And the other one “sure ISAs are terrible at the moment!”
These are a couple of things we often hear from people. We may hear it when we are first meeting a prospective new client. Or when we are talking to someone on the street (and they find out what we do for a living). We also see it on social media channels like Facebook when the Keyboard Advisor is giving everyone their take on pensions (and usually why they are terrible!).
Things like a pension or an ISA are wrappers. They are ways of holding money with their own tax advantages and disadvantages. I have created a short video to help explain this (click here to view as well).
I hope the video helps to explain what exactly a tax wrapper is and that they aren’t useless or terrible.
Some of the things that tax wrappers can do include –
- Get tax relief on contributions into a pension (as an individual or as an employer)
- Not pay any tax on the growth of an investment
- Help preserve your wealth for your future, your children and your financial security
Tax wrappers are very useful when thinking about your long-term financial planning.
As in the video – what you get out of the mug / tax wrapper can depend on many things but mainly by what you put in.
If you hold cash in an ISA and expect to beat inflation over the long term, then you may well be disappointed.
You are unlikely to have a positive investment experience if your pension –
- only invests in single asset funds e.g. Asian Equities, UK Equities or High-Yield (read risky) Bonds
- You haven’t considered your long term planning in a while
There is a much greater chance of having a successful and positive investor experience if your portfolio
- Is well-diversified in terms of asset allocation
- Contains some of the great companies of the world
- Is spread around the world
- Is aligned to your financial plan (with consideration of your risk profile)
- Is held for the long term & you remain disciplined
If you haven’t considered what you hold in your various investment wrappers, then now is a good time to drop us a line. Reviewing what you hold to ensure it aligns with your financial plan is important. It gives you context in relation to your long-term financial security.
As always, we want to hear your thoughts and appreciate your feedback. If you want to contact us then you can do so on hello@modulusfp.com, on the phone or through our social media channels.
PS – please note that other types of tea are available apart from Earl Grey. It just so happens that this is the only tea I am aware of (apart from the normal breakfast kind) so apologies!
Please note – the money you invest is at risk and could go down as well as up and you may not get back what you have invested.