Want to buy breakfast with gold? Millions face British Gas price hike: Energy bills for dual fuel customers will increase by an average of 5. The fall in the Footsie this week comes at a bad time for those investors who tony cooper easy volatility investing’t yet used their Isa allowance but are considering buying into equities.
Although there is the argument that fresh investors are getting a better deal as shares are cheaper as a result of the falls, the rapid drop in the market will have done little for investor confidence. According to the financial experts, the drop, which wiped out all of the FTSE 100’s gains this year, was a healthy correction and the four-year bull-run is likely to continue. But the truth is that no-one can truly predict what will happen in the future. For those investors that want to use their Isa allowance but are unsure what to do with it, we outline some options to consider. Mark Dampier, investment expert at Hargreaves Lansdown, says: ‘If you are that nervous about the market at the moment, keep your money in cash and invest when you think they markets offer better value.
You can actually ‘reserve’ your Isa allowance for this year by keeping it in a cash account and then invest the money when you feel more comfortable about the state of the market. 14,000 tax-free in the one tax year. Alternatively, just use the cash part of your Isa and ignore equities altogether. According to Capita Registrars, investors have been taking money out of shares and keeping the money in cash because the recent increases in the bank rate have made cash accounts more attractive.
Newcastle Building Society is currently offering 6. 7,000 Maxi allowance now to a fund supermarket and then phase the investment into your required funds over the following months. This has the benefit of ‘pound cost averaging’, which is useful in a volatile market. For example, when a unit trust price has fallen, then more units can be purchased for that month. Similarly when the price rises then fewer units can be purchased. Over a period of a few months, the average price paid will be lower than the average unit price for that period as more units are bought at the lower price and fewer at the higher price.
You can phase your investment over three, six, nine or 12 months, although you should check with your Isa provider on any restrictions, and interest is earned on the proportion that is still held in cash. Fundsnetwork, which powers This is Money’s fund supermarket partner Skipton Financial Services, allows investors to phase their Maxi-Isa over six months and pays the Barclays basic savings rate in interest. These plans offer a chance to share in any stock market growth over a set period, but promise the capital back at the end if markets have fallen. They suit lump sum investors, not regular savers, and can be held within an equity Isa. If the market does rise over the term, you will not do as well as if you invested directly in the index through a tracker fund because you do not get any dividends – income paid out by companies to their shareholders.