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Ever thought you might want to start investing but not been sure about where to begin?
Things can already seem confusing enough, even before adding in potentially baffling acronyms like ISA, SIPP, ETF, or more (here’s a useful glossary of investment terms).
Actually, though, an ISA can be a useful way to start investing.
Making the most of your money
The reason for that is not about the investing itself. You could do that in a normal share-dealing account, after all.
Instead, the potential advantage 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, those also will go untaxed.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Now is the perfect time to think about this, as every year the end of the tax year marks the closure of that tax year’s allowance.
That deadline is only for putting money into the ISA, though. It can inside it for a while (years, even) before being invested.
So, for someone who has an inkling to start investing, now could be a good time to think about whether a Stocks and Shares ISA might match their needs.
Start as you mean to go on
Investing can seem complicated and, indeed, many people make it complicated.
But look at some of the most successful investors from history as well as today and what becomes clear is that their success is often built on simplicity not complexity.
I think that can be a sensible way to start investing – and keep going.
Doing so involves sticking to businesses you can understand, taking time to understand a company’s financial health, paying close attention to valuation, and thinking of investment as a marathon, not a sprint.
Getting going can be quick
It may take a bit of time to get to grips with the basics of how the stock market works. But the mechanics of actually investing are not complicated.
Comparing options for an ISA, choosing one, and setting it up could probably be done in a matter of days — or perhaps within a day.
So, someone who wants to start investing and does that this weekend should still be in good time to put money into their new ISA before the 5 April deadline a fortnight from now.
Finding the right shares
Once inside the ISA, as I mentioned, the money can sit without being invested.
Right now, though, I think there are some shares worth considering for their long-term potential.
J D Wetherspoon (LSE: JDW), for example, tumbled at the end of last week as the market digested its interim results. Pre-tax profits tumbled by almost a third year on year.
The company warned that rising energy costs are a risk to profits.
National Insurance and labour rate increases have hammered Spoons, adding around £60m in annual costs. That equates to almost 90% of last year’s net profit of £68m.
So, why do I remain upbeat from a long-term perspective?
The pub industry faces ongoing challenges as demand falls and taxes increase, but Spoons is a best-in-class operator. It has a compelling value proposition for customers. It has sizeable economies of scale.
At under 10 times earnings, I reckon its share price now looks like a possible bargain.
