Any time is surely a good time to start a Stocks and Shares ISA. But there are two things that can give investors a boost.
Firstly, the sooner the better. The UK currently boasts more than 2,000 ISA millionaires. Many of those started back in the PEP days and converted their PEPs to ISAs.
Time can make a huge difference. The average Stocks and Shares ISA return over the past 10 years is 9.6%. Now, £1,000 invested a decade ago at that rate, with nothing added to it, would be worth £2,500 today.
How much?
The same sum invested back when ISAs started in 1999 would have reached £9,000. Again, that’s with no additional money invested.
And starting at the introduction of PEPs in 1986, an initial £1,000 would have grown to a whopping £29,000 today.
Time counts
There’s no guarantee an ISA will keep earning 9.6%. But it’s clear that, whatever the return, starting earlier is better. The early years can make a huge difference.
The stock market itself can also help a new investor. Or, rather, how cheap or expensive shares are in those early days.
If we buy when shares are cheaper, dividend yields are higher for one thing. And a couple of extra percent on a dividend, for a sum invested today, can add up to a big boost over time.
Crises
Over the past few years, I think UK shares have been way too cheap. It was the result of years of crisis after crisis, economic and political. And we’ve had some great buying opportunities from it. But how long can it last?
I’d thought 2022 might have been the best year to invest in an ISA. Inflation, interest rates, and general economic gloom were all keeping the stock market down.
As soon as inflation started to drop, I thought interest rates would come down. That would give share prices a boost. And the super cheap years would quickly fade.
Downturn
When the FTSE 100 broke through 8,000 points in February, I saw my expectations being confirmed. But now it’s all going wrong again.
Inflation is still high, and so are interest rates. And shares are dipping again. There’s even talk of a new stock market crash in 2023. What do I think of that?
Lovely! It’s just what I want, a renewed period of cheap shares. I’m still in the net buying stage of my investing plan.
2023 better?
The longer a return to economic growth is delayed, the higher I expect my long-term profits to be. So maybe 2023 will turn out to be a better year for Stocks and Shares ISA investors than 2022.
And don’t forget, we only have a few weeks left to use up as much as we can of our 2022-23 allowance.
On the upside, we’ll then have a whole new financial year in which we can invest up to £20,000 in an ISA. I just hope UK shares stay this cheap for me to put in as much as I can.
