Why is my Stocks and Shares ISA losing Money?

No matter what type of Investment Account you are using, the actual Stocks, Funds or Bonds that you have purchased using that account can go up or down in value.

It’s important to understand the difference between an investment account and assets you have invested in using that account. When you begin investing it is most common to use a General Investment Account (GIA) or a Stocks and Shares ISA (Individual Savings Account). Once you have opened an account with an investment company, then you can begin buying assets using that account. Typically people buy Stocks, Funds or Bonds, but other types are also available.

Anything you purchase into an ISA account in the UK has huge Tax benefits (i.e. you don’t have to pay any!… here you can learn more about what a Stocks and Shares ISA is) but you should never assume that the value if those assets will always go up.

Have a look at British Airways (IAG) shares over the last 5 years, you can see that they have gone down in value by almost 70%!

This is obviously because of the impact of Covid on the Airline industry, but if you bought £100 of their shares 5 years ago in your Stocks and Share ISA you would only be left with about £30 now. You would not see any of the Tax benefits an ISA gives you, because only the profits are Tax free.

Investments of any type can go up or down in value, and that is why they are never considered risk free.

Comments

Why do Share prices go up and down?

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What are Dividends in Stocks and Shares?

A Dividend is simply a profit share. If you own Shares in a company, and the company is profitable, typically once a year they will transfer some money into your account, this is called a Dividend. This Dividend is your share of the company’s profits, and you can withdraw and spend it however you wish. Let’s imagine your neighbour Suzy wants to open a Lemonade Stand. She needs some investment to buy lemons, so being a shrewd investor, you offer to give her £100 in exchange for half her company (the Shares) and half of any profit she makes (the Dividend). Suzy has a busy week and sells lots of Lemonade, after buying enough Lemons for next week she is left with £20 of profit. She gives you £10 (the Dividend) and she keeps the other £10. You still own half her company, and you will keep receiving half of the profits every week. In large companies the Directors may decide not to pay all their profits in Dividends, instead choosing to reinvest to buy new machinery, or grow the business. B

What are Stocks and Shares for beginners?

To be honest it is quite acceptable to use the words Stocks and Shares interchangeably and nobody will bat an eyelid. In reality though, Shares represent a fraction of the companies Stock. But what does that really mean? Imagine Bitesized Money Inc is a bag of 100 marbles (the Stock), and everyone that owns one of the marbles owns 100 th of the company (a Share). They benefit when the company makes money, they collectively vote when big decisions need to be made, and they share the pain when the company loses money in hard times. In simple terms this is how Shares work, when you buy a Share, you are buying a part of a company. What should you pay for one of their marbles Shares? Well that is the tricky question and why investing is fun, but also carries some risk. Generally when a company is doing well, or people think it will do well in the future the price goes up, and when its future doesn’t look so good the price will go down. Company Shares are traded on a Stock Market, and pe

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