Updated: January 24, 2020

Stocks and Shares ISA Comparison

You should always compare rates and deals before opening an investment ISA. Find out how to quickly compare the entire market without lifting a finger in our guide

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: January 24, 2020

Stocks and shares ISAs, also referred to as investment ISAs, offer a variety of ways to invest your money tax-free. While you can choose to invest your ISA allowance, set by the government, in a variety of stock-linked investments, this guide looks at how to compare investment fund ISAs.

Knowing how to compare stocks and shares ISAs will help you make the right decision about where to invest your annual ISA allowance for the best returns.

Read on to discover what you should look for when comparing investment fund ISAs…

How to compare investment ISAs

While there are several different investments you can make using your annual ISA allowance one of the most popular choices is through an investment fund. Although you can choose to buy individual stocks and shares inside an ISA wrapper, this option tends to be for seasoned investors and people with a high appetite for risk who understand the markets and take a keen interest in trading.

Bonds are also an option which can be used for your ISA allowance but this article will focus on comparing pooled funds.

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How to compare investment fund ISAs

Many investment houses sell investment funds. By pooling your capital with others who are investing, these collective investments are a way to gain access to a wide range of assets.

They can be a very practical and affordable way to gain exposure to global stock markets, while removing the pressure of having to manage a portfolio of stocks and shares by yourself.

Three popular types of pooled or collective investment fund which can be used for your ISA allowance are:

  • Unit trusts
  • Investment trusts
  • Open-ended investment companies (OEICs)

Investment funds invest your money across tens or even hundreds of different companies, spreading your risk and limiting costs and fees since you’ll only be charged on one investment.

There are many comparison websites which compare the past performance of investment fund ISAs but if you don’t know what to look for, the only thing you have to go on is the projected returns.

The problem with this is that past performance doesn’t guarantee future returns and although it’s a good indicator of what you might achieve, the true reason for the past years’ returns will be down to the person managing the fund you’re investing through.

When considering investment funds you should compare:

  • Fees and charges:

    It’s important to pay attention to fees since high fees on a fund which is underperforming could, over time, erode the money you’re investing. Usually you would pay an initial upfront fee of around 5% and an annual management charge of around 1%, although some investment providers charge the annual fee on a sliding scale, according to how much you manage to invest.

  • Income or growth:

    If you are hoping to draw an income from your investment, either now or sometime in the future, make sure the fund allows this option. Some funds are designed specifically for income or growth so it’s useful to know what your long term financial goals are before you make a final decision about what you’re investing in.

  • Fund manager experience:

    Is the fund manager the same person who has been managing the fund for years? If the performance quoted by an investment provider is great, check who is responsible for delivering such strong performance and make sure the same person is still at the helm before you invest.

  • Sector

    What sectors can you invest in through the fund or investment house? Can you mix and match your ISA allowance across a variety of market sectors or will you be investing in one specific segment? Diversification can be critical when you want to spread your risk while maximising potential returns and flexibility in regards to the type of industry you can invest can often be key to achieving your financial goals.

  • Risk level

    What’s your appetite to risk and how diverse is the fund you are thinking of investing into? Some investment funds only invest in FTSE 100 companies and others stick to investing only in emerging markets. Make sure you understand the products and how much risk your investment will be exposed to.

If you would like help finding the right investment fund, or funds, talk to one of the experts we work with.

They will ask you questions to understand your appetite for risk and advise you on the investments which are most likely to perform, whether you’re looking for income from your investment or you want to invest for long-term growth, and take full advantage of tax-free compound growth.

All the experts we work with are independent financial advisors with the knowledge and experience to help with all aspects of your financial planning needs.

How to judge and compare rates

Rates of return are used to promote investment funds, but it’s important to understand how to judge the rates being quoted. Rates of return and dividends on any pooled investment fund will fluctuate according to how the market segment is faring in the global economy. And just because the performance was X% last year, doesn’t automatically mean results will be replicated this year.

Don’t be lured by the promise of a high yield without first understanding who was responsible for achieving it and ensuring that the same fund manager is still in charge of the investment fund at the time you make your investment.

Knowing where to find the best investment ISA for you comes down to having a clear understanding of your goals, your appetite for risk, whether you are investing over the medium or long term and if you want to get income or growth on the investments you make.

Speak to an expert

Talk to one of the experts we work with and let them explain which investment funds might be best for you and your investment goals. All the experts we work with are independent financial advisors who offer a five-star service and have access to investment funds from providers across the entire UK.

Whether you’re planning on investing a little bit of money every month, or investing a lump sum in one go, they will help you work out an investment strategy to suit your investment goals and appetite for risk.

Call 0808 189 0463 or make an online enquiry for a free chat with no obligation to act on the guidance you’re given.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in ISAs. Ask us a question and we'll get the best expert to help.

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Richard Angliss

Richard Angliss

Finance Expert

About the author

Richard Angliss has made a career in financial services which stretches over 40 years.

His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.

For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.

At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.

With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them.  Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.

He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.

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