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What are the benefits of starting your ISA early?

Last minute investing may not be the best way to maximise your ISA allowance

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Topic: Investing

The benefits of starting your ISA early

It’s a familiar story; as April 5th looms, people across the country suddenly realise they have a tax-free allowance they haven’t used and leap into action.

While these people are benefiting from using their ISA allowance, they actually could be missing out on even greater returns by not investing from the beginning of the tax year.

So what are the benefits of starting your stocks & shares ISA early? We’ve highlighted a few of them here.

1. Starting early can pay off

  • Invested at
    the start of the year

  • Invested at
    the end of the year

If you had invested at the start of the year in the FTSE All Share from 2007 to 2017, you could have made £6,627 more than if you had left it to the last minute (excluding charges).1

2. Enjoy the snowball effect of compounding

The longer you’re invested for, the more your investment can snowball. For example, a one-off £5,000 investment in the FTSE All Share in 1986 would have grown to £28,357 by the end of 2016. However if all the returns were continuously re-invested over that same period, then the original investment would have grown to £88,3962

3. Drip-feed your investments over a longer period

An early start with your ISA means you can spread your investment over the year. Making regular contributions to your ISA over the whole year allows you to even out the ups and downs of the market because you end up buying more shares when prices are low and fewer shares when prices are high.

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