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The account trap costing you thousands – Transcript
Video by Nischa · Watch the original on YouTube
Summary
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- The account used to invest determines how much of the investment returns are actually kept.
- Most countries offer tax-efficient accounts, such as the ISA in the UK or a Roth IRA or a traditional IRA in the US.
- The amount of tax paid on investments can have a huge impact on a person's overall financial position.
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Transcript
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This is something a lot of people overlook. They spend hours researching what to invest in, but very little time thinking about the type of account they're using. And actually, the account that you use determines how much of your returns you actually keep. And using the wrong one could actually cost you thousands over time on the exact same investment. Most countries offer tax-efficient accounts specifically designed for this. So, in the UK, the
most common one is the ISA. You can invest within it right now up to 20,000, and any investment gains on that amount is tax-free. In the US, it's a Roth IRA or a traditional IRA. Other countries have their own version. And as tempted as you might be to just open the first investment account that you come across, the amount of tax that you pay on your investments, the impact of that can be huge on your overall financial position.
So, if the tools exist to help you save and invest tax-efficiently, you absolutely need to use it.