Basic savings question-stocks & shares ISA vs general investment

sturgeon

I have about £5k to save and hope to contribute £1.5k monthly to build it. I'm looking around for the best investment options to grow the pot, but in a 'safe' manner. I would invest over 1-2 years.Sites such as Nutmeg seem to do the job.

I'm confused what the advantage of a Stocks and Shares ISA is vs a 'general investment' product. Clearly I will be well below the tax threshold so the historical advantage of an ISA is't going to be helpful here. Why would I choose Stocks and Shares ISA's vs a general investment vehicle?

Also, if I wanted to take a risk and specifically choose some companies to invest in, what is the most trusted way in order to do that, any recommendations for brokers/websites? Although my investment pot would swing, is the capital protected?

Stubod

..because anything earned in an ISA can be taken tax free....so unless you are planning to "earn" less than £1k, or are earning less than the £11.5K "tax threshold", then there is no real advantage...


at least I think that's right...

ColdIron

1-2 years is too short a time frame to invest, think a minimum of five and better ten years plus

Many people didn't use an ISA for dividend producing securities as they weren't taxed if you were basic rate tax payer. Until they were, Tax legislation changes. Once in an ISA you can forget all about tax. Even if you don't have to pay tax you will be required to keep detailed records to prove it if you are challenged. There are almost no downsides to an ISA and it's a no-brainer to use one

Investing in singe companies is a high risk strategy, requires a lot of research, monitoring etc and has no FSCS protection. Don't do it until you have a lot more money and have exhausted or dismissed collective investment vehicles. Most investors will never buy company shares

With your level of investment you should not be creating a portfolio and should look at easier options. A multi asset fund would work or something like Nutmeg though it will cost a little more

But for 1-2 years forget it, use savings

ValiantSon

sturgeon wrote: »

I have about £5k to save and hope to contribute £1.5k monthly to build it. I'm looking around for the best investment options to grow the pot, but in a 'safe' manner. I would invest over 1-2 years.Sites such as Nutmeg seem to do the job.

Your investment timeframe is far too short. The volatility of the markets makes it quite likely that within a two year period the value of your investments could fall below their initial cash value, i.e. you would lose money. Investments are appropriate for long term growth as the up periods are likely to outweigh the down periods. Investing for anything less than 10 years is pretty high risk.

Why are you looking at only 1-2 years? If it is because you have something particular in mind to spend the money on then you need to use the best paying savings/current accounts that you can find. Your money is perfectly safe with these and you will earn interest, but in stocks and shares you could easily end up 40% down over such a short time.

Nutmeg are expensive. You would be better off using a multi asset fund on a reasonably priced platform.

sturgeon wrote: »

I'm confused what the advantage of a Stocks and Shares ISA is vs a 'general investment' product. Clearly I will be well below the tax threshold so the historical advantage of an ISA is't going to be helpful here. Why would I choose Stocks and Shares ISA's vs a general investment vehicle?

Your investments will pay dividends, which are taxable, and when you sell them you could be liable for capital gains tax if the price between what you paid and what you sold for exceeds your capital gains allowance. Putting your investents inside an ISA wrapper protects you from these taxes. On a practical level it also saves you a lot of time and paperwork in having to do tax returns.

Given that there is no disadvantage to sing an S&S ISA, I'm not sure why you would choose not to do so.

sturgeon wrote: »

Also, if I wanted to take a risk and specifically choose some companies to invest in, what is the most trusted way in order to do that, any recommendations for brokers/websites? Although my investment pot would swing, is the capital protected?

No, your capital is not protected. If you buy shares in companies then you have spent the money (it is the same with funds), but the hope is that the value of your assets (the shares) will increase over time and you will be able to sell them at a higher value than you paid (and inflation over that period) and thus make a gain.

Investing in individual copanies is crazily high risk, especially for a small investor like you. What happens if you pick the next Carillion? If you want to tart investing then look at multi asset funds as these will give you good diversification (reducing the potential for massive losses - but not eliminating them).

Based on what you have said so far, I don't think that you really undrstand what is going on with investing, so before committing your money to it, I suggest that you do some reading about it. A good place to start would be with these two websites:

monevator.com/

diyinvestoruk.blogspot.co.uk/

sturgeon

Great, thank you for the advice.

So if I am happy to accept some level of risk, as a new investor is opting for a Stocks & Shares ISA the best way to invest for the next couple of years, rather than a general investment product? Or should I just put into a savings account (which offers !!!!!! all interest).

ColdIron

sturgeon wrote: »

So if I am happy to accept some level of risk, as a new investor is opting for a Stocks & Shares ISA the best way to invest for the next couple of years, rather than a general investment product?

No, they are both terrible choices for you, saving tax pales in comparison to losing your capital. You say you want to grow your pot in a 'safe' manner. Short term investing is not safe, cash is safe over the short term

Or should I just put into a savings account (which offers !!!!!! all interest).

Yes. Savings have the advantage that you will not get out less than you put in

What is it that is happening in 1 - 2 years? Could you defer it for another 1, 2 or even more years?

Do you have a separate emergency fund for, well, emergencies or is this all your cash?

dunstonh

I have about £5k to save and hope to contribute £1.5k monthly to build it. I'm looking around for the best investment options to grow the pot, but in a 'safe' manner. I would invest over 1-2 years.Sites such as Nutmeg seem to do the job.

Contradictions in your post. 1-2 years is an extremely high risk. A crash could take 18 months or so to recover or we could end up in a slow decline period like the early part of the millennium. So, "safe" as you call it is actually an extremely high risk.

I'm confused what the advantage of a Stocks and Shares ISA is vs a 'general investment' product. Clearly, I will be well below the tax threshold so the historical advantage of an ISA is't going to be helpful here. Why would I choose Stocks and Shares ISA's vs a general investment vehicle?

Tax free ISA vs taxable GIA. Not just tax but also administration. ISAs dont require any documentation in respect of trades to be provided. GIAs require you to maintain a history of any purchases and sales.

So if I am happy to accept some level of risk

"some level of risk" doesnt match with the very high risk that you are taking. We are overdue a crash on the basis of statistical averages. And you are looking to invest for a period could be less than the recovery period of the crash. I would say you have a pretty high chance of suffering a large loss.