Monthly Income Fund ISAs

Monthly Investing

Many ISA providers allow you to invest monthly. Nutmeg offer a simple ISA plan where you can set up different pots for different savings objectives e.g. house fund; children's saving fund where you can decide on the different risk levels you are prepared to take. For more information on how you can invest tax efficiently from £100 pm click here »

What is a monthly income fund ISA?

Monthly fund income ISAs offer a way to take a monthly income from your investments in a tax-efficient manner. They let you use your annual ISA allowance to invest in stocks and shares without paying tax on the return you receive.

The fund manager will invest your money with the goal of providing a regular income, rather than necessarily aiming for the highest possibly growth. This makes this kind of investment product popular with those who wish to use their savings to generate regular, dependable returns, such as retirees.

Monthly income fund ISAs usually use a diversified approach to investing, meaning some of your money may be in cash and some in stocks and shares. As the goal is to provide a regular income, fund managers will normally aim for relatively low risk investments.

However, as with any investment in stocks and shares, there is the potential for the value of the assets to go down as well as up which could harm your potential income.

Benefits of a monthly income fund ISA

By investing in a monthly income fund ISA, you can:

• Use your saving to generate a regular, tax-efficient income
• Limit your risk – fund managers for monthly income ISAs generally invest in dependable shares from companies with a good track record
• Choose from a wide range of products to match the level of risk and return you are comfortable with

Alternatives to monthly income fund ISAs

If you are looking to see larger returns or want to put your savings into a longer term investment, there are various other investment ISAs you can choose from.

Popular investment ISAs include:

Growth ISAs – If you want to see bigger returns and don’t mind waiting longer to see them, a growth ISA may be a good choice. These typically have terms of 3-6 years and you usually won’t get anything back until the loan term ends.

Structured ISAs – Instead of investing in individual stocks and shares, a structured ISA is linked to the overall performance of an index such as the FTSE 100. This limits your risk but can result in lower returns than those provided by well-chosen stocks and shares.

Kick out ISAs – A kick out feature means your investment ISA has a chance to mature early if certain conditions are met. This can allow investors to hedge their bets as there are more chances for the fund to pay a return throughout its lifetime with the payouts generally getting larger the longer the fund runs.