The clock is ticking. After midnight on Tuesday, you won’t be able to open or add to a stocks and shares ISA and still benefit from the 2021/22 tax-free ISA allowance.
So, with ISA deadline day almost here, a leading investment platform has highlighted five investing mistakes to avoid. But are you making any of them? Let’s take a look.
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ISA deadline: what’s happening on Tuesday?
Tuesday 5 April is the last day of the 2021/22 tax year. This means it’s also the last day to open or add to a stocks and shares ISA and make maximum use of the £20,000 ISA allowance for the current tax year. On Wednesday, a new tax year begins, giving everyone a new £20,000 allowance.
However, from this Wednesday, any proportion of the 2021/22 tax-free allowance you haven’t used is gone forever. As a result, now really is the time to ‘use it or lose it’.
It’s worth knowing that the end of the tax year is the reason why many investors are motivated to add to their stocks and shares ISA during the first week of April.
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What investing mistakes should you aim to avoid?
Given that the ISA deadline is now within touching distance, Fidelity UK has highlighted five common investing mistakes to avoid. So, let’s take a look at each of them.
1. Worrying about the size of the ISA allowance
The first mistake that Fidelity highlights is believing that you need to be rich in order to invest, or to take advantage of the ISA allowance.
The platform outlines that this isn’t the case at all, suggesting that for newbie investors, there’s nothing wrong with investing as little as £25 per month. It also highlights how ISAs are one of the most tax-efficient ways to save, regardless of whether you’re able to use the full £20,000 annual allowance or not.
2. Opening a stocks and shares ISA (or SIPP) but not using it
Another investing mistake is to open a stocks and shares ISA, or self-invested personal pension (SIPP), and not actually invest in them.
In other words, once you’ve opened either of these tax-efficient investing products, you still have more work to do. That’s because you must also choose investments to sit inside your ISA or SIPP. If you don’t, your wealth may as well be kept in cash.
3. Forgetting to diversify your investment
Given the nature of the stock market, we know that it rises and falls. This is especially true during times of economic uncertainty, such as now.
However, to minimise market turbulence, it’s often a wise move to diversify your portfolio. According to Fidelity, you should look to invest globally and ‘across different assets’, such as shares, bonds, commodities, property and cash.
4. Overpaying for your investments
When it comes to investing, share dealing fees and platform charges are common. To limit the impact of these fees eroding the value of your investment, it’s a good idea to choose an investing platform with low fees.
To help with this, take a look at The Motley Fool’s list of top-rated stocks and shares ISAs. We compare fees from a number of different providers, so you can choose the right account for your needs.
5. Meddling with your portfolio too often
With fast-moving markets, it can sometimes be tempting to keep a close eye on your investments in order to calculate how recent swings have impacted your portfolio.
While there’s nothing wrong with taking an interest in your investments, tracking your portfolio too often might encourage you to meddle with your investments. This is discouraged for two main reasons:
- It’s extremely difficult to try to ‘time the market‘, and this investing strategy can easily leave you worse off.
- Meddling with your investments too often can increase the amount you pay in charges or fees, especially on platforms that charge for each trade.
So, instead of making changes to your investments often, you may be better off following The Motley Fool’s ‘buy and hold‘ investing mindset.
For more ISA tips ahead of 5 April, take a look at our guide that explains everything you need to know about stocks and shares ISA.
