Demand for stocks and shares ISAs has surged in the last year as Brits look to beat record low savings rates.
Barclays stockbrokers is reporting a 67% increase in the number of investment ISAs opened, adding that 20% of current ISA holders plan to invest more than they did last year.
By contrast, savers have been withdrawing record levels of cash from their accounts, as repeated cuts to the base rate have left savings rates languishing at their lowest ever levels.
According to the Bank of England, the average branch-based notice account now pays just 0.18%, while current account and instant access savings account holders earn an average rate of 0.17%.
Good time to invest…
With stock markets having been in free fall for much of the last year, many people feel they now represent fair value.
According to research from investment ISA providers LV=, more than half (56%) of all Brits considering investing are driven by a sense that shares are currently undervalued, whilst one in three (37%) are simply looking for higher returns than they could make from a cash deposit account.
A further third (33%) say they are not worried by short-term market movements, and 30% say the best time to invest is often precisely when others are shying away from the markets.
…but investors are anxious
Interestingly, the survey also highlights a degree of hesitance among investors as a result of market volatility.
Almost half (47%) of all current investors feel this period will be remembered as a strong investment opportunity, yet only one in three (29%) are actually planning to up their investments in the market.
"Given the continuing volatility in global markets, investors could be forgiven for not having courage of their convictions,” says LV= finance advice director Robin Willison.
Choose your risk level
However, Willison stresses that investing in the stock market must be seen as a long-term decision, adding that savvy investors can shape their portfolio to match the level of risk they are prepared to take with their money.
“More risk-averse investors will probably want to spread their risk by investing across a range of asset classes, and this balance is most easily achieved through managed funds,” he says.
“Naturally, investors should also consider taking financial advice wherever appropriate."
So where are they investing
According to brokers TD Waterhouse, investors are taking a far more diversified approach to their ISA selection this year.
The Blackrock Gold and General Account is currently the most popular choice among its ISA investors, while emerging markets are also seeing strong demand through the Gartmore China Opportunities and Fidelity Global Special Situations funds.
“This trend is supported by results of our recent survey of retail investor confidence in the UK, which showed that 38% of respondents are more likely to invest in Asia over the next 12 months,” explains TD Waterhouse CEO Angus Rigby.
If you are looking to try your hand at investing, stocks and shares ISAs are a great option, as they allow you to protect your returns from the tax man.
If you plan to make use of this year’s investment ISA allowance you’d better get moving, with the April 5 deadline fast approaching.
