Leaving things to the last minute is human nature. Whether it is packing for a holiday, studying for exams, filing tax returns or topping up your Isa, most of us are guilty of procrastinating in some area of our life and end up having to do important things in a rush.
The trouble is that if you miss a deadline, there can be repercussions: failed assignments, fines and, in the case of our annual Isa allowance, losing out on it altogether to the detriment of our future financial well-being.
Whether you invest by post, by phone or online, there are a number of common mistakes made each year that cost investors. The good news is that they are all avoidable. Here are eight tips to avoid Isa disappointment:
1. Sign on the dotted line
The most common mistake in my experience is that too many investors forget to sign their application form or cheque. Always double-check your forms before heading off to the post box or hitting ‘send’.
2. Know your provider
Perhaps the second most common mistake is that people make the cheque out to the wrong company. Read the instructions carefully – it could be a platform, rather than your intermediary, that should be the payee.
3. Get your address right
If you have moved house since you last put money in an Isa, make sure you have informed your bank, intermediary and Isa provider. If you have registered a different address with your bank and your Isa provider, your investment may get stopped.
4. 1st, 2nd or guaranteed delivery?
If you want to guarantee you use your Isa allowance, I find it is best to send application forms and cheques via guaranteed overnight delivery, rather than rely on first or second class post. It may cost more, but at least you know they will arrive on time.
5. Want an income? Tick the box
A mistake you often don’t know about until well into the new tax year is that if you want an income but don’t tick the right box, you won’t get the payment you are expecting. That is unless you indicate that any income generated by your investment is to be reinvested, rather than sent to you.
6. Don’t rely on your bank
Mistakes are not just made with written applications. Online investing can be troublesome too. Can you guarantee your bank won’t have any glitches and your debit card will work at 11pm on 5 April? It’s a good idea to let your bank know if you want to transfer a large sum of money, so it doesn’t need to talk to you first and make your investment a good few days ahead of the deadline.
7. Computer says “no”
It’s all very well having 24/7 access to the internet, but what if your broadband is down or your computer freezes? Don’t leave it until the very last minute and save yourself the stress of watching the wheel of death on your monitor.
8. Don’t lose it – invest now, decide later
If the reason you are procrastinating over your Isa is that you don’t know where to invest this year, your hesitation is understandable: stock markets have been volatile and there has been a lot of geopolitical uncertainty of late. However, while you do need to invest your Isa allowance before 5 April in order not to lose it, the good news is that you don’t need to decide where to put it straight away.
Isas today are fully flexible and you can transfer from cash to investments and back again as much as you like. So you could invest in a Cash Isa for now and switch it into an investment fund at a later date. Another alternative is to invest in a fund you already know and like, and switch it when you have had time to think more carefully about your investment. Some Isa providers also have a ‘cash park’ option that you can use while you decide what to invest in.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’s views are his own and do not constitute financial advice.