Investment ISAs: What are my options?
When looking to open an Investment ISA, there are a lot of different options that you have to choose from. Picking the right account for you can make sure that you get the best returns in the best way for your situation, whilst taking advantage of the tax-free ISA wrapper offered by Stocks and Shares ISAs. But what are your options? We’ve broken down all of the different types of Investment ISAs here, so that you can make an informed decision.
What is an Investment ISA?
An Investment ISA, also known as a Stocks and Shares ISA, allows you to invest your money without paying tax on the returns.
The government cap on an ISA means that with an Investment ISA, you can invest up to £20,000 each tax year into any ISA account.
If you’re looking to grow your money, you’ll want to be thinking about opening a Stocks and Shares ISA, as they tend to generate higher returns than other ISA accounts, such as Cash ISAs.
There are a lot of different types of Investment ISAs available, including:
- Index Tracker ISAs
- Fund Supermarket ISAs
- High Income ISAs
- Ethical ISAs
- ETF ISAs
- Gold ISAs
- Monthly Income ISAs
- Share Dealing ISAs
- Self Select ISAs
- Structured Growth ISAs
Types of Investment ISAs
An Index Tracker ISA is a type of Investment ISA which looks to replicate stock market trends by tracking performance closely. A fund will generally buy all the different company shares within an index, as opposed to an actively managed fund where a fund manager will attempt to do better than the index itself.
A Fund Supermarket ISA is an ISA which allows you to invest in a wide variety of different investments in one place. The main highlight of this type of ISA is the variety of options for your income and growth.
A High Income ISA largely does what it says on the tin: it is an ISA where the investments you make are intentionally designed to garner the highest possible returns, which are then paid in regular intervals, e.g. quarterly, bi-monthly, monthly. These are higher risk but do generate both regular returns and ideally high returns if the stock performs well.
An Ethical ISA allows you to put your money where your mouth is when it comes to any strong convictions you may have regarding certain issues. This is done by only including companies in the investment Index which adhere to certain specific criteria, e.g. environmental practices etc. Some examples of industries or links which would be avoided by this type of ISA include: tobacco, alcohol, pornography, gambling, fur trades, and armaments.
An ETF ISA stands for an exchange-traded fund; these issues shares which are then traded on a stock exchange. One of the upsides of this type of Investment ISA is that it offers a very wide range of types of assets and opens up access to specific markets, sectors and strategies which may not be accessible with other forms of Investment ISAs.
A Gold ISA is an excellent option for an investor who is looking to diversify their investments. If you are interested in investing beyond the traditional stocks and bonds options, you can do so with a Gold ISA which enables you to invest in more non-traditional assets. It is important to remember with this type of ISA that a long-term approach is needed in order to see good returns.
As the name would suggest, this is a type of ISA which aims to gain returns which allows investors to be paid in regular intervals (quarterly, six-monthly or annually) in the form of ‘income’. These aim to offer the highest possible income for investors, so for those looking for diversity and gain regular returns then this is definitely one to look at.
A Share Dealing ISA is another option if you are looking to diversity your investment portfolio by putting your money into different stocks, shares and other investment vehicles. Examples of the types of investment vehicles you could choose with a Share Dealing ISA include: stocks, shares, gilts, equities, investment funds, investment trusts and exchange traded funds.
This is an ISA for those who have experience in investing and are looking to have more of an active role in their investments. With this ISA, any decisions about investments are down to the investor themselves. There are no fund managers for these accounts, so the investor will do the work of a fund manager in selecting and actively investing in individual funds and stocks.
A structured growth ISA is a specific type of growth product where, instead of buying individual stocks and shares, or having a fund manager do this for you, your investment is linked to the stock market as a whole. In the UK, this will usually be the FTSE 100 index. Your investment will then pay out depending on whether the index as a whole moves up or down.