5 Considerations for Your Next Investment ISA
You've decided to invest your savings into a Stocks and Shares ISA. You'll be using your tax-free ISA allowance for this year before the deadline, while also investing your money for your future. But what do you need to consider before opening an account? We've put together a list of our top five considerations for you to think about before you click "apply".
Are you a first-time investor looking to make use of your remaining ISA allowance for this tax year?
If you’ve never done this before, you need to look at the options before investing your hard-earned cash into a Stocks and Shares ISA, to make sure you’re getting the best deal having considered all the options.
With that in mind, we’re here to give you a helping hand. Here is our list of top five things to consider before opening a new Investment ISA:
1 Don’t just pick the cheapest option you can see
Now, costs are important – this decision is unlikely to be changed year-after-year. But the cheapest advertised rate might not be the cheapest option overall (or the best one for you). Hidden costs can mean you actually end up paying more with some of the options which look cheaper at first glance.
For a modest portfolio managed on the most popular platforms, the costs can include:
- Annual account charges ranging from zero to £100 a year.
- Annual fund charges from zero to 0.45% of portfolio value.
- Plus charges each time you make a trade, which could be from £1 to £12.50 per transaction.
BUT… some of the more expensive platforms are rated highly by investors for ease of use and good customer support. So don't write these off for slightly higher rates!
2 Where do you want to put your money?
You don’t necessarily have to choose the exact ISA you want but you can choose your platform – but, not all platform offer all the different kinds of funds. If you are very passionate about certain issues, such as Climate Change or other ethical concerns, you might find it useful to know you can open ISAs which are specifically targeted at funds which align with your values.
Know your priorities, check your platforms and do your research to make an informed decision.
Some examples of ISAs with specific purposes are:
3 What kinds of tools and research opportunities do platforms offer?
Being able to easily research, use and monitor their finances is often one of the biggest factors by which other customers will judge a platform. So, do some research into reviews and what different platforms offer in terms of support.
Some people are willing to pay that little bit more in account fees for a platform which offers user-friendly functions such as in-app optimization and easy access to information.
4 How much are you investing?
The amount of money you’re looking to funnel into an investment is a really important consideration when choosing where to put it. Look at the fee structures and thresholds for the providers – as some offer reduced fee charges for those with more sizeable investment portfolios.
Some investors with larger pots of cash (eg. £50K plus) might want to be on the lookout for platforms that specifically charge flat-rate fees.
5 What added costs (and potential savings) am I looking at?
When it comes to choosing a platform, you need to know if they’ll be any hidden costs. In addition to annual management charges, you should be looking for…
- Any dealing charges (which vary depending on the level of trading)
- Any dividend reinvestment fees
- Transfer charges
- Exit fees.
You should also look out for any potential extra savings – such as discounts or bonuses for adding your money monthly rather than in one lump sum.