Stocks and Shares ISAs: my top picks
The new financial year is now well and truly underway, so if you haven't used your fresh set of tax allowances to boost your money’s potential, now's the time to consider it.
These include your Stocks and Shares ISA allowance, if you’re willing to invest. After all, cash rates are in the doldrums and inflation wipes out current savings rates. And you don’t need stacks of cash to get started in the stock market. There are masses of providers that make the process really simple these days.
But, of course, returns aren’t guaranteed! And it’s possible you might lose your initial investment.
Sometimes the stock market seas get a little rough, and you have to ride out the highs and lows of investing. There’s a chance you could get back less than you put in, but with any luck, and given enough time, you’ll benefit from juicy profits.
Here I look at what you need to know, how to get started and some exclusive deals I've bagged for you to make it a bit sweeter.
If you want a bit more info on how stocks and shares work and what to watch for, scroll down for the low-down.
Some of the best Stocks & Shares ISA providers
It’s tricky to list the best providers for everyone, as this depends on loads of factors. For example, whether you want to buy funds or shares, do it yourself, or pass over management to the provider. Some have better research tools than others, while others are aimed at absolute beginners.
But here are some of the options that will suit different types of investors – and why I rate them.
Chip - get a £30 bonus when you invest at least £30: Chip shook the savings market last year with a 1.25% savings account (which has now gone to 0.70%) and now it's moved into investments.
To access Chip's investment products you need to pay either £1.50/month for Chip AI or £3/month for ChipX. Fees are then 0.75% or 0.25% depending on the package you've opted for. There are a range of funds you can choose from, most from investment goliath BlackRock, and fund fees are between 0.40% and 0.97% depending on the fund you choose.
Even better, Snoopers that are new to Chip and sign up to ChipX can get a £30 bonus when you invest £30 in a S&S ISA and keep it there for at least three months (remember, investing is for the long-term anyway!). Just enter the code SNPX30 when you join. Unfortunately, we couldn't get an existing customer offer for Chip - but we're working on that! The bonus £30 will be paid around 90 days after you invest.
👉 Get the Chip S&S ISA*
Freetrade - get a free share worth up to £200: The Freetrade S&S ISA costs a flat £3/month and there are no extra charges for any share dealing you do, although they do charge a fee on foreign exchange conversions if you buy shares on an overseas exchange, for example the New York Stock Exchange. Freetrade doesn't have the pre-packaged risk-based funds like many of the other platforms but you can invest in a wide range of stocks, exchange traded funds (ETFs) and investment trusts.
Plus we've bagged a deal for Snoopers. Open a S&S ISA and Freetrade will give you a free share worth between £3 and £200. The stocks are randomly selected from a list of UK or US companies, ETFs, and trusts, with a value from £3 to £200. It's pot luck what you get - let us know!
👉 Get the Freetrade S&S ISA*
Nutmeg: You can choose from a wide range of investment portfolios. For example, they include fully-managed options, and socially-responsible portfolios. Fees range from about 0.25% to 0.75% plus the fund fees, depending on the portfolio you chose, and how much you’re investing. You need to start with a minimum of £500 for the S&S ISA.
👉 Get the Nutmeg S&S ISA*
evestor: This is one of the newer platforms aimed at beginners seeking a cheap way to invest in the stock market. You can choose from three risk levels, with charges around 0.50%, and invest from £1. It’s a really easy-to-use option.
👉 Get the Evestor S&S ISA
Vanguard: This US fund manager is known for offering cheap ready-made portfolios, such as its five popular LifeStrategy funds. These will manage your money across lots of investments around the world for a fee of around 0.41%. But the website comes without bells and whistles when it comes to research and tools.
👉 Get the Vanguard S&S ISA
AJ Bell: This is a good option for those that are comfortable with investing. Platform charges start at 0.25% and the larger your portfolio is, the more cost-effective it is. The research and market information is also good. The app is available on both iOS and Android.
👉 Get the AJ Bell S&S ISA*
Fidelity: If you want plenty of research options, and to invest in shares as well as funds, Fidelity could be a good bet. Its ISA was named Boring Money’s best in 2020. You can invest in low-cost, wide-ranging portfolios, with charges from about 0.6%, depending on what investments you choose.
👉 Get the Fidelity S&S ISA*
Halifax: Of course, there are always high street names offering ISAs, too. And Halifax is known for a good investment service, and a simple choice. You can choose from a few ready-made portfolios with costs ranging from 0.6% to 0.7%, or go DIY. It’s also got a good record for customer service, according to Fairer Finance.
👉 Get the Halifax S&S ISA
But...if you still feel confused, or don’t have the time, or have a complex situation, you may want to speak to a financial adviser – you can find a local one on Unbiased or VouchedFor.
🤔 What is a Stocks and Shares ISA?
A Stocks and Shares ISA is simply a type of investment account. You can hold a variety of investments in one, such as funds and individual shares, with the major benefit being that you don’t pay tax on any gains.
Think of these accounts as a protective, tax-efficient ‘wrapper’ for your investments. You get to benefit from future market rises, and keep any profits away from the taxman – bonus!
You can save up to £20,000 in an ISA for the 2021/22 tax year, which runs from April to April. This may be divvied up between cash and stocks and shares – or the entire sum can be invested in one particular type of ISA. It’s your call. So, you have flexibility with your ISA allowance, depending on your financial situation and personal goals.
🤔 When should you use one?
This depends on your situation, but here’s what I reckon you need to know to decide whether you should invest in a Stocks and Shares ISA, or stick to cash.
- If you’ve got debt to pay off it’s usually wise to focus on this first, before saving or investing.
- Check your cash savings. Ideally, you need to set aside around three months’ worth of expenditure in a general savings account – or more if you’ve got a mortgage. This is for use in an emergency, such as your boiler breaking down, or to cover you if you’re out of work for a period.
- You must be willing to take a gamble in the market, as returns aren’t guaranteed. So, don’t invest if you might need the cash within the next five years.
- Remember, investing is a long term game! Chances are, over the years, your investments will rise in value. But the longer you can keep your money invested in the market, the greater the potential for juicy profits.
🤔 What are the charges on Stocks and Shares ISAs?
Unlike cash ISAs, you’ll pay a fee for your account. For starters, you pay to use the investment website. How much varies depending on which one you pick (see more below), and the amount you’re investing. This is in return for using the website to buy and sell funds, and other investments, alongside using its research tools and insights into the market.
You’ll also pay a fee to the fund manager, and share dealing charges may also apply. So, there are generally two types of fees that you’ll need to think about when comparing Stocks and Shares ISAs. There could be admin fees to think about too, so check the details.
Clearly, it can be a massive headache trying to understand investment charges. But plenty of providers these days are offering clear and simple charging structures, which makes things miles easier, particularly for first-time investors.
For example, evestor charges a total of around 0.50% a year for its ready-made portfolios. This amounts to around £100 a year on a £20,000 Stocks & Shares ISA portfolio, although the exact amount you pay depends on your investment's value at the time.
Whatever you do, check the charges before you invest. That’s because paying 0.35% compared to 1%, for example, can make a massive difference over time. As the value of your investments grow, so will the fees charged, as they’re a percentage of the amount invested.
🤔 Should you be focusing on funds?
For first-time investors or those who simply want to spread risk, funds are an appealing option. You can hold dozens of company shares in a fund, so you’re spreading your risk, instead of relying on a single firm’s fortunes.
Of course, you can also opt for individual shares (if the provider offers these) but you’ll need to really do your homework and keep track of the company’s performance.
If you choose a fund, its manager will be in charge of choosing the particular shares you’re investing in, and will pool your money with other investors’ cash, using this to invest widely.
🤔 How can you choose the right fund for you?
There are thousands of funds to choose from, and it can seem a minefield. But, basically, they fall into a few types and span a variety of themes.
Active funds: These have a manager and focus on particular markets, such as the UK, Europe or emerging markets. Or, they may invest in a particular industry, such as mining or energy. Plenty of investment websites list their ‘best buy’ active funds, to make choosing easier.
Passive funds: Typically known as ‘trackers’, these mirror the movement of a particular stock market, such as the FTSE 250. They are a plain vanilla fund, and can be a cheap and simple way to invest, without the need for expert fund management and research teams.
It’s entirely up to you what fund you pick. But the simplest option is a ready-made portfolio, which invests in a range of funds, and spreads risk between different types. You can choose the level of risk you want to take, so you get one that’s suited to you and your goals.
🤔 How to pick the right provider
Okay, so now you’ve got to grips with the basics, you’ll want to get on and invest. But choosing from the wide range of providers can seem impossible, and leave you feeling stuck. I've highlighted some ISAs that I like above but if you need more help...
There are some really simple tools to help. For example, Boring Money asks how much you want to invest, and whether you want it to be really simple – or to choose your own funds (DIY). You can also opt for, say, an ethical choice, or a big brand. Or, simply the cheapest! Then it suggests potential choices for you.
There are other impartial services that can help, too. Moneytothemasses lists a range of cheap ISA providers on its website. So, too, does MoneySavingExpert, alongside which is most suitable for you, depending on how much you have to invest, and how much help you want.
🤔 What if you’ve already invested in a cash ISA – can you transfer?
Yes. You can shift a cash ISA to a Stocks and Shares ISA. You may want to do this if, say, your situation changes, and you want to financially plan for the long term. That’s provided you’ve enough cash set aside for a rainy day. Moving your ISAs into one pot is also a good way of consolidating, or combining all your accounts, too, if you want.
Once you’ve invested...keep calm and carry on!
Over the years, stock markets inevitably take a tumble (and they’ve been spooked plenty of times over the past year). But, whatever you do, avoid selling your investments if they suddenly fall in value – given time, there’s every chance they’ll recover.
It’s sensible to check on your investments every six months or so. Ensure you’re happy with how much you’re investing, and that your goals and timeframes are the same. Then keep calm and carry on, if at all possible.
I hope this helps give you the lowdown on Stocks & Shares ISAs – so you can make the most of your money!
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