How to find the best ISA

Finding the Best ISA – Key Steps

Stocks and Shares ISAs are tax efficient wrappers into which a certain amount (£20,000 for the 2017/18 tax year), can be held.  They allow you to buy a huge range and combination of investments from shares and corporate bonds through to both unit and investment trusts.  There’s almost zero tax to pay on any gains made within an ISA.  Not every ISA is the same however, so here’s a few points to consider when looking to find the best ISA for you.

Knowledge is key to finding the best ISA for you:

Your attitude to risk will affect your investment approach, so it’s important to understand all of the risks involved before you invest.  Which? Have a good guide to investment risk here.

With a total ISA allowance of £20,000, for the 2017/18 tax year, you need to consider how this is divided between a cash and a stocks and shares ISA.

How do you want to invest?

When investing your ISA annual allowance, there are two main ways to go about it:

  • Regular contributions.  Many investors simply choose to set up a monthly direct debit to contribute to their ISA.  Apart from convenience, the advantage of this option is known as ‘pound cost averaging’.  Since the market fluctuates, some of your monthly contributions will benefit from lower asset prices.
  • Lump-sum investment.  By investing a lump-sum, returns will immediately begin compounding.  This means your money can start working straight away.

Where do you want to invest?

Certainly diversity is key to an investment portfolio, allowing you to manage risk levels.  One option to help with this is an investment fund, which conveniently enables you to invest in a wide array of assets.  Of these funds, there’s a choice between active and passive options when choosing the best ISA for you.

  • Active Funds.  These attempt to consistently beat the market, but generally charge slightly higher fees than passive funds.
  • Passive Funds.  These follow the market, and are also known as Index Funds.

Having considered the various ISA options available as outlined above, you’ll be in a strong position to decide the best ISA option for you.  For more details about Shard Capital’s ISA, take a read here.