Image source: Getty Images
Have you ever thought you might want to start investing but aren’t sure where to start?
Things can seem confusing enough, even before adding potentially confusing acronyms like ISA, SIPP, ETF, or more (here’s a handy glossary of investment terms).
In practice, however, an ISA can be a useful way to start investing.
Making the most of your money
The reason for that is not about investing itself. You can do that in a regular share account, after all.
Instead, the potential benefit of an ISA is about tax. If the shares held in it go up in value – even by a lot – they will not attract capital gains tax. If they pay dividends, they will not be taxed either.
Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.
Now is a good time to think about this, as every year the end of the tax year marks the close of that tax year.
That deadline is only for putting money into an ISA, however. It can sit in it for a while (years, even) before it is planted.
So, for someone with an initial inkling of investing, now would be a good time to consider whether a Stocks and Shares ISA might suit their needs.
Begin as you mean to proceed
Investing can seem complicated and, indeed, many people make it difficult.
But look at some of the most successful investors in history and today and it’s clear that their success is often built on simplicity rather than complexity.
I think that would be a reasonable way to start investing – and continue.
Doing so involves sticking to businesses you can understand, taking the time to understand the company’s financial health, paying close attention to valuations, and thinking of investing as a marathon, not a sprint.
Travel can be fast
It may take time to understand the basics of how the stock market works. But investment vehicles are actually not difficult.
Comparing ISA options, choosing one, and setting it up can probably be done in a few days – or maybe even within a day.
So, someone who wants to start investing and does so this weekend should be in good time to deposit money into their new ISA before the April 5th deadline two days from now.
Finding the right share
Once inside the ISA, as I said, the money can sit without being invested.
Right now, though, I think there are stocks worth considering for their long-term potential.
JD Wetherspoon (LSE: JDW), for example, fell at the end of last week as the market digested its interim results. Pre-tax profits fell by about a third year on year.
The company has warned that rising energy costs are a threat to profits.
National Insurance and rising labor costs have put a strain on Spoons, adding around £60m to annual costs. That equates to almost 90% of last year’s total profit of £68m.
So, why am I always happy from a long-term perspective?
The bar industry faces constant challenges as demand dwindles and taxes rise, but Spoons is the best in class. It has a compelling value proposition for customers. It has large economies of scale.
At 10 times earnings, I think its share price now looks like a potential bargain.
