What is a Stocks and Shares ISA?
You are able to invest anything up to the tax threshold for that year and choose to have it spread across a Cash, Stocks and Shares and Innovative Finance ISA or consolidated within one account.
A Stocks and Shares ISA is a tax-efficient way to invest. Despite the name, you can invest in many things besides Stocks and Shares, all with varying levels of risk.
As well as shares you can also invest in:
- Investment trusts
- Open Ended Investment Companies (OEICs)
- Unit trusts
- Government bonds (Gilts)
- Corporate bonds
A Stocks and Shares ISA can be a good way to put aside some money each month or invest some extra cash. This kind of account is not advised if you don’t have any other savings or are in debt because you won’t be able to access your money easily if you need to and you could make losses.
However, Stocks and Shares ISAs have the potential to provide better returns than any other savings account.
What to Consider when Choosing a Stocks and Shares Provider?
- Assess the level of risk you’re willing to take, most providers can filter assets depending on the level of risk you’re willing to take or even provide you with a ready-made portfolio
- Low risk investing tends to focus on bond funds which pay interest or dividends regularly, whereas higher risk portfolios tend to focus on property investment and the stock market
- Providers often hold a limited amount of carefully selected options to invest in whereas others have a much larger range of funds. Work out which is right for you
- Some providers have a simple interface with clear copy about each investment and its past performances. Make sure you find one that you find easy to use, helpful and clear
- Be careful of management charges and account fees. All investment ISAs have some form of charge, whether that’s a trading fee or an account management fee. Make sure you know how much your ISA will be costing you before you invest
- Some providers allow you to hold cash in your account, ready to invest whenever you choose. You can even earn interest on that money so make sure your potential provider offers this if you think you may need this option
Why Choose a Stocks and Shares ISA?
Many people are turning towards investing in light of the ever falling interest rates offered by banks. While there are risks involved, you can generally expect a good rate of interest on your investments. With many accounts now offering managed portfolios, it is now easy for people to begin investing.
It’s relatively easy to transfer your Cash ISA in to a Stocks and Shares ISA or change ISA providers and can take around 30 days. It simply involves filling in a form but be careful of penalty charges from your current provider.
You can invest your full ISA allowance of £20,000 into a stocks and shares ISA or choose to split your allowance with a Cash or Innovative Finance ISA.