As the general election date of 12 December moves closer, many investors are wondering how share prices may be affected in the near future. Political uncertainty can inevitably disrupt the flow of decisions taken by businesses, such as investment levels, new orders and progress of current projects.
Yet uncertainty may also create opportunity. Sooner or later, question marks surrounding UK equities are bound to turn around. Personally, I am quite hopeful that this pre-Christmas election will help the country to get over the Brexit saga and acrimonious polarised thinking. Therefore, today I’d like to take a step away from all the political discourse and posturing that is inevitably affecting the mood of the average British investor and remind our readers why most savvy investors would keep a clear focus on their investment goals, including a comfortable retirement.
Stocks and Shares ISAs can help in retirement
We would all like to maximise our available funds as we look to grow a nest egg or boost our monthly income. Recently, I have had several friends ask me if individual savings accounts (ISAs) could be right for them. I have referred them to the government website on ISAs, which is quite comprehensive.
ISAs offer tax-efficient benefits. Thus I believe every UK resident should learn more about the different types of ISAs available to them, with an emphasis on Stocks and Shares ISAs.
Currently, there’s a maximum subscription allowance of £20,000 per adult per tax year set by the UK government. This is the maximum amount we can invest in ISAs each year.
Individuals can divide this in any way across a simple Cash ISA, a Stocks and Shares ISA, a Lifetime ISA (maximum of £4,000) or an Innovative Finance ISA, as long as they stay within the annual limit.
Making the most out of the allowance
Individuals can usually invest in three ways:
a) With a lump sum only, from a year-end bonus, for example. This method gives the portfolio a longer time for growth during the year.
b) For those with irregular income, an initial lump sum, followed by top-up payments works best.
c) With regular (usually monthly) payments, which can often be set up automatically by direct-debit.
Monthly investing enables us to smooth out prices by buying assets on a regular basis, rather than just once. My personal experience is that regular investing helps me stay more disciplined and patient. It may also give you the stamina to stick it out in the tough or volatile times.
Type of investments to consider
There’s a wide range of investment options available for a Stocks and Shares ISA.
You could invest directly in FTSE 100 or FTSE 250 shares. These two indices offer the possibility of investing in a range of dividend-paying stocks, such as Aviva, Bellway, Britvic, BT Group, Carnival, Diageo, G4S, National Grid, Persimmon, Tate & Lyle or WPP. Any capital gains delivered by the stock would be an added bonus on top of the dividend.
Or investors could buy an actively managed fund, such as the Fundsmith Equity Fund, which can provide instant diversification from a single investment.
Another option could be to invest in low-cost exchange-traded funds (ETFs). If you are interested in dividend stocks, but not quite sure where to begin, then the iShares UK Dividend UCITS ETF may be a possibility.