I have the option to open a savings and investment account. I've been offered three different options:
Investment and Savings Account
- Yearly, low standard taxation
- No need to declare every sale / no hassle with income tax return
Fund Account
- Can trade funds
- Can compensate profits against losses in income-tax return
- Usually 30% tax on profits and dividends
Equity Trader
- Trade equities and other securities
- Can compensate profits against losses in income-tax return
- Usually 30% tax on profits and dividends
I do not know where to begin in researching what these things mean in practical terms, and what benefits might suit me most. Can anyone help me make sense of this?
Who "offered" you these options? It sounds like you just have money and can put it somewhere. In that case, the common advice is that you can't beat the market so you should just spread it out (diversify) as much as possible. For example, a stocks and shares ISA will offer you various stock markets that you can buy one of every share from. If you want to buy one of every share in the FTSE 100, for example, you can put your money there using one of the companies that do it.
When I wanted to do this, finding the companies that do it was actually the hardest part. Vanguard is one, Hargreaves Lansdowne is another, and Legal & General is a third. You can also buy individual shares if you want to from companies like AJ Bell.
I just gave all my money to Vanguard, and none of the bullet points you mentioned ever came up. I invested about £10,000 with them, so if you are much richer than this, you're welcome to ignore my advice. But if you plan to use one of the companies I've mentioned, they will give you lots of reading material to explain what will happen in more detail. It depends on what you want to do, but if you're happy to just passively pile your money into "stock markets in general", then get an ISA and ignore most of what you mention in the OP.
1. Equity and fund accounts are the same thing. Platforms can differ on which they're geared towards but I can't think of anywhere you can buy shares in funds but not directly into equities.
2. You mean capital gains tax which is a different beast and I don't see it hitting 30%, in all likelihood you will never have to pay this due to the tax-free allowance and ISA but record keeping isn't hard as platforms keep records. Unless you fuck about with crypto and pictures of monkeys.
3. You're liable to lose money with investing early on as the market is on a downturn, and you can lose it all by panicking or gambling which is what gets people. That said if you can plop your money in a low-cost tracker fund and forget about it then you will beat almost any other form of saving I can think of aside from houses and maybe investing in skills.
I don't know lad, put a little in a credit union, a little in a standard bank savings account and the rest on low-risk investing until you learn the ropes. No need to be all tally-ho.
