26th February 2016
The best way to save into an ISA is ‘little and often’ to benefit from pound cost averaging says The Share Centre.
ISAs have become the go-to tax-efficient savings vehicle in Britain but still 55% of people are unaware that the current annual allowance is £15,240.
Over the past three years the average Share Centre customers has paid in £8,349 a year but 41% of people thought they could save as much as they like.
For most people saving £15,240 a year may seem like a lot of money but the best way to save is little and often. This will not only spread the cost of your ISA but could also help your investment performance thanks to pound cost averaging.
This technique reduces exposure to falling markets when investing a lump sum. By investing at regular intervals more shares are purchased when share prices are low and fewer shares are purchased when prices are high.
Richard Stone, chief executive of The Share Centre, said: ‘Decisions on the ISA allowance can often be reduced to political point-scoring. The fact is, the majority of people don’t know what the current allowance is and for the majority, that doesn’t actually matter. The message that does, however, is that the best approach to saving is to start early and to save often, regardless of how little you invest.
‘It can be easy to shy away from investing when the current ISA allowance is beyond an individual’s means. It can often scare people off investing all together! However, adopting a ‘little and often’ approach to investing is an achievable and sensible method, especially in volatile markets. Drip-feeding money into an investment rather that investing a lump sum – a technique known as pound cost averaging – can additionally help reduce exposure to volatility.’