Investors are turning their attention to maximising their tax-efficient Individual Savings Account (ISA) allowances. This is always a difficult investment decision to make and this year is no easier with volatility continuing in the investment markets. Here are my top ten tips for choosing a suitable ISA investment this tax year:

1) If you don't want any investment risk then choose a Cash ISA. The interest you receive will be paid to you without any income tax to pay on it. Over the long term the returns from a Cash ISA are unlikely to keep pace with inflation, but at least you will have capital security in the short term.

2) If you are looking for capital growth over 5-10 years then consider investing in an equity ISA; one that invests in stocks and shares. It is probably best to invest in collective investments such as unit trusts, investment trusts or open ended investment companies where you spread risk by investing in a "basket of shares" rather than a single company.

3) Choose investments that suit your attitude towards risk, reward and volatility. Most people we meet are invested in arrangements that are way ahead of their attitude to risk. We often see examples of very cautious investors with ISA portfolios completely exposed to UK and/or international equities. Make sure that your chosen investments match your expectations.

4) Don't invest in an ISA at all! If you have credit card, store card or overdraft debt then pay that off first before you even start to think about saving or investing for the future. Come on - wake up and smell the coffee. Unsecured debt is bad news!

5) Do it yourself. Don't go to a "financial adviser" who is going to charge you commission to arrange an ISA. If you don't need advice then you can do it online and cut out the middleman.

6) For goodness sake don't do it yourself if you know you will get it wrong. Talk to a competent professionally qualified fee charging adviser and get proper financial and investment advice before making a decision.

7) Don't pick a flavour of the month type of ISA investment. Instead you should spread your £7,000 allowance (£7,200 next tax year) over a number of investment funds in different asset classes to build a portfolio to suit your particular investment objectives and attitude towards investment risk.

8) Don't choose a Cash ISA based just on interest rates, particularly where part of the rate is some kind of special bonus. Look for a provider who has consistently offered decent interest rates not one who lures you in with high rates and then later on ceases to compete.

9) Don't be rushed into doing making an investment decision. Sure you lose this years allowance if you don't invest before 5th April, but this is no big deal over the longer term.

10) Consider the alternatives. Consider paying off debt first (see Tip 4 above). What about a pension contribution instead?

New ISAs for the new tax year You can now save £3600 in cash this tax year and you can invest a further £3600 in shares. Order free ISA brochures from leading providers today

I am NOT affiliated with any banks or institutions. I'm just another web surfer like you. My posts are based on what I find on institutions' websites, what they advertise and what the banks' customer service reps tell me. I also receive valuable help from readers who inform me of new rates and deals. Comments and emails are much appreciated.

 

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