Is it too risky now to put my £15k into an Isa?
The international crisis is making many investors anxious but there is still a way to help minimise the risks
QI want to invest £15,000 into an Isa before the end of this tax year. I have been holding off because of the uncertainty caused by the Ukrainian crisis. Should I just skip investing this year or take the plunge and risk losing money? I have other Isas and am happy to take a bit of risk, but need the money to fund my retirement in hopefully around ten years’ time. What should I do?
AYou are not alone in wondering what to do with your investment money, as the stock market continues its rollercoaster ride in response to the dreadful news coming out of Ukraine. Luckily you don’t have to make the choice whether to invest just yet or risk losing your Isa allowance. This is because you can open an investment Isa account, but keep the money in its cash fund until you feel comfortable investing, be it in a lump sum or by drip feeding it over a period of time. You can invest up to £20,000 tax-free in an Isa in the tax year to April 5, 2022. The limit is the same for the 2022/23 tax year starting April 6, and you must use it or lose it each year.
Jason Holland, managing director at Bestinvest, says: “Don’t feel under pressure to get invested by April 5. Trying to call the market over the short term is a mug’s game. But with markets down you are getting more for your money at the moment, so you should look to invest in dribs and drabs over the next few weeks and months.” He says where the money is invested depends on how long you have to invest and your existing portfolio. In your case, with ten years or more until you need the money, you have the scope to take more risk, if you are comfortable with it, than someone with a shorter investment timeframe.
You also need to let where your existing money is invested shape this year’s Isa investments. What gaps have you got in terms of geography and asset class? Don’t let the current international situation influence your thinking.
Lee Wild, head of equity strategy at Interactive Investor, explains: “Making investment decisions isn’t always easy, but volatile stock markets can make the process much harder. An extra element is added to your usual due diligence when it’s armed conflict that’s driving sentiment.
“History tells us that, despite considerable human suffering, we carry on. It’s the same with financial markets. Stock prices have recovered from every war, bar none — the Second World War, Korea, the Gulf War, Afghanistan, Iraq, all of them. Only the time element changes.
“It’s the same for other massive social and economic events. Around the 13th anniversary of the Great Financial Crisis, it’s worth remembering the FTSE 100 traded as low as 3,460 on March 9, 2009. Even after the recent crash, it’s more than doubled in value. Include dividends, and total return is over 200 per cent.”