How to choose the best investment-based Isa for you

When it comes to choosing a stocks and shares Isa, investors are spoilt for choice. 

Everyone from big-name platforms to newer robo-advisers have an offering. The hard bit is finding out which is right for you.

To find the best option, think about what you want to invest in, how much you have to invest, how much help you may want choosing your investments and what you are prepared to pay to have your Isa looked after.

The first thing to consider when choosing an investment-based Isa is what you are going to invest in. 

The first thing to consider when choosing an investment-based Isa is what you are going to invest in

Adrian Lowcock, head of personal investing at fund scrutineer Willis Owen, says: ‘Some people will be happy investing in shares, others will be more comfortable buying investment funds or investment trusts. 

‘Many wealth platforms have a bias to one or the other, and it can have an impact on the fees you pay, as well as the research that is available.’

Most people are either looking to invest in a ready-made portfolio of funds, choose their own or pick individual shares. The category you fall into will have a big impact on which investment Isa is right for you.

If you want to pick stocks: One of the best stocks and shares Isas for people wanting to actively choose shares is offered by Interactive Investor. 

With the standard £9.99 plan you get one free trade a month. Any more costs you £7.99 per trade. To have dividends reinvested costs a further 99p a month.

Other plans are available for £13.99 and £19.99 a month which allow you to trade more often and more cheaply, for example when buying overseas shares.

There are also plenty of articles and research to help you choose what to invest in.

For those seeking a ready-made portfolio: Investment house Vanguard is suitable if you want a pre-selected portfolio of investments. 

It offers five ‘LifeStrategy’ funds based on how much risk you are willing to take with your money and how long you are planning to invest for.

The annual platform fee is just 0.15 per cent and you can expect to pay about 0.22 per cent a year on top of this for your underlying funds. 

The downside is that if you want to pick your own investments the choice is limited to 74 funds, which is much less than some other Isa providers.

So if you want to add a fund that you have read about in The Mail on Sunday’s weekly Fund Focus column, for example, the chances are that it will not be there.

To build a varied portfolio of funds: Broker Charles Stanley is a good option with more than 1,500 investment funds to choose from.

You pay an annual platform fee of 0.35 per cent plus the underlying fund charges, which will vary depending on what you invest in. 

There are no trading fees when it comes to buying or selling funds. Fund platforms Hargreaves Lansdown, AJ Bell and Fidelity also offer investors plenty of choice when it comes to picking funds, as well as a lot of useful information to help you build your portfolio.

To find the best option, think about what you want to invest in & how much you have to invest

To find the best option, think about what you want to invest in & how much you have to invest

To invest ethically: Interactive Investor provides a list of the best ethical investment funds – the ‘ACE 40’. Other platforms increasingly have research and fund recommendations for those looking to invest ethically.

Robo-adviser Nutmeg scores all of its ready-made portfolios out of ten for their ethical credentials.

It also offers ten socially responsible portfolios that avoid companies involved in ‘controversial activities’ – like the defence industry – and instead focus on those with good ESG (Environmental, Social and Governance) credentials.

THE fees you pay on your investment Isa are important because they will reduce your returns. But do not get too hung up on finding the cheapest possible deal.

Lisa Vaughan is a chartered financial planner based in Sheffield and runs her own advice business. 

She says: ‘Charges alone should not influence your choice of Isa provider. As with any other purchase, consider what you are getting for your money.’ 

Willis Owen’s Lowcock adds: ‘Too cheap and you might miss out on some services you need – too expensive and you could be paying for things you don’t use. Cost is about getting value for money.’

When comparing platform fees, think about how much money you hold in your Isa. For fairly small balances then one that charges a percentage fee may be cheapest. If you have a sizeable balance a flat fee may work out better.

Also check if there is a minimum funding requirement on any Isa you are considering. For example, Vanguard and Nutmeg both have a minimum Isa deposit of £500.

Read through the small print to see if there are any other fees or charges that you could face in the future, such as a transfer-out fee.

Don’t forget to ascertain whether you’ll be able to move existing Isa savings into your new account, if that is your plan. Check that the provider accepts Isa transfers, in particular from cash Isas.

Also, check to see whether the Isa provider will allow you to ‘bed and Isa’ investments. In other words sell investments held outside an Isa and buy them back inside an Isa. By doing this, you will move investments into a tax-friendly wrapper in an easy way.

The amount going into the Isa will still count towards your £20,000 annual allowance, while any profits from the sale are likely to be covered by your capital gains tax allowance of £12,300.

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