Tips for first time ISA investors – what you need to know…

16th February 2015


If you are thinking about investing in an ISA for the first time, it might be seem daunting.  Adrian Lowcock, head of investing at AXA Wealth sets out some tips on what to look out for and what you need to know…

Firstly be more tax efficient, use your ISA

Taxes are another cost to the portfolio taken out of any profits you make. Investments held in an ISA will not incur any capital gains tax on capital growth, nor is there further tax to pay on any income earned. You get a new ISA allowance each tax year. In the current tax year (2014/2015) you can invest up to £15,000 within an ISA.

Know why you are investing

Before you start investing you need to set a clear goal of what you want to achieve.  Deciding what you want will help you decide what risk you can take and what you should invest in. Whatever your goal it is important to remember that investing is not for the short term.

What is your appetite for risk

Your attitude to risk is quite personal and it will change.  Age, lifestyle and surroundings can all contribute to your attitude to risk. The amount of risk you should be taking also depends on why you are investing and for how long.  A simple measure is you shouldn’t be having sleepless nights over concerns of an investment falling in value.

Do your research                                             

It is important to do your homework. Take some time reading up about the different types of asset classes, the benefits of ISAs, different types of investment styles. Consider what you want from your investments and how each asset class and fund style fits in with your objectives. Give yourself time to digest the information before proceeding.

Set yourself an asset model

An asset model is the proportion of your portfolio you wish to hold in each asset class.  This model can then be used as a reference point so you can check how far your portfolio has moved from your original investments. Few investors actually do this, but it is a good way to manage your investments, maintain your attitude to risk and identify areas to take a profit or need extra investment.

Picking the right investments

Different investments have different characteristics and risks; for example   individual shares and bonds offer significant potential but can be volatile and require a lot of knowledge, time and indeed experience.  Unit Trusts and OEICs offer a broader investment and an investment manager with significant experience.  In addition you don’t pay a premium when buying them – unlike Investment Trusts where you could pay a premium or buy at a discount – one for more experienced investors.

Choosing the right fund

There are far too many for a beginner to know where to start.  Fortunately there are tools and services, which can help reduce the list. Review fund recommendations and preference lists to find funds in the area you are looking for which the experts like.

Finding the right investment service

As a self-investor there are a number of choices in this market.  There are several important factors to consider, costs, service and jargon are top of my list.  Costs for example have a direct impact on the performance of your investments. Watch out for hidden fees’ such as Exit charges.

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