It’s almost like the start of the new millennium all over again on the stock market – and experts are predicting yet more to come.
Currently the UK stock market is up around 6,700 edging ever closer to the magic 6,930.2 it hit way back at the end of 1999. Back then West Life were at the top of the charts with I Have a Dream and American Beauty starring Kevin Spacey and Annette Benning was cleaning up at the Oscars.
But as West Life lost their top spot to The Manic Street Preachers with The Masses Against The Classes and then Britney Spears followed with Born to Make You Happy the masses investing in shares were anything but happy.
At its worst the stock market lost 40 per cent of its value – translated into real money that means someone investing £1,000 at the peak saw their cash slide to £600 and only now is seeing it climb back a long, long seven years later.
Share boom or bust
No one wants to lose 40 per cent of their money and then wait seven years to get it back but it doesn’t have to be that way. You can invest in share funds where the risk is spread around a number of shares and companies.
You can even invest in the stock market and get tax breaks and discounts if you use the services offered by MoneyExpert.com.
Each tax year, UK adults are entitled to invest up to £7,000 in ISAs or Individual Savings Accounts. All of this can be invested in a single fund – a Maxi ISA – or £4,000 can be invested in an investment fund mini ISA and another £3,000 in a cash mini ISA. You cannot have a mini and a maxi ISA in the same year.
What are the breaks?
Capital gains made within an ISA fund are tax free. So if the shares you invest in double in price you won’t be taxed on the money you make.
The dividends on shares held in ISA funds are though subject to tax. However, at least higher rate tax payers do not have to pay any more tax than what is taxed at source on the dividends, so it is still worthwhile for them to have investments in ISAs.
Picking an investment can be a tough decision. There are around 2,000 unit trusts and open-ended investment companies – so-called Oeics – registered in the UK, many of which are open to ISA investments. These are investment funds into which a large number of investors pool their cash to invest in a wide range of stocks and shares.
Another kind of pooled investment is an investment trust. Some of these trusts are also open to ISA investment, although the choice is more limited.
You can invest in UK companies, large or small, for example, but you can also invest in Far East or Latin American stocks, too. Specialist sectors such as technology, property or pharmaceuticals are also an option. Nor do you have to invest in shares. Funds that invest in the safer option of bonds are open to ISA investment, too.
Paying the price
You still have to pay charges on the funds themselves. The standard initial charge for a unit trust or Oeic is 5-6%. This is used to pay commission to brokers and cover the fund management companies’ administration fees. There is also an annual management charge of around 1.5% of the value of the fund. A third of this is used to pay brokers an ongoing, or ‘trail’ commission. The rest goes to the fund management companies.
But you can get a discount on the initial charge by buying your funds through MoneyExpert.com, which charges 0% initial commission.
Click through on the Investment button on MoneyExpert.com to find out more.