ISA season is nearly at its end as Tuesday marks the final chance for investors to put money into a tax-free wrapper for this financial year.
With just three days left, it is heartening to know that almost a third of readers (28%) have already maxed out their ISA allowance for the year, while a further 18% have been investing as part of a monthly savings plan.
However, of the 2,000 readers who responded to a recent poll on Trustnet, 28% said they had yet to do so, but planned on putting in a lump sum, while a quarter (25%) were not going to invest in the next few days.
There are understandable reasons for the former. Life can get hectic and it can be difficult to find the time to sort out your finances. As someone who regularly pushes the self-assessment tax deadline each year, I can sympathise.
However, it is critical to remember to do so as stocks and shares ISAs represent one of the few methods of investing tax-free with the chance to beat inflation.
Experts at Capital Group this week said that investors should keep a check on one of the key lessons that stockpickers have learnt over the years: market downturns are a part of investing.
“Over long periods of time, stocks have tended to move steadily higher, but history tells us that stock market declines are an inevitable part of investing. The good news is that corrections (defined as a 10% or more decline), bear markets (an extended 20% or more decline) and other challenging patches haven’t lasted forever,” they said.
That is not to say that markets are suddenly going to recover. Last year’s 30% returns were more the exception than the rule but, over the long term, markets tend to rise from the bottom left to the top right of a chart, with some blips along the way.
“Behavioural economics tell us recent events carry an outsized influence on our perceptions and decisions,” the Capital Group experts said.
In other words, what is holding back investors is likely to be more the emotional reaction to market events. Emotions can get the better of us – just ask Will Smith.
In an investing context, emotions are perfectly normal. It would be inhuman if we did not feel nervous when markets fell, but acting irrationally can lead to worse results.
“It’s always important to maintain a long-term perspective, but especially when markets are declining. Although stocks rise and fall in the short term, they’ve tended to reward investors over longer periods of time. Even including downturns, the S&P 500’s average annual return over all 10-year periods from 1937 to 2021 was 10.6%,” said the experts at Capital Group.
It is why, over the past two weeks, the Trustnet website has encouraged investors to look at an array of options before the ISA deadline.
Tom Aylott covered some interesting options for investors with the longest of timeframes – parents investing in a Junior ISA – while Abraham Darwyne looked at the other end of the spectrum, highlighting bond funds that had avoided the worst of the market falls this year (and those that had not). He also looked at alternative forms of income for those nearing retirement.
Eve Maddock-Jones covered how the number of ISA millionaires jumped by more than 800 over the past year and outlined how people had accrued their wealth, as well as how younger investors needing to invest for their first home deposit or for other shorter-term goals might go about putting money away.
Whatever your circumstance, there has been something for everyone in recent weeks. We hope you have found it useful and that if you have yet to invest, there are some ideas for you to make a decision in the coming days, should you choose to do so.