The UK stock market is one of the most mature and efficient in the world. It offers investors a broad range of companies to choose from, many of which are global leaders in their respective fields.
However, with the cost of living crisis and the rise in the price of basic essentials, many people are finding it difficult to make ends meet. So, the big question is, is it the right time to be investing in stocks and shares ISAs?
Some might say yes, as there are plenty of great opportunities out there. Others might say no, as the market is becoming increasingly volatile. However, one way to ease the financial pressure is to invest in stocks and shares ISA.
A stocks and shares ISA is a tax-efficient way to invest in the stock market. You can invest up to £20,000 per year in a stocks and shares ISA and any gains you make are tax-free. This makes them an ideal way to build up a long-term investment portfolio.
There are many different ways to invest in UK stocks and shares. You can choose to invest in individual companies or buy into a managed fund that invests in a basket of companies. You can also invest in exchange-traded funds (ETFs) that track a particular index, such as the FTSE 100.
Whatever route you choose, make sure you do your research and only invest in companies or sectors that you understand. It’s also important to remember that stock prices can go down as well as up, so don’t invest more than you can afford to lose.
If you’re looking for some ideas on where to start, read on.
What is an ISA?
An individual savings account – or ISA – is a tax-free way to save and invest. The government allows you to put away a certain amount of money each year (currently £20,000), which can be invested in cash, stocks and shares or a mixture of the two.
The key benefit of an ISA is that any gains you make are tax-free. So, if your investments increase in value over time, you won’t have to pay any capital gains tax on the profits when you cash them in.
There are two types of ISA: a cash ISA and a stocks and shares ISA. A cash ISA is simply a savings account where you can earn interest on your money without paying any tax on it. A stocks and shares ISA, on the other hand, allows you to invest in things like shares, bonds, gilts and funds.
In addition to the annual £20,000 limit, you can also now put up to £240,000 into a Lifetime ISA. This is a long-term savings account for people under the age of 40 who are saving for their first home or retirement. The government will top up your savings by 25%, meaning you could get up to £30,000 towards your goal.
Since the introduction of the Lifetime ISA, the annual ISA limit has been reduced to £20,000. This means you can now split your allowance between a cash ISA and stocks and shares ISA, or have one of each.
For example, you could put £10,000 into a cash ISA to earn interest tax-free and invest the other £10,000 in a stocks and shares ISA. Or you could put the full £20,000 allowance into a Lifetime ISA if you’re saving for a long-term goal.
Where To Buy Stocks and Shares ISAs?
As the end of the tax year looms, many savers are looking to use up their ISA allowance before it disappears. But with so many options available, where’s the best place to put your money?
There are a few things to consider when picking stocks and shares ISA. Firstly, what kind of investor are you? Are you looking for growth or income? And secondly, how much risk are you willing to take?
If you’re after growth, then you’ll want to invest in companies with good prospects for the future. For income, on the other hand, you’ll be looking for stocks that pay regular dividends.
Of course, there’s no such thing as a risk-free investment, but some stocks are less risky than others. For example, big blue-chip companies tend to be more stable than small start-ups. And shares in UK companies are generally seen as being less risky than those in emerging markets.
So, with that in mind, here are the best ways to invest in shares and stocks ISAs:
1. Online Brokers
If you’re a DIY investor, then an online broker could be the best place for your ISA. You’ll have access to a wide range of investments, and you’ll be able to choose exactly how you want to allocate your money.
There are plenty of reputable online brokers to choose from, but our top pick is Hargreaves Lansdown. With Hargreaves Lansdown, you can invest in stocks, ETFs, commodities and even cryptocurrencies. And if you’re not sure where to start, you can copy the portfolios of other investors.
2. Investment Trusts
If you’re looking for a hands-off investment, then an investment trust could be the answer. With an investment trust, your money is pooled with that of other investors and then invested in a portfolio of assets. This means that you don’t have to worry about picking individual stocks and shares.
Investment trusts also offer the potential for higher returns than traditional ISAs, as they can invest in a wider range of assets. And because they’re not bound by the same regulations as other types of ISA, they can also borrow money to invest, which can increase returns even further.
If you’re considering an investment trust ISA, then we recommend Baillie Gifford US Growth. This trust invests primarily in US companies and has returned an impressive 20% per year over the last five years.
3. Robo-Advisors
If you’re not sure where to invest your money, then a robo-advisor could be the answer. Robo-advisors use algorithms to automatically allocate your money according to your investment goals. For example, if you’re looking for growth, they’ll invest in stocks that are expected to perform well.
One of the best robo-advisors on the market at the moment is Wealthtify. With Wealthtify, you can invest in a wide range of assets, including stocks, bonds, and real estate. And because it’s a robo-advisor, you don’t need to worry about picking individual investments.
4. Peer-to-Peer Lending
Peer-to-peer lending is another alternative to traditional ISAs. With peer-to-peer lending, you lend money to businesses or individuals through an online platform. In return, you receive interest payments on your loan.
Peer-to-peer lending can offer higher returns than other types of ISA, but it’s also riskier. So, if you’re thinking about investing in a peer-to-peer platform, make sure you do your research first.
5. Cash ISAs
If you’re risk-averse, then a cash ISA could be the best place for your money. With a cash ISA, your money is invested in a savings account and is therefore protected from any stock market fluctuations.
Of course, this safety comes at a price – cash ISAs tend to offer lower returns than other types of ISA. But if you’re looking for a place to park your money for the short-term, then a cash ISA could be the perfect option.
So, there you have it – five of the best stocks and shares ISAs on the market at the moment. Whatever your investment goals, there’s an ISA out there that’s right for you.
How To Invest In The Best UK Stocks And Shares ISA: Step-By-Step
The best UK stocks and shares ISA will offer you the opportunity to invest in a wide range of companies, from small-cap to large-cap, and across different sectors. With investing, the best option is through an online platform. In this example, we will use Hargreaves Lansdown’s platform.
Step 1: Set Up An Account
To get started, you will need to set up an account and then self-select the stocks and shares ISA that best suits your needs. When doing so, there are a few key things to keep in mind:
- The type of investor you are: Are you a growth or income investor? Do you want to take more risk for the chance of higher returns, or would you prefer a steadier investment with predictable dividends? Your answer to this question will determine the types of stocks and shares you should be looking at.
- The size of the companies you want to invest in: Do you want to focus on large-cap or blue-chip stocks that are less volatile but offer less upside potential, or would you prefer to take a punt on small-cap or mid-cap stocks that come with more risk but also more potential rewards?
- The sectors you are interested in: Which industries do you think will be the best performers in the years ahead? When it comes to picking stocks, you can either choose individual companies or invest in a sector-specific fund.
Step 2: Research Your Chosen Stocks
Once you have an idea of the types of stocks and shares you want to buy, it’s time to start your research. When looking at individual companies, there are a few key things you need to take into account:
- Financial statements: Reviewing a company’s financial statements will give you an indication of its overall health. You can find these on the company’s website or on sites like Morningstar.
- Analyst reports: These provide an in-depth look at a company and its prospects. You can find them on the websites of brokerages like HSBC or Jefferies.
- Newsflow: Keeping tabs on the latest news affecting a company will help you to understand its share price movements. You can set up Google Alerts or use a stock screener to do this.
Step 3: Decide How Much To Invest
Once you have found the stocks you want to buy, it’s time to decide how much money you want to invest. This will depend on your investment goals and appetite for risk.
If you are investing for the long term, then you can afford to take more risks. You can also afford to be patient and wait for share prices to recover from any short-term dips.
On the other hand, if you are investing for the short term, then you will need to be more cautious. You will also need to be nimble and quick to take profits when share prices rise.
Step 4: Place Your Trades
Once you have decided how much you want to invest, it’s time to place your trades. If you are using an online platform like Hargreaves Lansdown, then this is a straightforward process.
First, you will need to log in to your account and find the stock or fund you want to buy. Then, you will need to enter the amount you want to invest and place your trade.
It is worth noting that you will usually have to pay a commission when buying stocks and shares. However, many online platforms now offer commission-free trading.
Step 5: Monitor Your Investments
Once you have placed your trades, it’s important to monitor your investments on a regular basis. This will help you to spot any problems early on and make sure your investments are on track to meet your goals.
Most online platforms will provide you with the latest share prices and news updates. You can also set up price alerts, so you will be notified if a stock reaches a certain level.
Additionally, it’s a good idea to review your investments at least once a year to ensure they are still in line with your goals. If not, then you can make changes accordingly.
Best UK Stocks and Shares ISA Platforms (Including Robo-Platforms)
| ISA Platforms | Subscription Fee | Fund Management Charge | Dealing Fees | Spot Fees |
|---|---|---|---|---|
| Hargreaves Lansdown | £0 | 0.45% – 0% | £11.95 | £0 |
| InvestEngine | N/A | 0.60% | 0.16% | N/A |
| IG Stocks and Shares ISA | £0 | N/A | £3 – £8 | 0.50% |
| Wealthify | N/A | 0.25% | 0.22% | N/A |
| Interactive Investor | £9.99 | Covered by subscription | £5.99 | 2% |
Hargreaves Lansdown
Hargreaves Lansdown is one of the most popular investment platforms in the UK and offers a stocks and shares ISA as well as other types of ISAs. They have a wide range of investments available including ETFs, mutual funds, and individual stocks. The platform is easy to use and has excellent customer service.
Hargreaves Lansdown is skilled at what they do. They have long been a well-known and trustworthy option for investors. The Hargreaves Lansdown stocks and shares ISA is well-rounded and will appeal to a wide range of long-term investors, especially those who like funds in my opinion.
Over the years, Hargreaves Lansdown has received several honours. Its mission is to offer investors of all skill levels a place to go and receive what they need. There is a wide variety of investments, a mobile app that works effectively, share-dealing fees that are reasonable, and there is professional research and information available.
Pros
- Robust resources for investment and research available.
- Active investors can trade for less money, and fund dealing is free.
- for smaller holdings, low platform fees
Cons
- High costs for a small number of deals
- Fee structures may be intricate.
- Fewer trading instruments
Fees
- Subscription Fee: £0
- Fund Management Charge: 0.45% – 0%
- Dealing Fees: £11.95
- Spot Fees: £0
InvestEngine
As one of the Robo-advisors in the UK, InvestEngine is a newer platform but has made quite a name for itself. Its claim to fame is that it offers fractional shares which allows you to invest in companies, such as Amazon and Facebook for less than £1.
No matter whether you are a beginner, a passive investor, or a more seasoned, hands-on investor, InvestEngine wants to help you maximise the possible returns on your assets. The managed portfolio service on the platform will construct a diverse portfolio for you at a level of risk you are comfortable with, saving you the time-consuming task of selecting the investments yourself.
The new DIY service from InvestEngine, which enables you to build and manage your own portfolio, is an option for more seasoned, hands-on investors. Due to the minimal costs, you keep a larger portion of any investment profits, and you are also free to sell or transfer your investments at any time.
The fact that InvestEngine gives you power straight away might be its best feature. Either you develop and maintain your own investment portfolio, or you may have one established and managed for you.
Pros
- Very affordable platform
- Option between DIY and managed portfolios
- Vast array of ETFs
Cons
- Minimum investment to establish a portfolio is £100
- Neither trading tools
- No ready-made ethical portfolios
Fees
- Subscription Fee: N/A
- Fund Management Charge: 0.60%
- Dealing Fees: 0.16%
- Spot Fees: N/A
IG Stocks and Shares ISA
IG is one of the oldest and most well-known online brokers in the world. They offer a stocks and shares ISA as well as other types of ISAs. They have a wide range of investments available including ETFs, mutual funds, and individual stocks. The platform is easy to use and has excellent customer service.
IG offers investors over 17,000 different markets to choose from, including forex, indices, commodities, shares, and more. You can trade on their web platform, mobile app, or their desktop platform.
The fees are very reasonable at 0.10% per year with no minimum investment requirements. You can also trade on leverage which can help you to make bigger profits but it can also lead to bigger losses.
Pros
- There are several trading tools and many investing options.
- For aggressive investors
- Great educational resources
Cons
- For less regular or inactive investors, expensive
- Trading is prioritised above long-term investing.
- The platform might be challenging to utilise.
Fees
- Subscription Fee: £0
- Fund Management Charge: N/A
- Dealing Fees: £3 – £8
- Spot Fees: 0.50%
Wealthify
Another Robo-advisor, Wealthify, offers a stocks and shares ISA, as well as other types of ISAs. They have a wide range of investments available, including ETFs, mutual funds, and individual stocks. The platform is easy to use and has excellent customer service.
Wealthify is one of the simplest investing platforms with an extremely user-friendly app that is available for both Android and iOS devices. You can start investing with just £1 and there are no trading fees. The fees are very low at only 0.5% per year.
Your money is automatically diversified across a range of investments including stocks and shares, government bonds, and corporate bonds. You can choose from 5 different risk levels depending on your investment goals and the time frame you have in mind.
The beauty of Wealthify is in its simplicity. You don’t need any prior investment knowledge or experience to start investing. All you need to do is decide how much you want to invest and for how long, then select your risk level and leave the rest to Wealthify.
Pros
- Create a new account for £1
- Cheap, straightforward, and open fees
- Simple to use platform
Cons
- Limited number of pre-made portfolios
- Limited ability to govern your investments
- Cheaper options are available
Fees
- Subscription Fee: N/A
- Fund Management Charge: 0.25%
- Dealing Fees: 0.22%
- Spot Fees: N/A
Interactive Investor
Interactive Investor is one of the most popular investment platforms in the UK and offers a stocks and shares ISA as well as other types of ISAs. They have a wide range of investments available including ETFs, mutual funds, and individual stocks. The platform is easy to use and has excellent customer service.
Interactive Investor charges a flat rate fee of £10 per month regardless of how much you invest. This makes it very affordable for small-scale investors. You can also trade on leverage which can help you to make bigger profits but it can also lead to bigger losses.
The platform is easy to use and offers a wide range of investments. You can also get access to professional research and information. The customer service is excellent and they offer a mobile app for both Android and iOS devices.
Pros
- Robust selection of investments
- Easy, fixed monthly cost
- Free monthly trading
Cons
- For smaller investors, it is expensive
- Large selections might be intimidating.
- No commission reduction for investing often
Fees
- Subscription Fee: £9.99
- Fund Management Charge: Covered by subscription
- Dealing Fees: £5.99
- Spot Fees: 2%
What to Look for in a Stocks and Shares ISA Platform?
When it comes to finding the best stocks and shares ISA platform, there are a few key things that you should look for:
1. Fees
The first thing you should look at when comparing different stocks and shares ISA platforms is the fees. Some platforms will charge you a percentage of your investment, while others will charge a flat fee. Make sure to compare the fees so that you know how much you will be paying in total.
2. Ease of Use
Another important factor to consider is how easy the platform is to use. You should be able to easily add and withdraw money from your account, as well as view your investment portfolio. The platform should also provide you with tools and resources to help you make informed investment decisions.
3. Investment Options
The best stocks and shares ISA platforms will offer a wide range of investment options, including stocks, bonds, ETFs, and mutual funds. This will allow you to diversify your portfolio and reduce your risk.
4. Customer Service
When you invest in a stocks and shares ISA, you want to be able to get help and support when you need it. The best platforms will offer customer service through live chat, email, or phone.
5. Safety and Security
Finally, you should make sure that the platform you choose is safe and secure. The platform should use encryption to protect your personal and financial information.
FAQs
1. What is an ISA?
An Individual Savings Account (ISA) is a tax-free savings account available to UK residents. Money saved in an ISA can be used for any purpose, including buying a first home, saving for retirement, or simply building up a rainy day fund.
2. Who can open an ISA?
Anyone who is a UK resident and aged 18 or over can open an ISA. You can open more than one ISA in a tax year, but the total amount you save on all of your ISAs must not exceed the annual ISA limit.
3. What are the benefits of an ISA?
The main benefit of an ISA is that any interest or capital gains you make on your savings are tax-free. This can boost the growth of your savings significantly over time, as you will not have to pay any tax on money that would otherwise be taxable.
4. What types of ISAs are there?
There are two main types of ISAs – cash ISAs and investment ISAs. Cash ISAs work like regular savings accounts, where you can deposit money and earn interest on it. Investment ISAs, on the other hand, allow you to invest your money in stocks and shares or other assets such as bonds and funds.
5. What is the annual ISA limit?
The annual ISA limit is the maximum amount of money that you can save in an ISA in a single tax year. For the 2022/23 tax year, the annual ISA limit is £20,000.
