What caught my eye this week.

This might be a Mini Budget moment for the US. Its regulators moved yesterday to shut down Silicon Valley Bank and to take control of its deposits. It’s the biggest US bank failure since 2008.

Silicon Valley Bank’s shares had already been pummeled this week as the Californian lender tried to secure extra funding to shore up its balance sheet. But in the face of a bank run, its regulator cited “inadequate liquidity and insolvency” and pulled the plug, taking control of its $175.4bn in deposits.

Financial shares sold off on fears of contagion – even here in London – but this doesn’t look like a ‘Lehman moment’. However that doesn’t mean the failure is not significant.

Silicon Valley Bank was the dominant lender to the US venture capital industry, was the 16th biggest bank in the US, and it was valued at over $44bn at the end of 2021.

It’s failure is probably not systemically disastrous, except in exactly why Silicon Valley Bank got into trouble and what it reveals (again) about the state of the financial system.

Because its failure isn’t really due to troubles in the venture capital ecosystem that it serves  – despite the well-documented collapse in tech and start-up valuations over the past 18 months.

No, it has been undone by our old and now clearly not so risk-free friend – fixed income.

On the run

At the height of the post-pandemic growth mania, everyone was throwing money at the venture capital sector.

The biggest VC companies ballooned. Some began to pivot their strategies to become permanent owners of the companies they funded. Meanwhile at the other end of the spectrum, VC newsletter writers and podcasters launched one-man firms and raised real money.

One way or another, much of this froth ended up on deposit at Silicon Valley Bank. As the FT explains, the bank then decided to park $91bn of these deposits into low-risk but – crucially – long-dated assets, such as mortgage-backed securities and US government bonds.

Well we know what happened next. But in case you’re still oblivious to the regime change, central banks around the world hiked interest far faster and further than anyone predicted. This crashed everything from blue sky tech firms to Amazon and Apple to the 40 in your 60/40 portfolio.

It also saw Silicon Valley Bank’s portfolio of safe assets that stood behind its customer deposits fall $15bn underwater.

Which wouldn’t in itself have been a problem – the assets have a positive yield-to-maturity, and will pay out their face value in the long run – unless sufficient depositors got scared and began to demand their money back in droves.

Which is what happened this week.

As economist Noah Smith explains in a comprehensive piece, the US FDIC scheme – the equivalent of our FSCS guarantee – was beefed up after the financial crisis to try to stop this happening:

Because everyone knows the federal government will cover their deposits, they aren’t worried about losing their money in a run, so they’re never in a rush to pull it out. And because they never rush to pull it out, runs can’t even get started.

For a normal bank, about 50% of deposits are FDIC insured.

But there’s a but:

But 93% of SVB’s deposits were not FDIC insured. So SVB was vulnerable to a classic, textbook bank run.

Why did SVB have so many uninsured deposits?

Because most of its deposits were from startups. Startups don’t typically have a lot of revenue — they pay their employees and pay other bills out of the cash they raise by selling equity to VCs. And in the meantime, while they’re waiting to use that cash, they have to stick it somewhere.

And many of them stuck it in accounts at Silicon Valley Bank.

Smith gives an excellent summary of how the run got started. It was down to the usual alchemy of initial lemming-like behaviour transforming into rational action once everyone else is at.

Just as we saw 16 years ago with Northern Rock.

We are gonna make it…

The consensus of opinion this weekend is that Silicon Valley is an outlier that over-served a concentrated customer base. And so that the rest of the financial system isn’t very exposed.

I imagine US regulators are pulling all-nighters to try to ensure that narrative holds over the weekend. Ideally they’d probably want to get the bank’s business shifted into bigger and safer hands by Monday.

However the episode is another example of the rapid ascent from near-zero interest rates leading to a mild calamity. We previously saw it with the Mini Budget-provoked pension crisis here in the UK, and I’d argue with the collapse and bankruptcy of much of the cryptocurrency infrastructure.

The more of these blow-ups we go through without a system-wide meltdown, the more confidence we’ll have that the financial system was sufficiently shored-up following the dramas of 2007-2009.

I mean, just imagine what would have happened to bank balance sheets following the collapse in fixed income asset values last year if they had still been levered-up like in 2007.

On the other hand, the more of these blow-ups we see, the more we might fear that one of them is going to get us eventually. (My best bet would be something connected to the global housing market.)

So let’s hope inflation calms and rates can stop rising soon.

Have a great weekend!

[continue reading…]

The past year saw interest rates ascend from the murky depths of near-zero. What began as a gentle wobble expanded like some giant emission from the sub-aquatic crust below calm seas to – ahem – belch violently at the surface, causing shockwaves in all directions.

Hmm, my co-blogger The Accumulator makes these metaphors look so easy. Anyway you get my point.

Early last year I warned this regime change could derail early retirement plans by whacking equities and bonds. Mortgage rates would rise, too. Although on a brighter note cash savings would pay more. Albeit not, as things have turned out, by anything like enough to match inflation.

In the UK we eventually even got a government-induced Mini Financial Crisis, when a spike in bond yields threatened to blow-up the pension system and imperil the banks again.

And to my surprise, this shift is still not over. 18 months ago I’d expected inflation to have eased a lot by now. The longer high inflation lasts, the more likely it gets embedded via higher wages.

Policymakers are similarly bemused, if not panicked. They first talked of “transient” inflation. Then they unleashed a rapid succession of hikes. Then they arguably lowered their guard – only to see inflation fears now pick up again.

Bonds and equities have fallen recently as more and longer-lasting US rate rises are back in sight:

Rate expectations

What we are seeing here is the messy sausage-making behind the ugly word ‘normalization’.

We’ve gone back to a world where money is no longer almost free.

As much discussed, the inverted yield curve that has resulted from the rate hikes that got us here seems to predict a recession is coming. (Though the academic behind this signal has doubts).

Most pundits expect a mild slowdown. But I suppose a very deep recession could hammer the outlook for inflation and hence rates. Maybe we can’t entirely dismiss a return to near-zero interest rates – especially if the vast amount of borrowing out there limits how long high rates can endure.

However it looks much likelier to me that we’ve seen the last of policy rates of 0-2% from central banks for a while. That we’re back in a 3-6% market interest rate world.

That has consequences for financial products and services, and for government borrowing and business strategies, too.

Higher borrowing costs will surely inflict a correction on frothy residential property markets. Higher costs will also change how businesses raise money and where and why they invest. Zombie outfits propped up by low rates could finally go bust. There will be other winners and losers.

Banks for instance should do better in a higher rate environment, all things considered. They’ve become masters at finding other ways to make money rather than simply sweating their ‘net interest margin’, which was crushed in the near-zero era. But the alchemy of lending at higher rates and paying savers less is more forgiving at today’s levels. So traditional banking should do markedly better from here. (Barring a true housing crash…)

Elsewhere, any company sitting on a lot of cash will finally have the wind at its back – whereas such prudence was a drag on returns for over a decade.

But these won’t just be conservative companies with strong balance sheets.

We can also expect firms that take a lot of customer cash upfront – and then sit on it for a while – to report higher income from interest earned, too.

Many companies are in this position. It all depends on exactly when they pay their suppliers for whatever they sell their customers. A big delay creates a cash ‘float’ that can generate an income.

Cash in an investment account

However the most interesting winners from the return to higher rates from a Monevator perspective are the investment platforms and brokers.

Stephen Yiu – who manages the sometime market-beating Blue Whale Growth Fund – reminded me of this in a recent interview with the Investor’s Chronicle.

Yiu mentions his fund invested in US broker Charles Schwab explicitly on expectations of higher interest rates. That’s because Schwab earns interest on cash left idle in its customer accounts.

When risk-free rates were very low, this ability was redundant.

But with short-term US rates nearing 5% and Schwab boasting $7.5 trillion in assets under management, it’s almost a superpower.

Not all Schwab’s trillions under management will be in the right kind of assets or accounts. I just pulled up that $7.5 trillion total figure from investor relations. Plenty of assets will be, though.

Consider next that Yiu says 10% of customers’ money on Schwab’s platform is typically held in cash. Depending on what exactly you multiply by what, you can quickly forecast a huge income stream here.

All without any of the risks attendant with banking.

I remember seeing a similar dynamic when studying the results of Hargreaves Lansdown many years ago. Interest on customer cash back then contributed nicely to its profits. But this dwindled to nothingness in the years after the financial crisis.

Hargreaves scrambled for a fix for a while. It even worked up a peer-to-peer savings product, though this was ultimately scrapped. But today’s higher interest rates are a panacea.

Hargreaves’ revenue in its latest half jumped 20% thanks to higher interest income and customers holding more cash, presumably spooked by last year’s turmoil. That’s a nice hedge to the bond and equity downturn for the investment platform.

Indeed from its perspective, the best thing a customer can do is hold cash.

From its recent results:

Overall revenue margin [was] between 50 and 55 basis points, primarily reflecting the higher revenue margin on cash resulting from higher interest rates. The margin for each asset class being:

– Funds 38-39 basis points (no change)

– HL Funds 55-60 basis points (no change)

– Shares 30-35 basis points (no change)

– Cash 160-170 basis points

Notice that cash is by far the most profitable asset class for the broker.

How do you rate them?

Higher rates are good news for Hargreaves Lansdown and its shareholders, then. But what about for you and me?

Well I was dismayed to hear Schwab’s US customers leave 10% of their money un-invested.

Yet a quick glance at where customers keep their money on Hargreaves Lansdown suggests we’re even worse – with just over 11% of investment account assets held in cash.

To be fair, Hargreaves Lansdown does pay interest on this cash. From 1% to 2.4% right now, depending on what kind of account you have the cash in, and how much you have there in total.

As a quick comparison, rates seem a little higher at Interactive Investors. Whereas it appears that AJ Bell pays a little less. This is just my quick impression, you’ll have to break out the calculator and look at your own balances for an accurate comparison. And of course consider the total cost of investing.

We’ve thought about adding interest rates to our broker comparison table, incidentally, but the wide variety of permutations – and the frequent rate shifts – means it’s not really feasible.

Hence you’ll have to do your own research I’m afraid.

Money for nothing

Whatever your broker pays you on cash in an investment account, the point is those rates are likely much far lower than you – and your broker – can earn with the best cash or cash-like options.

Which is exactly why uninvested cash is a profit center for the brokers.

Investment platforms need to make money of course. Even zero commission brokers must get paid to stay in business.

Personally I’d prefer to see higher interest rates at the expense of higher explicit charges, at least with the mainstream platforms. (And lower foreign exchange costs while we’re at it. They’re dreadfully expensive at most platforms.)

However I’m in a minority. As with free banking, we’ve been conditioned to look for cheaper-to-zero explicit costs – and to not think about exactly how we’re the product as well as the customer.

Make any cash in an investment account work for you

The bottom line is that if we’re now back in a permanently higher interest rate world, then you need to have a strategy for what you’re doing with your cash allocation.

We have already seen skirmishes in this battle in the past few months.

For instance, there was the short-lived euphoria over the high interest rate Vanguard was paying – but this has since been reduced.

I suspect the previous charging structure was a legacy of the low-rate era that the investing giant hadn’t got around to updating until customers (and us!) paid attention. See the comments to that article for how things played out there.

We’ve also seen growing interest in money market funds.

My co-blogger is skeptical about these, but I see it a bit differently.

I definitely agree that if you want all the benefits of cash, hold cash. Any funds are riskier, even if those risks are tiny. Both in terms of volatility and risk to capital, but also maybe access in a crunch.

However if you have the bulk of your worth inside investment accounts – and a lot of that is in cash – then the extra income you could get from a money market fund paying you more than 3% versus a broker paying 1.5% could be meaningful.

And given how much we obsess over small fee differences around here, I don’t think we should lightly dismiss the cost of uncompetitive cash holdings. So perhaps putting a portion of whatever you want to hold in cash into a money market fund could make sense for some.

There are also fixed income ETFs that fit the bill. I own a big slug of the iShares Ultrashort Bond ETF. (Ultrashort in terms of duration, not in terms of ‘going short’!) This holds mostly investment grade corporate bonds close to maturity. It is very stable, can be disposed of in moments, and currently boasts a weighted yield-to-maturity of 4.7%, if you believe the iShares factsheet.

A better option though if you want to permanently own cash as part of your investment portfolio – to diversify your ‘bond-ish’ 40% or similar of your 60/40 portfolio, say – would be to start opening cash ISAs again. This way you’d get a tax-free and competitive return on your cash. And that cash would actually behave exactly like cash in a crisis. (That is, it would do precisely nothing.)

Just please don’t leave 11% of your portfolio lying around in your investment account as a generic cash balance on a long-term basis. You’re throwing money away.

Or if you do, then maybe also buy some shares in Hargreaves Lansdown or Schwab. That way you might also benefit from such folly!

The joy of a stocks and shares ISA is that it legally protects your investments from tax on growth and income. That’s more important than ever as tax-free allowances are being slashed or suppressed across the board.

If you hope to build wealth through investing then shielding your gains from unnecessary tax must be a core part of your strategy.

ISAs are tax-efficient ‘wrappers’ created by the UK government to encourage saving. Any investment inside the ISA wrapper can grow tax-free as long as you don’t break the rules.

Stocks and shares ISAs are provided by high street banks, fund managers such as Vanguard, financial advisors, and specialist online brokers or platforms.

You get a new ISA allowance every tax year. You can put the entire amount into a stocks and shares ISA if you wish.

£20,000 is the maximum amount of new money you can pay into a stocks and shares ISA during the tax year 2022-23. (£9,000 in a JISA1). The same limit will apply from the new tax year: 2023-2024. The tax year runs from 6 April to 5 April.

The ISA deadline is 5 April every year. That’s the last day of the current tax year you can use up your allowance. You get a new allowance from 6 April. But you can’t roll over unused ISA capacity from the previous year.

If you’ve left things late then know it’s enough to have the cash taken off your debit card and inside your ISA by close of business on 5 April. You don’t need to have actually invested the cash for it to qualify for tax-free protection.

Why open a stocks and shares ISA?

A stocks and shares ISA combines three critical features:

• The ability to invest in assets that are expected to grow faster than cash.

• Legally recognised tax protection. You don’t have to worry about HMRC handing you a large bill because you invested in some sketchy offshore caper.

• Instant accessibility. You can invest in liquid holdings that can be sold to meet unforeseen difficulties or other life events that occur before you reach pension age.

In short, ISAs are a private investor’s top tax-protection shield, along with pensions.

• Find out more about the benefits of ISAs vs SIPPs.

Which taxes are not paid in a stocks and shares ISA?

The main taxes that you do not have to pay on investments in a stocks and shares ISA are:

• Income tax on interest – as earned on bonds and bond funds.
• Dividend income tax – as paid by shares, equity funds, and property funds.
• Capital gains tax on profits – as paid on the growth in value of taxable assets when you sell them.
• Inheritance tax – although it’s complicated, and depends on the ISA passing to a spouse or civil partner who’s not been estranged from the deceased.
• Interest and dividends paid straight out of your ISA are not taxed.
• ISA withdrawals aren’t taxed, unlike with a pension. (You will pay a penalty if you withdraw from a Lifetime ISA at the wrong time).

Even more reasons to use an ISA

Investing in a stocks and shares ISA is a no-brainer, even if you think your holdings are too small to be caught up in the taxman’s net.

• Many providers charge you no more for holding an ISA than they do for keeping your assets in a taxable account.
• Though most of us start out small, your investments can grow surprisingly rapidly. Over the years you will outstrip your ability to manage everything within your tax allowances.
• Taxes can go up. On top of explicit increases in dividends and capital gains, other UK tax thresholds are being frozen until April 2028. This is a stealth tax, so use your tax shelters while you can.
• You don’t even have to tell HMRC about your ISA transactions. (Believe me, if you ever have to fill in a tedious capital gains tax form, you’ll fall to your knees with thanks that all your investments are in an ISA.)

ISAs can be mission critical

If you’re on a mission to achieve financial independence (FI) before your minimum pension age2 then stocks and shares ISAs will accelerate you towards your goal.

The best course for most will be to combine ISAs and SIPPs to achieve the FI dream. ISA investments can bridge the gap between your FIRE3 date and your minimum pension age.

The minimum pension age for accessing your personal pension is currently 55. But the government has confirmed it will rise to age 57 at some point in 2028. Thereafter the minimum pension age is due to be set to ten years before your State Pension age.

A stocks and shares ISA is also a great place to stash your pension’s 25% tax-free lump sum so that you can expand the amount of income you can take without being pushed into a higher tax bracket.

Investment ISA types

You can hold investments in the following types of ISA:

• Stocks and shares ISA
• Lifetime ISA (choose a stocks and shares version not cash)
• Junior ISA (again, shares not cash)

ISA providers call stocks and shares ISAs by various names including:

• Shares ISA
• Self-Select ISA
• Ready Made ISA
• Share Dealing ISA
• Investment ISA
• Workplace ISA
• AIM ISA

They’re all stocks and shares ISAs. But they are given different marketing labels depending on how the provider is trying to appeal to consumers.

A stocks and shares ISA may also be a flexible ISA. This means you can potentially replenish withdrawals you make without running down your ISA allowance.

You can invest in a stocks and shares ISA from age 18 onwards by opening an account with your chosen platform (bank, fund manager, IFA or similar).

We’ve put together a list of providers in our cheapest online broker table. These providers enable you to invest in a DIY stocks and shares ISA. You can see who offers a flexible stocks and shares ISA in the left-hand column.

Stocks and shares ISA rules

You can:

• Have as many stocks and shares ISAs as you like, so long as you don’t put new money into more than one per tax year.

• Split money across a stocks and shares ISA, lifetime ISA, cash ISA, and innovative finance ISA, provided you don’t put in more than £20,000 between them,4 nor open more than one of each type, in the same tax year.

• Transfer money from previous years’ ISAs (of any type) into multiple stocks and shares ISAs with any provider. And vice versa.

Transferring old ISA money or assets does not:

• Use up your ISA allowance for the current tax year
• Break the one-type-of-ISA-a-tax-year rule

You can transfer any amount of your previous years’ ISA’s value. Either transfer the whole lot into one ISA, transfer a portion of it into several ISAs, or do any other combo you desire.

How to transfer an ISA

You must transfer the whole balance if you’re transferring your current tax year’s stocks and shares ISA

You can transfer it into a different type of ISA – provided you haven’t already opened one of that type this tax year.

In that scenario, you can also open a new stocks and shares ISA later that tax year.

This is an exception to the one-type-of-ISA-a-tax-year rule.

It works because transferring from one type of ISA to another means that you now count as subscribing to the receiving ISA type.

For example, you transfer from a stocks and shares ISA to a cash ISA. You can now open a new stocks and shares ISA without falling foul of the ‘one type of ISA per tax year’ rule.

Always transfer an ISA to retain the tax-free status of its assets. Don’t withdraw cash and plop it in a new ISA – that uses up your ISA allowance!

Transfer assets in specie (this avoids them being sold to cash) if you are given the option. In specie moves are also known as re-registration.

• See our comprehensive guide on the ISA allowance rules.
• How to transfer a stocks and shares ISA.

Other ISA funding rules

You can’t invest new money in a workplace ISA and a stocks and shares ISA.

If you invest £9,000 per tax year in a JISA for each of your children that does not reduce your own ISA allowance.

Most stocks and shares ISAs have minimum required contributions. They are often as low as £50.

Replacing cash withdrawn from a flexible stocks and shares ISA does not use up your ISA allowance. However you can’t replace the value of shares, or other investment types, that you moved out of the account.

It’s worth checking your ISA’s T&Cs whenever you choose a product. Not all of the government’s ISA rules are mandatory. ISA managers do not have to support all features.

Best ISA funds

The main investment vehicles you can include in a stocks and shares ISA are:

• Mutual funds such as OEICs and Unit Trusts including money market funds
• Exchange Trade Products such as ETFs and ETCs
• Investment trusts
• Individual company shares
• Individual government and corporate bonds

The government maintains a comprehensive list of the complete menagerie.

If you are new to investing then our passive investing HQ can explain more.

Remember that the assets listed above are riskier than cash – you can get back less than you put in.

It’s worth regularly reflecting on how much risk you might be able to handle as you build your investing portfolio.

Index trackers are an investment vehicle that combine simplicity and affordability. They are recommended by some of the best investors in the world – and us.

• See our list of particularly useful low-cost index funds and ETFs. 

The Financial Services Compensation Scheme (FSCS) provides some investor compensation should your ISA or investment manager go belly up. Do take a look at the link. The scheme is convoluted, to say the least.

Stocks and shares ISA costs

You can expect to pay stocks and shares ISA investment fees that cover:

• Your ISA provider’s management costs
• The cost of owning investment funds
• Dealing fees for trading investments in the open market
• Fees for special events such as transferring your ISA

All fees should be transparently laid out by your ISA provider and investment fund managers.

Charges that can be paid from monies held outside of your ISA, if your provider agrees, include:

• ISA provider’s management costs
• Fees for special / one-off events, such as closing your account

Charges that must be paid from funds held within the ISA include:

• Dealing fees
• The cost of owning investment funds

A flexible ISA doesn’t enable you to replace the cost of ISA charges against your allowance.

Beware of transfer fees that can rack up when your provider charges you ‘per line of stock’. For example they might charge you £15 per company stock and investment fund that you own.

Tax efficiency

You can’t transfer most unsheltered assets straight out of a taxable account and into your stocks and shares ISA wrapper.

You generally have to sell the assets first and buy them again inside your ISA. This is colloquially, if not popularly, known as Bed and ISA.

Selling an unsheltered investment can cost you capital gains tax on your profits. But you can duck that by staying within your capital gains tax allowance and defusing your capital gains.

You can transfer employee share save scheme shares directly into an ISA in some circumstances.

If you want to invest more than you can squeeze into your annual ISA allowance, then research tax efficient investing to avoid building up a capital gains tax time bomb.

Inheriting a stocks and shares ISA

Your surviving spouse or civil partner can receive your ISA assets tax-free upon your death. Although do check that the T&Cs of your particular stocks and shares ISA allow for it to remain tax-free and invested after your passing.

++Monevator Minefield Warning ++ The rules below apply equally to spouses and civil partners but we’ll just refer to spouses for brevity’s sake. Unmarried couples do not benefit from these special inheritance rules. See our article on how unmarried couples can protect their finances.

A surviving spouse is given a one-off ISA allowance that equals the value of your ISAs. 

This is called the Additional Permitted Subscription (APS).

A spouse uses the APS to add the value of their deceased partners’ ISAs into ISA accounts held under their own name. 

For example, if you die with ISA assets worth £50,000, then your spouse is entitled to an APS of £50,000.

Plus they get their usual annual ISA allowance on top.

The APS effectively means your spouse benefits from the tax-free status of your ISA assets after your death.

The APS is worth the higher of:

• Your ISA’s value at the date of your death
• Or the value of your assets when the account is closed. (This assumes no part of the APS has been used up to that point)

Surprisingly, your spouse still benefits from the APS even if your ISAs are willed to someone else. 

In this scenario, your partner can fund their APS from their own money or other inherited assets.

That said, under most circumstances, a surviving spouse will fill their APS simply by transferring their deceased partner’s ISA assets. 

The APS must be used no later than:

• Within three years of the date of your death 

OR

• Within 180 days of the completion of the administration of your estate, if that’s later

The surviving spouse does not have to wait until the estate is settled to use the APS though. 

Managing an inherited ISA

Assets within the deceased’s ISA can be managed by their personal representatives before it is closed. However they can’t make new contributions into the account. 

The ISA continues to grow tax-free until the earlier of:

• Completion of the administration of the estate.
• Closure by your executor
• Three years and one day after your death. The account is automatically closed at this point

If you have multiple ISAs with different providers then your spouse’s APS is divided between them according to the value of the ISAs lodged with each firm. 

Your spouse must claim each portion of their APS from each ISA provider involved.

Again, check that the various providers of your ISAs subscribe to these rules as described. Terms can vary.  

More ISA inheritance rules

(Because there isn’t enough to think about already…)

The other main wrinkle is that your spouse can only receive assets in specie from a stocks and shares ISA by transferring them to the same provider that you held them with.

They can then transfer the assets to another manager once held in their own name.

Another clause is that assets transferred in specie must be the ones held on the date you were told of the death of the investor. (Some might see this rule as pretty heartless. However I don’t know about you but the very first thing I want to know after hearing the news of my partner’s death is the list of non-cash assets they’ve got tucked in their ISAs. Let’s cut to the chase!5)

In specie transfer must be made within 180 days of the assets passing into the beneficial ownership of the surviving spouse.

Your ISAs do not pass on their tax-free status to anyone other than your spouse. 

The tax benefits do not apply if you and your surviving partner were not living together on the date of death, or were legally separated, or in the process of becoming legally separated. 

AIM-ing for even more

Some wealth managers and platforms market AIM ISAs that twin the advantages of a stocks and shares ISA’s tax efficiency with the inheritance tax-elusiveness of Alternative Investment Market (AIM) shares.

Some but not all AIM shares qualify for inheritance tax relief under peculiar government rules that are subject to change.

An AIM ISA is:

• Risky
• Not guaranteed to work out
• Subject to high minimum investments, which add a naughty elite frisson to the escapade

Check out the links above if you need ‘em.

Stocks and shares ISAs aren’t just for the rich

Some people think ISAs are a rich person’s concern. That’s because few have experience of paying capital gains tax, or even income tax on share dividends.

However even modest savings can really add up to a big portfolio in a bull market, at which point the tax protection is invaluable.

Shielding your investment returns from tax like this can make a huge difference to your end result from investing.

Finally, if you want to optimise your ISA to the max then take a look at our cheapest stocks and shares ISA hack. 

Take it steady,

The Accumulator

1. Junior ISA for kids. [↩]
2. The moment you can first crack open your personal pension. [↩]
3. Financial Independence Retire Early. [↩]
4. Or more than £4,000 in the case of the lifetime ISA. [↩]
5. Sarcasm. [↩]