Source: Netwealth. Assumes gross investment returns of 6% per annum.
Create a diversified ISA
The mantra of being aptly diversified is well worn – for good reason. Different assets perform better at different times: US stocks could outperform one year, emerging market shares could outshine the next and UK government bonds the year after. It’s very difficult to predict which assets will do better or worse over a given period. A diversified portfolio can help you to capture the gains, while minimising the losses.
Understand your risk tolerance
By understanding how much risk you are comfortable taking, you can take enough risk to maximise your returns. For example, younger investors may want to target higher growth – and therefore higher risk – knowing that in the event of a downturn there is time for asset prices to recover. More risk averse investors may prefer a portfolio with a higher percentage of government bonds. Once you know what your risk tolerance is (whether low, medium or high) you can then choose investments that make the best use of your preference.
Use your full allowance – each year
The ISA allowance of £20,000 cannot be carried over to the next year. Where possible use your full allowance – doubled to £40,000 for a couple – every year to help maximise the size of your ISA pot.
Capture the benefits of investing early
The earlier in the year you can contribute more to your ISA, the better. This allows your ISA to benefit from the potential of a full year of growth, although there is no guarantee that the value of your investment will rise. Even if you do not have the full amount you would like to invest you can invest monthly or regularly, to also take advantage of your money spending time in the market.
The next step to boost your ISA
As we have examined in a previous article, there are several aspects of investing – and therefore your ISA – you can control. These valuable steps may be worth considering sooner rather than later.
If you would like the prospect of lower fees, effective diversification and a risk level that suits your goals better, please get in touch about transferring an ISA to us.
Please remember that when investing your capital is at risk.