Paying into a stocks and shares ISA is a great habit to get into. But did you know that you can really benefit from investing the full amount as early as you can?
Let’s take a look at just how much money you might be able to make by being an early investor and using this type of account to its full potential.
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When is the best time to invest in my stocks and shares ISA?
No one likes arriving at a party exactly on time. But holding off on your investments could seriously postpone your financial celebrations.
When it comes to your investing strategy, it appears that it’s not a good idea to be fashionably late.
Research from St. James’s Place Wealth Management shows that investing your full allowance can really impact your returns.
What does the research say about when to invest?
If you had invested your full stocks and shares ISA allowance every year since 1987, it could have had a big impact on your potential returns.
Assuming you’d put the money into the FTSE All-Share Index (a global equity fund), your returns could now look like this:
- £1,100,932 – If you’d invested your allowance at the beginning of each tax year
- £1,025,023 – If you’d waited until the end of the tax year to invest
An extra uplift of around 7% is no joke. That’s a difference of £75,909!
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Should I invest early in a stocks and shares ISA?
Using up your full ISA allowance can be an excellent way to build long-term wealth.
Tony Clark, senior propositions manager at St. James’s Place Wealth Management, explains: “Some people have a habit of waiting until towards the end of the tax year to use up as much of their ISA allowance as they can.
“However, by paying in as much as you are able to early in the tax year, you give your money a far better chance of working as hard as possible for you.
“Not only does this shield your investments from tax for a longer period of time it also gives your money extra time to benefit from ‘compounding’. That’s when the money your ISA makes through growth and investment income is reinvested – and so that, too, has the chance to earn even more for you.”
How can I invest in a stocks and shares ISA?
It’s easy to get set up with one of these accounts. We’ve put together some of the best options available and you can compare stocks and shares ISAs here.
Remember that all investing carries risk and you may get less out than you put in. It’s also worthwhile doing lots of research on investments to make sure you’re giving yourself the best chance of success.
Setting yourself up with a tax-efficient account like this and using it to its full potential can be a solid way to create wealth if you have a long-term investing outlook.
Please note that tax treatment depends on the specific circumstances of the individual and may be subject to change in the future.
