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An ISA is not a product!

Written by John J Bloomfield

Shopping Bag ISA

In this time known to financial advisers as ISA season I hear a lot of people who don't normally talk finance talking about ISAs and generally have little interest in financial planning. A very smart man just said to me earlier this evening – "A guy on the radio said I should buy an ISA – how much would I expect it to be worth this time next year if I did" – I went on to explain the same thing I am about to explain to you – I had never thought of doing this sort of post before but the guy who asked the question is really smart so if he is confused in to thinking an ISA is a tangible thing or product then there are probably millions of other smart people out there who are thinking in the same way.

The language used around ISAs particularly by financial services marketers has led I think to this misconception. We hear invitations to invest in or buy in an ISA making it sound like a thing.

The truth is your ISA is nothing more than a wrapper to claim your ISA Allowance. Your ISA allowance is simply the amount you can put each year in to investments or savings that will not be taxed in the same way that investments and savings usually are.

The list of investments that can be in your ISA is vast ranging from Cash to highly volatile and speculative investment funds and all manner of things in between. So there is no answer to "A guy on the radio said I should buy an ISA – how much would I expect it to be worth this time next year if I did" because the ISA is not the actual investment it is just a designation or wrapper to keep the investment tax free.

A more insightful question would be if I invested in this inside an ISA how much more would it be worth next year than if I hadn't claimed my ISA allowance.

Visit www.the-isa-adviser.co.uk to download your free comprehensive guide to ISAs, penned by my own fair hand.