Updated: January 24, 2020

How to Find Top Rate Investment ISAs

Looking for the best rates and deals on investment ISAs? Find out how to get them along with expert advice in this guide

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: January 24, 2020

When you start looking at where to invest your ISA allowance for the best rates of return you first need to understand what will impact the rate you might get. Most investment ISAs will not offer a guaranteed rate of return, simply because they are tied in with stocks and shares and prices can fall as well as rise.

Although there are some products which have more likelihood of offering consistency, if you are considering using an investment ISA you should be comfortable to tie your money up for at least three years, and preferably longer.

What impacts investment ISA rates?

There are a variety of investment ISAs. Rates of return will depend on where you invest, how the investment performs and how long you stay invested. While there is no hard and fast rule on what makes an investment fund work, there are things you can look for to make sure you’re making the best decision for your investment goals.

The other thing which can influence your return on investment is how much you are paying in fees. Usually you would expect a 5% charge when you make your investment. On top of this initial fee, an annual fee of around 1% will usually be taken from your invested funds. If these fees are particularly high or the investment isn’t performing very well, fees could diminish your returns, especially if the fund continues to perform poorly over the longer term.

Investment ISAs can take the form of:

  • Individual stocks and shares
  • Investment trusts
  • Unit trusts
  • Open-ended investment companies (OEICs)
  • Exchange-traded funds
  • Corporate bonds
  • Government bonds

Individual stocks and shares

If you invest your ISA allowance in individual stocks and shares you’re reliant on the performance of the business whose shares you have purchased. If the company performs poorly, this will be reflected in the price of the shares. Most experts will tell you that you should only invest your money this way if you have an appetite for risk.

It’s also a good idea to make sure you will be able to invest your money for the medium to long term. This will allow you to take the rough with the smooth, safe in the knowledge that you don’t need the money and, once you do start thinking about selling your shareholding, you can do so at the highest possible point in and around the time you want to cash out.

Investment trusts

When you invest in investment trusts, your money is pooled with other investors and you can get access to a wide range of assets through a single investment product. The beauty of this is that your money is invested across tens or even hundreds of different companies, thereby spreading your risk and you’ll only be charged fees on one investment.

The rates you will see on this kind of investment ISA will depend on the way the money is invested. There are a wide variety of investment trusts which allow you to access a variety of investment opportunities. Funds invest over more than 30 different sectors and are grouped according to geography and type of investment. Choices range from Global Growth, UK Growth, Europe, Asia, Property, Private Equity and far more besides.

Rates of return you see on your investment will vary by sector and be influenced by market sentiment.

Unit trusts

Like investment trusts, unit trusts are pooled investments. Your money is invested across tens or hundreds of different companies, along with other investors. This pooled investment approach allows you to benefit from spreading your risk while being exposed to a wide range of companies and reaping the rewards of strong investment strategy, and exposure to a single set of fees.

The best way to ensure you are exposing your ISA investment to top performing funds is to ensure you find a unit trust fund with consistent performance and an experienced fund manager. For the best returns, you should invest for the medium to long term. If you know you’ll need to access your money within a year or two, you’re unlikely to benefit from the best possible growth on your investment.

The investment experts we work with know the best performing fund managers and can help you work out where you want to invest depending on your goals and appetite for risk. Make an enquiry for a free, no-obligation chat.

All the experts we work with are independent financial advisors with access to every UK investment provider and their wide-ranging products.

Open-ended investment companies (OEICs)

Open-ended investment companies are another type of pooled investment. Like unit trusts, OEICs are run by fund managers who invest your money, along with funds from other investors, in a selection of company shares. Every fund has a different focus and rates of return will depend on the performance of the collection of investments the fund manager makes.

Some investment providers offer OEICs which give you a choice of receiving ‘income units’ which provide regular payouts of any dividends or interest earned on your investment share, or ‘accumulation units’ which are reinvested in the fund automatically. The rate of return could be maximised with accumulation units since you can benefit from the compound interest generated by reinvesting growth. The same is also true of many unit and investment trusts.

Investing inside an ISA wrapper means your money remains tax free whether you invest for growth or income.

Exchange-traded funds

An exchange-traded fund (ETF) is a collection of securities which track an underlying index, like the S&P 500 or FTSE 100. These funds offer the benefit of spreading your risk and diversifying the money you invest. You can invest in ETFs whose underlying investment range from stocks, commodities and bonds, or mix and match a variety of investments.

Generally, the more you spread your risk, the more you protect yourself from being affected by poor performing stocks or shares which will help you benefit from potentially higher rates of growth on the money you invest. Most ETF fees can be relatively low too, which also helps as your money is less likely to be eroded by high fees over time if the fund you invest in performs less well for a period of time.

Corporate bonds

Corporate bonds are a way for businesses to raise money. When you buy a bond you’re effectively lending money to a company who needs to raise cash. In return, the company gives you an IOU which comes assigned with a term (often five to ten years) and when the investment reaches maturity the invested sum is returned in full.

Bonds have a nominal value and pay interest for the duration that you hold the stock. The rate of return you’re likely to see from corporate bonds will depend on the nominal value (typically £100) and the interest rate. The interest will be paid at a fixed rate at regular intervals. Most bonds will allow you the option to take interest as a regular income payment, usually twice a year.

Because corporate bonds are fixed interest securities, they generally offer lower risk and higher returns which make them a popular choice for investors. However, if the company whose bonds you bought goes bust you could lose your money.

Government bonds

Better known as gilts or gilt-edged securities, government bonds work in the same way as corporate bonds. Instead of being issued by a company, government bonds are issued by the UK Government. While government bonds generally provide a lower rate of return on investments, they can also be viewed as less volatile and therefore a lower risk option for investors.

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How do I find the investment ISA with the best rates?

The rates of return you can get through investment ISAs can be significantly higher than you can get by holding cash. The best rates are achieved by making the right investment and holding your investment for the medium to long term. Get the best rates by investing in a fund managed by an expert and check there aren’t excessive fees.

As you can see from all your different options, there’s a lot to think about when considering making an investment. To sum it up, you need to:

  • Decide if you want to invest for growth or income
  • Invest for the medium to long term; consider 3 years minimum but five to ten years can help you get the better rates of return this is because if you invest for growth you will be benefiting from tax free compound growth every year
  • Check the fees charged; excessively high fees could erode your investment and negatively impact potential growth
  • Invest according to your risk profile

Speak to an expert

To make sure you’re making the best investment decision and using your ISA allowance wisely, talk to one of the investment experts we work with. They will be happy to answer your questions and understand your investment goal with a view to all your other circumstances and advise you accordingly.

All the experts we work with are independent financial advisors with access and relationships with all the investment providers in the UK. They know what makes a fund manager tick and how a strong investment strategy can deliver the best returns.

Call 0808 189 0463 or make an enquiry for a free, no-obligation chat and we’ll introduce you to an expert.

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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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*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

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