This week saw the first anniversary of the collapse of Lehman Brothers, the US
investment bank whose failure triggered a collapse in share prices around
the world. But the FTSE index has celebrated its strongest summer rally
since 1933 by breaking through the 5,000 mark. British shares have now risen
by 40 per cent since their low point in March, and are still considered
cheap for the long term.
If you want to venture in, do remember that the value of shares can go down as
well as up. The three golden rules are: don’t try to time the market; never
invest in anything you will lose sleep over; and never invest more than you
can afford to lose.
WHAT ARE ISAS?
Everyone may save up to £7,200 this tax year in an ISA (inidual savings
account), in which investments roll up free of tax. People over 50 will see
their allowance increase to £10,200 from next month, and everyone else will
benefit from the higher allowance from April next year.
If you invest in stocks and shares, you are usually taxed on idend income
and on any capital gains you may make. These taxes can be avoided by holding
shares in an ISA, albeit not entirely. Tax of 10 per cent on idends is
still deducted before they are paid, and you cannot claim it back.
Outside an ISA, basic-rate taxpayers do not pay any further tax on idends
paid, but higher-rate taxpayers must pay the difference between 10 per cent
and 40 per cent – and this is where the value of ISAs really comes into
play.
REGULAR SAVINGS, SMOOTHER RETURNS
Saving money regularly into a stocks and shares ISA, rather than investing all
your money in one go, can help to smooth out the highs and lows of the stock
market.
“Investing regularly – perhaps every month – allows you to dip a toe
into the water rather than ing straight in,” says Martin Bamford,
from Surrey-based financial advisers Informed Choice. “You also get to
benefit from volatile investment markets as the number of shares or units
you are buying will vary each month.” This is because you buy more
units when prices are low, and fewer when they are high.
“Don’t put all your …
Read the original article at Telegraph
