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Stocks & Shares ISAs : Buying Tactics
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Last update : November 2011
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| Anyone over the age of 18 (16 for a Cash ISA) can open a Stocks & Shares ISA through the following - |
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- Stockbrokers
- Investment managers/Fund management companies - However, be wary of companies that offer ISAs but then only allow their own funds to be bought. This limits an ISA's flexibility and therefore should be avoided at all costs
- Most Banks and Building Societies offer Cash ISAs but not always Stocks & Shares ISAs
- Independent Financial Advisors (IFAs), see - How to find a good IFA
- Fund Supermarkets - discussed in more detail here
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| How to buy a Stocks & Shares ISA |
| This is easy, find the right deal for you and your investment goals and then fill out a few forms. The opening process is simple but it can take a week or so with some providers while they carry out their identity checks.
One tip is to try to open an account with a provider that offers online access for buying/selling investments as well as getting up-to-date information on your portfolio.
Then, make sure you familiarise yourself with how the trading software works before you start dealing. Most companies will have some online training videos to help you with this process.
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| What to look out for |
There are two main ways to run a Stocks & Shares ISA -
- Do it yourself investing, where you choose how, when and where to invest, and
- Advisory type deals where your stockbroker or financial advisor (IFA) will advise you
The first style are often referred to as Self Select ISAs in that you select which investments to buy.
I am not in favour of the second type as they can often be a (legal) licence to generate excess fees for the companies that offer them. This is especially the case with clients that are new to the stockmarket and investing in general - sadly they're the best ones because of their lack of experience to try to load up with expensive fees.
Never forget this when investing (and not just with ISAs) - at all times there will be commission and fee hungry sharks circling you. And if you don't keep an eye out for them or realise their often subtle game they'll continue to dart in and nibble at your capital in a myriad of different ways.
One easy way for advisors to generate high fees for themselves is to heavily promote and advise on the funds that pay them the most commissions, rather than similar products which pay them less.
My own thoughts on this topic are unless you're willing to do the work and investment research yourself, or you're lucky enough to hook up with a solid financial advisor, it's best not to get involved in the stockmarket.
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| Important Point -
Let's not criticise or chastise the financial services industry too much when it comes to charges or trying to sell us excessively expensive products. If we were in their shoes we would probably be forced to toe the party line as well.
Instead, we must recognise how they operate and do as much as we possibly can to seek out the deals which provide a product for a fair price and without high management charges or hidden extras.
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| Use Fund Supermarkets to reduce charges |
| One way to lower fees and charges, if you're interested in buying funds, is to use a Fund Supermarket.
For example - Tesco's offers good value food because it sells a large quantity, with few frills, and so can negotiate discounts with its suppliers. A Fund supermarket works in a similar fashion, a no-frills and no advice one stop shop for buying and selling investment funds.
There is a detailed explanation of what fund supermarkets are in this FAQ.
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| ISAs and regular savings |
| One of the best ways to use both Cash and Stocks & Shares ISAs is for regular savings.
Cash ISAs can be used to make regular savings from a monthly pay cheque, say £50 or £200 a month. Again, you are in control so if for any reason you want to stop the monthly deposits just cancel the direct debit.
Not all stockbrokers offer this feature so you must check beforehand. Using your ISA this way is an excellent way of saving for the long-term. And because you are in charge it's easy to stop the payments, or reduce them for a period before starting again.
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FREE Stocks & Shares ISA Report
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Why you must think long term with ISAs
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Costs and charges - How to slash them
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The best broker to use - and why |
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How to build a Portfolio of different asset classes
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More details |
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Read more in the ISA section:
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