ISAs are boring.
There it is I said it.
Putting regular money and lump sums into a boring portfolio of the world’s biggest and best companies diligently year on year, compounding away over time, the tax man keeping their hands off them and leaving you to it and slowly growing into the powerhouse backbone of your financial planning.
They are not going to 10x in a week nor are they are not going to disappear to dust. They are the investing version of England Cricketer James Anderson or Liverpool footballer James Milner. They are the drummer from Coldplay of investments, consistent but not spectacular, a millionaire rockstar who even their greatest fan would struggle to recognised in a Starbucks.
Without the tax relief of a Pension they can get overlooked in the short term but overlook them at your peril.
The greatest stength of ISAs is their flexibility and I want to take a moment to explain why,
To do this we need to flash forward to what life will look like when we have achieved our endgame and work is now a choice. Perhaps we have retired or sold our business and we need a different way of living. No longer having a steady monthly income but rather living on capital and the returns that capital produces.
Our outgoings are not consistant. Of course there are monthly bills to pay, food to buy and regular trips to the theatre and resteraunts to enjoy but there are many expenses that do not happen reguarly. Holidays are a primary one, perhaps this year is a special wedding anniversary and we want to take the whole famnily away or the car needs replacing, the kitchen needs a refresh or one of the kids gets into a bind and needs £20k to get them out of a hole. Each of these things have occured in the last 18 months for clients of ours.
Up steps the ISA.
Tax free at the point of access we don’t need to worry about income tax thresholds descimating the value of our capital. There are no concerns about triggering Capital Gains Taxes on the sales of the assets and there are no delay to accessing capital that you have with a property sale.
ISAs are your key to Financial Independance.
Added to this you have the rise of the ISA millionaire. ISA millionaires are my favourite kind of millionaire. They are the legal tax dodgers, they played the long game and won.
When I was a kid my Dad owned a Talbot Sunbeam Lotus. It looked like nothing, an unasuming hatch but my goodness it went like the clappers. 210BHP under the bonnet of small black hot hatch. I loved this car because people underestimated it, they saw the outside and figured it was a beat up old hatchback but it had real substance.
This is the ISA millionaire. The ISA millionaire has no property portfolio to discuss over dinner with friends, no tennant headaches, no wheeling and dealing being done and most important no nosey neighbours wondering how much they have squirrelled away. The ISA millionaire has no looming tax bills due or liquidiity issues to worry about when they come to spend their heard earned funds.
This is why ISAs matter so much. They are your ticket to financial flexiblity and freedom.