Assuming higher rate tax on income and capital gains and an average annual return of 4.5%. Please note that forward looking models are not a reliable indicator of future performance.
Gain peace of mind quicker and avoid the last-minute agitation of organising your finances at the end of the tax year – including niggling paperwork. Also, by replenishing your ISA sooner you are less likely to forget to check it off your to-do list.
Use it or lose it
When you do forget, there is no second chance. Your ISA allowance is not cumulative, so every year you must use it or forgo its benefit.
When we are flustered, or in a hurry, we are more likely to allow behavioural biases to affect our investments. These biases occur because we prefer to take shortcuts when making decisions, so for example, we may be prone to herd behaviour, overconfidence or simply suffer from inertia.
You may prefer to invest a lump sum at the start of the year but investing monthly is effective, too, if you don’t have the full amount to hand. This method captures the benefits of time for capital to grow and minimising hassle, but it also lets you use what is known as pound cost averaging. This averages the price you pay for an investment over time and helps to smooth out the effects of market volatility.
Deploy the wonders of compounding sooner
More time invested allows your returns to earn better returns – the key factor of compounding, which Albert Einstein reputedly labelled as the eighth wonder of the world. The sooner you allow your ISA wealth to compound the better.
Extra Netwealth benefits
You can also gain extra benefits if you are a Netwealth client. You can:
Naturally, the earlier in the year you top up your ISA the more time you have for the benefits to accrue. Yet even if a few months have passed you can still make a considerable difference to the value of your tax-free savings.
Please remember that when investing your capital is at risk.