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Top 5 ISA providers

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Hargreaves Lansdown
Type Do It Yourself
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AJ Bell YouInvest
Type Do It Yourself
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Nutmeg Review
Type Do It With Me
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Moneyfarm Review
Type Do It With Me
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Wealthify
Type Do It With Me
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What is an ISA?

ISA stands for Individual Savings Account, and is similar to any bank account, allowing you to add cash to save or make investments. The big benefit is that you don’t have to pay any taxes on capital gains or income made within your ISA.

There are four types of ISA (plus a junior ISA), each with differing features, and there is a £20,000 annual limit on how much you can put in them. Watch this video to find out more, or read this blog.

Everything you need to know about ISAs

What’s the difference between cash savings and stock market investments?

Cash savings are what most of us tend to do with our money, representing deposits we put into bank accounts. These are very low risk: banks are unlikely to go bust, and if they do, the cash is protected by the government’s Financial Services Compensation Scheme (FSCS), up to the value of £85,000 per account. Stock market investments represent buying financial assets that involve taking some degree of the risk with our money. It means returns can be significantly higher, but the value of your investments may also drop too.

Don’t let this put you off – stock market risks can be effectively managed using collective funds (more on that later), and given that interest rates are so low and the rate of inflation is very high at the moment, your cash savings still face risk because their value will be dropping at a fairly hefty rate.

How risky is the stock market?

It varies. A financial asset is a group of financial instruments that act in the same way in the markets and have similar levels of risk, for example the two most common, company shares and bonds. There is a vast array of financial assets out there, and each come with differing degrees of risk, meaning the money you could potentially make or lose. Some assets may only have the potential for small returns, but would be unlikely to lose you very much money either; other assets may have the potential to make you a lot more money, but could also drop in value fairly significantly too. This is the risk / reward trade-off that we must consider when investing. It means whatever your risk appetite, there’s a course for every horse – you can be a gung-ho slugger and bat for the big returns, or a cautious defender and ensure the value of your investments remains relatively stable. Either way, at least if you are investing your money, you have a chance it won’t be going backwards as it would be sitting in a bank account.

How can I invest sensibly in the stock market?

Investing in an individual security, like a company’s shares, puts your investment at a fairly substantial degree of risk. Ultimately, if the company you invest in goes bust, you would lose your entire investment. Yet, we still need to invest if we are to make a return: that is the all-important trade off. As such, the way to do this but reduce any excessive risk-taking is to invest through a fund: a portfolio of investments. This diversifies your money and spreads it across a wide number of companies or assets. If there’s a problem in one, the others in the portfolio will buffer the impact and prevent the value of your investment plummeting. If you then invest using a number of funds, this represents even further diversification and risk management. It’s that easy.

Are there limits as to how much I can invest in an ISA?

Yes. The annual tax year allowance is £20,000. Currently, there are four different types of ISA: a Cash ISA, Stock & Shares ISA, Innovative Finance ISA, and a Lifetime ISA. Across these ISAs, you may spread this allowance however you like, with exception of the Lifetime ISA, which comes with an annual limit of £4,000. You may open different types of ISA in a single tax year, just not more than one of the same.

Is there a minimum amount I need to invest?

Usually, you can open an account with a service provider from as little as £1, but you may need slightly more if you wish to invest in a fund – often £25 if you decide on monthly contributions, or £100 as a lump sum. For individual investments, the minimum can be lower, but depending on the service they usually come with dealing charges that make very small investments nonsensical.

How do I get started with investing?

First and foremost, if you want to learn more about the investing journey, we have a free beginner’s course that teaches you all the basics. Just sign-up and we’ll pop a 15-minute email read in your inbox each day over the course of a week. Find it here.

Beyond that, to make an investment you need to open an account with an investment service provider or platform. These come in the form of websites (sometimes known as online brokers) that offer access to stock markets and through which you can open an account like an ISA to make investments in funds and shares.

Very broadly, there are two flavours of investment service provider: do-it-yourself (DIY) platforms, which offer a very wide range of products and accounts, and do-it-with-me (DIWM) platforms, which are much simpler and make decision-making easy by offering a narrow range of funds that invest based on your appetite for risk.

What’s the difference between do-it-yourself (DIY) platforms vs do-it-with-me (DIWM) platforms?

DIY platforms tend to represent the more established players in the market, such as AJ Bell or Hargreaves Lansdown. These services are usually full fat – with platforms offering a wide range of accounts like ISAs and private pensions, and a wide range of products, including many funds and individual investments like single shares and bonds. DIY services are for those who want to get involved and retain maximum choice.

DIWM platforms are the new breed of investing platform. Having emerged with brands like Nutmeg and WealthSimple around a decade ago, they tend to be a much simpler proposition, offering a fast and easy route to investing in the stock markets. Usually, you will be asked some quick questions around your appetite for risk and your financial goals, and then directed into one of a trim selection of risk-targeted portfolios. These tend to be very diversified across numerous funds and assets around the globe.

How do I make sure I'm not being scammed?!

Unfortunately, we must be vigilant for scams, particularly if anyone is asking you to transfer funds to their service. Helpfully, the financial services’ regulator – The Financial Conduct Authority (FCA) – must authorise any company providing investing services, and as such, have a register which you can check to see if a company is genuine or not. Find it here.

How do fees and charges work in the investing world?

Broadly, there are two sets of charges: fees charged by the investing service provider (the platform), and fees charged by the fund provider. Platforms fees are usually charged directly to your investment account, which means you tend to need to keep a minimum in cash to cover them. Investment fees are charged differently and taken directly out of the value of your investment in any particular fund. Different platforms will charge different amounts, and different funds will charge different amounts, so make sure you read the small print before investing as high charges have a surprisingly big effect on the returns you receive over the long periods of time. Email us if you’ve any questions here.

What if I want to use a financial adviser?

Advice is costly, but worth it if you have particularly complex financial affairs, or you simply don’t want to get involved in investment decision-making. Fortunately, we have a portal to two different comparison sites if you’re looking for a financial adviser – we call them do-it-for-me (DIFM) services. See here.

Sign-up to our free course to learn more!

We have a free investing course that teaches you all the basics to get going. All you need to do is sign-up and we’ll send you a 15-minute email read each day for 7 days. By the end, you have a good enough grasp to get going and get investing! Find it here.

Top 10 ISA providers

Top 10 ISAs
Type
Overall rating
Hargreaves Lansdown
Do It Yourself
AJ Bell YouInvest
Do It Yourself
Nutmeg Review
Do It With Me
Moneyfarm Review
Do It With Me
Wealthify
Do It With Me
Interactive Investor
Do It Yourself
Fidelity
Do It Yourself
Halifax Share Dealing
Do It Yourself
Barclays Smart Investor
Do It Yourself
True Potential
Do It With Me