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Date : July 16, 2024
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How to start a Christmas Stocks and Shares ISA

Businesswoman calculating finances in an office

Did you get any money for Christmas? I know it’s been an especially expensive 2022, and folk might not have a lot of cash left. But I reckon many people would be surprised by the relatively modest sums needed to invest in a Stocks and Shares ISA.

The annual ISA allowance stands at £20,000, which is a decent chunk of money. I’ve heard people saying things like “I don’t have anything close to £20,000, so you can forget those ISA things“.

Not just for the rich

But that’s the upper limit. What’s the lowest amount we’d need to open an ISA? My provider only wants a minimum of £50, and most of them are similar. That’s really not a lot of cash needed to get started investing in shares.

Once we have an account open, we can transfer in as much or as little as we want, whenever we want. Many providers offer a monthly savings scheme. For mine, there’s a minimum of £25 per month, which again isn’t big money.

Minimum investment?

This sounds straightforward enough to me. But there’s another key question people often ask. What’s the minimum amount we’d need to make an actual share purchase?

There’s no technical minimum, but there is a broker’s charge for each investment. With mine, it’s a fixed £12 per transaction. So I wouldn’t want to invest just £12 in shares, for example, as the broker’s fee would end up doubling the cost.

Lower percentage

But it’s a fixed fee. So the bigger my purchase, the less it is as a percentage of my investment. I generally favour £1,000 as my ideal minimum investment. The charge then adds just 1.2% to the cost. And my shares need to gain 1.2% (plus the 0.5% stamp duty charged on purchases) to break even. I’d be a pretty lousy investor if I didn’t think I could manage that.

Saying that, with charges relatively low, I’d be happy to invest as little as £500 in a single purchase for a stock I really wanted. Other people will be happy investing less.

Starting now

So, starting again now, with a few days spare in the Christmas holidays, this is what I’d do. I’d open a Stocks and Shares ISA with as much spare cash as I had. And I’d then do my best to transfer some money in every month — whether using the provider’s savings scheme, or making manual transfers whenever I had the cash.

Then every time I’d built up somewhere between £500 and £1,000, I’d buy some shares.

Which shares?

Now, that leaves the obvious big question. Which shares should I buy? Well, that’s something every individual investor needs to decide for themselves. We all need to work out our own strategy, whether that’s seeking dependable dividends, growth shares, or whatever.

But whatever strategy I chose, I’d definitely do one thing. I’d diversify, and make my individual investments in different companies in different sectors. That way, even if one of my chosen stocks hits hard times, hopefully the others should improve my safety.

The post How to start a Christmas Stocks and Shares ISA appeared first on The Motley Fool UK.

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