Investing Q&A

Answers to some of our customers’ most common investing questions.

1. Do you recommend taking money out as you start making profit? Or just keeping it in and growing it?

Taking money out when you start making profit can seem tempting – especially if you’re new to investing. But, withdrawing your gains as profit is counterproductive when trying to grow your money over time.

That’s because of something called ‘compounding’. Compounding – also known as ‘compound interest’ – is the return you earn on top of your investment gains by reinvesting your profits instead of withdrawing them.

By reinvesting your capital gains (profits), you’ll be increasing the total size of your investment pot – which in turn can then generate greater returns if left alone for longer time frames.

But, when you’ve hit your financial goals or if your circumstances change, you should start to think about taking money out – there’s no reason why you can’t in these situations.

Learn more about compounding

 

2. What are the fees to invest with Moneybox?

With Moneybox, investment accounts have a £1 monthly subscription fee (free for your first three months). An annual platform fee of 0.45% also applies, as do fund fees – charged directly by the fund provider.

You can check out these fund fees for yourself on our funds page.

 

3. Are there any resources (books, podcasts, shows etc) that can improve my understanding of investing?

For books, we’ve written a comprehensive list of the top five investing books for beginners – read it here.

With podcasts, I quite like ‘Thoughts on the Market’ as a short and pretty regular take on recent market events. The ‘All Things Money’ podcast is also good – but it’s more of an overarching look at personal finance, not just investing. Clear Barrett’s ‘Money Clinic’ is also a great podcast for anyone looking to hear an expert reply to real-life money questions.

 

4. What’s the difference between investing in ‘funds’ and investing in ‘Starting Options’

When you invest in a Starting Option you’re buying multiple funds with a single investment.

 

5. Can I have both a Cash ISA and a Stocks & Shares ISA?

Yes! It’s encouraged! A Cash ISA is a different account to a Stocks & Shares ISA and can help you achieve different goals. A Cash ISA is a great place for your emergency fund, which you should really have in place before you start investing with a Stocks & Shares ISA.

An emergency fund is three to six months of your regular outgoings. Once this is in place, you can invest knowing that you have a nest egg there in case your car needs repairs or your boiler breaks.

With Moneybox, you can open both a Cash ISA and a Stocks & Shares ISA, so you can work on multiple goals with one award-winning app. But, if you have ISAs elsewhere and with Moneybox, you need to remember to stay under the £20k annual ISA allowance.

 

6. Can you explain how dividends work?

Dividends are a portion of a company’s profits. The company can choose to either reinvest all of their profit into future growth, or they can choose to pay some of this profit out to their shareholders. Think of it as a reward for investors who have bought shares in the company.

 

7. If I start investing today £100 a month, what is projected in 20 years?

Projections are a funny one – we shouldn’t bet on them as a sure thing, no one knows what the market is going to do tomorrow. But we can use them for hypothetical examples of gains with some assumed values.

So if you invested £100 a month, at a conservative annual rate of return of 5% (Moneybox’s Balanced Starting Option achieved an average annual return of 8.8% between 2013 and 2023), after 20 years you’d have £40,580. £24,000 of this would be money from your £100 monthly investment, and £16,580 would be from investment gains.

 

8. Can I have £20k in multiple ISAs or just up to 20k for all?

The annual £20k allowance is split between any ISA you might have. So you could pay £8,000 into your Cash ISA, £8,000 into your Stocks & Shares ISA, and £4,000 into your Lifetime ISA – for example.

Plus, the £20k ISA allowance resets at the start of each new tax year (the tax year runs from 6 April to 5 April each year) – so you can pay £20k in this year, £20k in the next, and so on and so on.

 

9. Is a Lifetime ISA likely to provide a better return than a pension?

The Lifetime ISA comes with a £1,000 government bonus in every tax year you max it out (pay in the full Lifetime ISA allowance of £4,000). That’s a guaranteed 25% return each year.

But, the annual Lifetime ISA allowance of £4,000 is much less than your annual pension allowance. So the best choice really depends on your personal circumstances and how much money you have free to put into either a Lifetime ISA or pension.

Learn more about the differences between a Lifetime ISA and pension

 

10. What’s the difference between the different types of ISA and how to choose what is the right one?

Yep good question – there are a few different ISAs to choose from, and you can have multiple types open at once – there’s no reason why you can’t have a Cash ISA and a Stocks & Shares ISA for example. Here are the ones that Moneybox offers.

 

That’s it for this follow up Q&A article. Hopefully you get some value from this information and it helps you make informed decisions on your personal finances and investing.

 

All investing should be long term (min. 5 years). The value of your investments can go up and down, and you may get back less than you invest.

Before committing to the longer term nature of investments, you should have a short-term cash supply available for emergencies.

Investment accounts have a £1 monthly subscription fee (free for your first three months). An annual platform fee of 0.45% also applies, as do fund fees – charged directly by the fund provider.

It’s important to know that investing involves risk.

 

The longer you leave your money invested, the higher the chance of it performing better than cash. You should plan to invest for at least 5 years.