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Rookie Investor: If you’re under 40, why haven’t you opened a Lifetime ISA?

piggy bank
Away from pensions and ISAs, the Rookie Investor is now Imagination-free…

Discussing pensions on a Friday isn’t to everyone’s taste but, as my colleagues will attest, being confined to the Proactive dungeon can affect what piques your interest and your sense of humour.

Thanks to Royal Mail, this morning’s discussion topic was our post-retirement plans, which got me thinking: I’m well under 40 and haven’t opened a Lifetime ISA, why?

25% government bonus and it’s tax-free!

To re-cap, a Lifetime ISA – individual savings account – is a tax-free wrapper for those aged 18-39 that allows £4,000 to be saved tax-free every year and comes with a 25% government bonus on anything you put away.

If I save the full £4,000 I’ll actually have £5,000 in the account, plus whatever interest or share appreciation I’ve earned. That bonus is paid every year until I hit 50.

It’s designed for two specific purposes: to help get people like me onto the property ladder and to boost people’s ‘later life’ (retirement) savings.

Unfortunately nothing in life is perfect and there are a couple of things to take into consideration. Firstly, if you withdraw the money before you turn 60 and it’s not for your first home, you’ll lose your government bonus plus a little extra.

Secondly, you can only open an account if you’re between the ages of 18 and 39 and you can’t make any more contributions into your LISA once you’ve turned 50 although you’ll still benefit from interest on what you paid into your account before.

There’s also a maximum bonus of £32,000, although to get that you’ll have to put in the full £4,000 every year from when you’re 18 right through to your 50th birthday.

So now that you’re up-to-date with what the LISA is, why haven’t you done it already? (Apologies once again if you’ve already opened an account).

You can benefit from what is essentially free money from the government. I know with the first house I bought recently (using a similar Help to Buy ISA) that the 25% bonus really is a welcome extra.

Don’t forget to use the rest of your ISA allowance

Even though post-university life has definitely aged me, I like to think that I’m still fairly young and all I hear from my elders is that I need to start planning for my retirement while I have time on my side.

To me it makes sense to have another little nest egg growing alongside my workplace pension and it’s also extremely tax efficient – all money taken out (assuming it’s for your first house or when you’re over 60) is tax-free.

It’s also important to remember that the overall ISA limit is £20,000 in the 2017/18 tax year, which means that, even with a LISA, you can still pump another £16,000 into a cash ISA, stocks & shares ISA and/ or innovative finance ISA.

Back to business: Bye-bye Imagination

Anyway, rant over. Let’s talk about what you’re all really here for: an update on how well I’m splashing investing my inheritance.

Last time around I told you that I took a £1,000 punt on British semi-conductor intellectual property licensor Imagination Technologies Group (LON:IMG).

My reasoning was that I thought it and Apple Inc (NASDAQ:AAPL) might resolve their recent dispute or, more speculatively, that someone would look to take Imagination on the cheap after its share price slump.

Well, as most of you probably know by now, Imagination revealed at the end of June that it had kicked off a formal sale process with potential bidders, which was followed by a surge in the shares.

I cashed out around a third of my shares at 161p – remember I bought them for 105p – and left some in there just in case they nudged even higher.

I stuck a £1.40 stop-loss on the remaining shares (see, I do listen to my own advice) to limit my downside and that order kicked in earlier this week when the shares fell away a little bit.

All in all, my venture into Imagination netted me a tidy profit of just over £500 – kerching!

JD Sports in fashion (with me at least)

I decided to use some of those profits to pump £2,000 (we’re entering the big leagues, folks) into sports fashion retailer JD Sports Fashion PLC (LON:JD.). I snapped up 500 shares at around 355p (once fees had been taken into account).

I’ve been waiting for a little while to get some JD shares ever since I ventured into one of their stores with my trendier younger cousin. I was really impressed by the store layout, the shopping experience and the products on offer. Plus it was absolutely rammed!

My comparison was Sports Direct International PLC (LON:SPD) so my standards weren’t exactly high when it comes to well-presented stores. I’m sure you know what I mean…

Shares plunged on news that margins had come under pressure in the first half as the retailer looked to sustain recent sales growth, although boss Peter Cowgill said this was “anticipated”.

Investors were also a little wary that the trading statement didn’t contain any exact figures but Cowgill hinted that was because, given the earlier timing of Eid this year and the subsequent adjustment of JD’s clearance sale, the numbers wouldn’t provide an accurate comparative at this moment in time.

When the Bury-based group releases its interims in a couple of months, I think there could be pleasant surprise in store in terms of sales (or perhaps that’s the eternal optimist inside speaking).

Rest of portfolio chugging along nicely (apart from BT)

As for the rest, it’s been rather uneventful to be honest.

Fevertree Drinks PLC (LON:FEVR) continues to hang around the £17 mark, so I’m waiting for the interims (and hopefully a profit upgrade) to move the share price. Those results should come out in the next few weeks so fingers crossed that US sales have gone through the roof!

I’m still waiting on AstraZeneca PLC (LON:AZN) to unveil the first readout of its key MYSTIC trial which (I feel like I’ve been saying this for weeks now) are due out any day. They were supposed to be here for the midpoint of the year so hopefully the delay isn’t because the study has been a flop.

There was some concern among investors this week on rumours that chief executive Pascal Soriot is to leave for a rival drugmaker, so that’s weighed on the shares although they’re still around the £50 level.

I’m still concerned that BT Group plc (LON:BT.A) might be a value trap, as discussed last time. Thankfully the share price has inched past the £3 mark this week which eases some of the pressure.

I’m still slightly in the red on this one, but as I’ve said before, I’m happy to hold on as the dividend is still decent even if it’s trimmed this year. 

Fevertree – 211 shares @ £9.50. Currently £17.

AstraZeneca – 48 shares @ £42.26. Currently £49.80.

BT – 328 shares @ 305p. Currently 301p.

JD Sports – 500 shares @ 355p. Currently 347p.

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