Can a stocks and shares ISA produce an income?

Biggles

NewKidOnTheBlock wrote: »

I know there's no such thing as a get rich quick method or else everyone would be doing it

Correct. I think some posters read your OP as meaning you thought there was, so you shouldn't have been surprised at one or two sharp remarks in response.

I'm interested in asking though, with an S&S ISA can you have more in it than £15000? Because say I deposit £15,000 in a single tax year and make £2000 interest, I'm going to have £17,000 in it, does this mean it's no longer safe from the tax man?

The £15k limit is on the amount you put into an ISA each year. Anything it generates within the ISA (in capital gains or dividends) is fine.

I just wanted to be clear I'm not going to chuck my money into this without learning about it

Good decision. Warning: you will need to do a lot of reading.

N1AK

Biggles wrote: »

Good decision. Warning: you will need to do a lot of reading.

Only if you want to find something that supports a pre-conceived idea that trading is a reliable way to get rich

NewKidOnTheBlock_2

Biggles wrote: »

Correct. I think some posters read your OP as meaning you thought there was, so you shouldn't have been surprised at one or two sharp remarks in response.

The £15k limit is on the amount you put into an ISA each year. Anything it generates within the ISA (in capital gains or dividends) is fine.

Good decision. Warning: you will need to do a lot of reading.

I was simply trying to figure out what type of trading he was doing. If you had £8000 in a S&S ISA but took £2000 out for whatever reason, do you lose your entire interest amount for that year?

I know there are some savings accounts that penalise you for taking out money from an account early so I'm wondering if there is a major downside to taking money out once you've put it in.

jimjames

NewKidOnTheBlock wrote: »

I was simply trying to figure out what type of trading he was doing. If you had £8000 in a S&S ISA but took £2000 out for whatever reason, do you lose your entire interest amount for that year?

I know there are some savings accounts that penalise you for taking out money from an account early so I'm wondering if there is a major downside to taking money out once you've put it in.

No, you only lose any future return on the money you remove, you won't lose any return already achieved. There are generally no restrictions on withdrawing money from a S&S ISA. It is said that they should be held for at least 5 years but there is no reason why you can't sell after a few months if you want - BUT you may lose money if your investment has dropped. If your investment has doubled then there is no penalty for taking those profits.

There also isn't anything called interest on shares. The return on shares is in 2 parts, dividends and capital growth. Dividends are part of the profits of the company paid out to shareholders. Capital growth is how much the shares have increased or decreased by.

Lots of useful reading on www.monevator.com

NewKidOnTheBlock_2

jimjames wrote: »

No, you only lose any future return on the money you remove, you won't lose any return already achieved. There are generally no restrictions on withdrawing money from a S&S ISA. It is said that they should be held for at least 5 years but there is no reason why you can't sell after a few months if you want - BUT you may lose money if your investment has dropped. If your investment has doubled then there is no penalty for taking those profits.

There also isn't anything called interest on shares. The return on shares is in 2 parts, dividends and capital growth. Dividends are part of the profits of the company paid out to shareholders. Capital growth is how much the shares have increased or decreased by.

Thanks for the link. So in some circumstances it may be better to sell the shares if you notice a sharp increase in price? I'll have a read of that website.

jimjames

NewKidOnTheBlock wrote: »

Thanks for the link. So in some circumstances it may be better to sell the shares if you notice a sharp increase in price? I'll have a read of that website.

Circumstances to sell - If you need the money?

If not then you'll be trying to time the market and if you're investing long term the price may well go up further. If you take the money out what will you then put it in? If you keep it as cash then you need to find somewhere that pays decent interest so it's not just a case of sell if the price rises.

Biggles

N1AK wrote: »

Only if you want to find something that supports a pre-conceived idea that trading is a reliable way to get rich

If you'd followed the thread, you would see that it has now moved on to discussing investing, not trading.

redux

NewKidOnTheBlock wrote: »

Thanks for your constructive and helpful comments. I know there's no such thing as a get rich quick method or else everyone would be doing it but I used an S&S ISA calculator and obviously it was only a rough estimate but here is what I think is possible.

I deposit a lump sum of £5000
I pay £700 a month into the S&S ISA
Over 5 years an estimate of 7% return

So after 5 years I've made a mere £9,849 and that's assuming everything goes well. I mean sure it's a nice chunk of money but not enough to live on by any means.

The thing is to keep that several hundred quid a month going for several years, then the effects of compounding of returns gradually start to accelerate.

£700 a month for 5 years at 7% is about £50,000

A lump sum will double in 10 years at 7.2%.

If you find funds that do a bit better than that, 30 years of £700 a month going up at 8% a year turns into a million.

But you'll have gradually increased your contributions of course ...

NewKidOnTheBlock_2

redux wrote: »

The thing is to keep that several hundred quid a month going for several years, then the effects of compounding of returns gradually start to accelerate.

£700 a month for 5 years at 7% is about £50,000

A lump sum will double in 10 years at 7%.

If you find funds that do a bit better than that, 30 years of £700 a month going up at 8% a year turns into a million.

But you'll have gradually increased your contributions of course ...

And it seems that the ISA allowance just keeps on rising so in the future we might be able to save more money each year. I appreciate all your help and I'm glad you had the patience to stick with my ignorance :j

It seems a long term investment in an Index Tracker like the FTSE 100 Index Tracker might be a good "secure" way to go. Just one later question, is the money in your ISA seen as "savings?

So when I am asked how much savings I have, if I have £30,000 in a S&S ISA, is this considered savings and I have to declare it?

colsten

NewKidOnTheBlock wrote: »

It seems a long term investment in an Index Tracker like the FTSE 100 Index Tracker might be a good "secure" way to go.

Index trackers are good but you should look at one that is much wider than the FTSE100, to reduce your risk. http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/

NewKidOnTheBlock wrote: »

So when I am asked how much savings I have, if I have £30,000 in a S&S ISA, is this considered savings and I have to declare it?

Anything you have in ISAs does not have to be declared. Protection from tax is the entire reason for ISAs.