CHOOSING A PLATFORM
BEFORE YOU CONSIDER what to invest in, you need to consider how you will invest. This means opening an account with a stockbroker or investment platform.
Most people will look to invest through an ISA in order to keep the bulk of their returns out of the taxman’s grasp. You can invest up to £20,000 a year in an ISA and you don’t have to pay any tax on capital gains and dividend income for investments kept inside this wrapper.
It’s also worth considering paying as much as you can into a pension, assuming you don’t need the money until age 55. You can pay the equivalent of your earnings into a pension each year, up to a maximum of £40,000. If you’re a basic or higher rate taxpayer, you’ll get 20% income tax relief and if you’re an additional rate taxpayer you’ll get 25% tax relief.
Helpfully, most brokers or investment platforms offer execution-only share dealing accounts, SIPPs or ISA wrappers. Under an execution-only remit a stockbroker will buy or sell according to your instructions without providing any form of advice.
However, a lack of advice should not mean a lack of support and it is important to pick a broker which is transparent, user-friendly and efficient. Have a read of reviews on the internet to see what other customers are saying about the level of service, for example.
After all a stockbroker is there to help you build and maintain your portfolio. Given this vital role it is really important to make the right choice.
If you do not shop around for a good broker you could end up facing prohibitive charges when you buy and sell assets such as shares, investment trusts, funds, exchange-traded fund (ETFs) or corporate bonds.