Forget the FTSE 100 crash, the Stocks & Shares ISA deadline is nearly here

The FTSE 100 might be falling, but here’s why I think a Stocks and Shares ISA is the best thing for your wealth in 2020.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The world’s stock markets are in the grip of coronavirus panic, and the FTSE 100 crashed below 6,000 points on Monday morning. Is that any time to be thinking about our 2020 Stocks and Shares ISAs? Well yes, I think short-term market panics can help us focus on what really matters — our long-term investing plans.

But shares? In the grip of a stock market crash, you might think a Stocks and Shares ISA is something to run away from. A safer Cash ISA, surely, is a better bet? But I think that’s dead wrong, and I’ll explain why.

ISA limits

But first, I reckon our investment plans are best served by making the best use we can every year of our ISA limit. At the moment, that limit stands at £20,000 per year — we can invest up to that much and not pay any tax on any of the profits we make. For the 2019-20 year, we have less than a month to use what we can of it.

You might not be able to afford to invest anything close to that amount, so you don’t need to worry and can carry on with your 2020-21 allowance. But even if you don’t come close to the limit, I think maximising the amount we invest before the annual deadline can have one very beneficial effect. It commits whatever cash we have available leading up to April, and doesn’t leave it lying round heading into the summer with all the temptations that brings.

Stocks and Shares ISA

Cash ISA rates are around 1.3% at the moment, and that’s if you pick from among the best payers. That’s below inflation, and guarantees you’ll lose money in real terms. So the question of whether a Cash ISA is a good alternative to a Stocks and Shares ISA doesn’t even arise — a Cash ISA isn’t even a good alternative to no ISA at all.

But if you’d piled your money into a Stocks and Shares ISA at the start of the year, you’d be down 20%. So how on earth is that a good move? Well, a this type of ISA is a long-term investment, so let’s look back a bit further.

If you’d invested in one in the depths of the banking crisis slump, around the beginning of 2009, you’d have almost doubled your money today. Actually, when you add 4% and more per year from dividends, you’d have more than doubled it, tax-free. And that’s even after the coronavirus panic sell-off.

Lessons from shares 

History is easily forgotten when markets are in the grip of the latest panic. But the real lesson is that times like this are times to buy, not times to sell.

I’ve no idea what will happen in the coming few months. But I am confident that if you keep trickling your savings into a Stocks and Shares ISA and buying shares throughout the downturn, you’ll come out of it in a much better long-term financial state.

And even if you’re nervous of buying shares right now, there’s no rush. If you get as much cash as you can into your ISA by the deadline, you can then take your time deciding what to buy.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »