiecs etc hargreaves lansdown dont charge any brokerage fees or any fees for your ISA if the funds you pick have a annual rebate so that might be worth a look.

https://www.hargreaveslansdown.co.uk