What is a Self Select ISA?
A Self Select ISA is a Stocks and Shares ISA account that lets you pick your investments yourself.
They are often referred to as investment supermarket ISAs or investment platform ISAs.
You can hold various types of investments within a Self Select ISA, and it’s up to you to choose your portfolio yourself.
What stocks can I hold in a Self Select ISA?
Here are the top three stocks commonly held in a Self Select share ISA:
Shares represent a portion of a publicly traded company. A company’s share price can rise or fall in value, so the better they do, the more your holding is worth.
Some companies also pay dividends to shareholders each year. The more shares you hold, the more dividends you receive.
2. Managed Funds (OEICs, Unit Trusts and Investment Trusts)
Managed Funds are investment companies that invest in a particular sector or area.
As an investor, your money is pooled together with every other investor and then the whole sum is invested across multiple companies operating in that sector.
The fund managers are investment professionals who decide the best companies to invest in. They also take an annual Ongoing Fund Charge deducted from the performance of the investment.
3. ETFs (Exchange Traded Funds)
ETFs are similar to Managed Funds in that they focus on a specific stock index, sector or geographical area.
However, they don’t have a fund manager who decides on the best companies to invest in. Instead, they invest in the main companies in the index so that the performance of the ETF tracks that of the sector.
For example, a FTSE 100 ETF invests proportionately across all the companies listed in the FTSE 100, meaning the performance is exactly the same.
You don’t get expert fund management, but you pay significantly fewer charges with an ETF investment. They can even outperform fund managers operating in the same sectors, despite the fact that they simply track the same index.
How do I choose what stocks to invest in?
Choosing stocks can be a daunting task due to the sheer number of options and variety available.
Here are some top tips for creating your own ISA:
1. Diversify your portfolio
Investing in Managed Funds and ETFs are a great way to spread your investments across multiple companies in your Self Select Stocks and Shares ISA.
By investing in one fund, your money is split across tens or hundreds of different companies. This means if one of them performs poorly or even goes bust, it won’t have too much of an impact on your overall portfolio.
But don’t stop there. Investing in different funds and ETFs across multiple sectors and areas that you think will perform well will diversify your portfolio further and protect you from swings in specific sectors.
2. Do your research
Before investing in any company, fund or ETF, make sure you completely understand how it works.
For example, ETFs can be leveraged up to five times, meaning the performance of the index or sector is multiplied by five. IF you don’t know this before investing you could be in for a shock if the market goes down.
Additionally, some managed funds include performance charges that only kick in at certain performance thresholds. You need to know all the information before making your decision.
The best place to look is the Key Investor Information Documents (KIIDs) that contain all the vital investment details.
3. Don’t chop and change too much
Remember that the best investment returns come over the long term, so try not to change your Self Select ISA portfolio too often.
If you are buying and selling different investments on a weekly or even daily basis, you might find it difficult to outperform the dealing fees and bid-offer spreads that you’ll be subject to.
What is the best Self Select ISA provider?
Here are our top five considerations for choosing the best Self Select ISA provider for you:
- What investments are available?
- What are the annual management charges?
- What are the ad hoc charges, like dealing fees?
- How good is their customer service?
- How good is their app or online platform?
Finding the best Self Select share ISA provider for you depends on how you’re going to use it.
The above factors will vary in importance depending on what investments you hold, your investment strategy and how much help you’ll need.