Wednesday, February 01, 2012

How you benefit from overall stock market growth

Taking the plunge into making investments can sometimes seem a little bit daunting at first, particularly if it’s something you’ve never done before. However, if you are keen to make some investments and are willing to invest your money over a long period of time in the hope of achieving maximum growth, read on to find out more about how you could benefit from overall stock market growth.

In particular, let us take the example of some of the best stocks and shares ISA. For those not already in the know, this is a kind of ISA that invests in – you guessed it – stocks and shares. There is an annual limit as to how much you can invest (£10680 for the 2011/2012 tax year), but all your interest and dividends are tax free, which is one of the reasons these ISAs make such a popular form of investment.

If you are looking to invest your money over the long term then one good example of an investment ISA to consider is a FTSE all-share tracker ISA. This is a type of ISA that purchases shares in all of the companies listed on the FTSE all-share index, which helps to spread out the risk and means that you have your eggs in multiple baskets as opposed to one, more concentrated, investment.

One thing to note, as you are probably already aware, is that your investment has the potential to go down as well as to grow, because the growth of the stock market is not guaranteed. However, when the market is growing, if you have an all-share tracker ISA, you’ll never miss out on that growth due to the fact your investment is spread around as opposed to concentrated in a smaller group of companies.

Also, one of the benefits of this type of share ISA is that you can get share dividends, which means there is a chance your investment will continue to grow even if the growth of the market is currently struggling. Plus, if you are able to invest money in your stock share ISA over the course of five years or more, there is a fairly decent chance that the FTSE all-share exchange will grow rather than fall, so even though you are taking on a financial risk with this kind of ISA, there is a good chance for growth – and the rewards can be very good.

Overall, if you are looking for a long term investment and are willing to take a risk in exchange for potentially very good returns, an all-share tracker investment ISA could be the ideal option for you.

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