Updated: January 27, 2020

Getting the Best Returns on Stocks and Shares ISAs

Getting the best returns on an investment ISA isn't always easy. Find out how to secure the best rates and make your money grow in this guide

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: January 27, 2020

Also known as an investment ISA, a stocks and shares ISA (individual savings account) is a type of account which allows you to invest in a combination of funds without HMRC taking a profit from your gains. With this in mind, you could make the most of this tax-efficient wrapper by choosing the best investment ISA for your needs.

Click a topic below for more information, or read on for a comprehensive overview:

Which stocks and shares ISA are the best?

Stocks and shares ISAs are tailored to meet each individual’s needs and requirements, so the best ISA for you will not necessarily be right for someone else. They are bespoke, as each ISA will have a range of multi-indexed investments that match your attitude to risk and performance, as well as how much you’re willing to invest.

Even if you select a ready-made fund, ISA providers will build a diversified investment portfolio around your needs. But if you want to know more about how ready-made and DIY funds work, see our sections below.

The best ISA investments will also depend on what you are investing for, as different products would be recommended for different purposes. For example, if you’re investing to grow your retirement income and have a decent amount of savings, you could potentially yield higher returns more quickly. On the other hand, if you’re wanting to raise cash for a property deposit, an ISA may offer you a better return on your money compared with a standard savings account.

Finding the right stocks and shares ISA can be a time-consuming and challenging process, so keep things simple by speaking with an expert. The advisors we work with are fully regulated by the Financial Conduct Authority (FCA) and have access to the whole financial market, so they are best qualified to find you your ideal investment ISA.

Ready-made funds

If you prefer to make things simple, you could opt for a ready-made fund, which is a term to describe a collection of investments, from stocks and shares to bonds and trusts. You can opt for a fund manager or broker to invest on your behalf, though you still retain the power of managing your money – for example, how much you choose to invest each month. The portfolio is catered according to your needs and your preferred level of risk and reward.

Choose your own funds

For ultimate flexibility and variety, you could open an ISA which allows you to pick your own investment funds. From shares and bonds to cash and property, you can view each fund’s profile to see if it’s the right fit for you. These profiles include each fund’s performance, risk profile, and what your money is invested in.

However, knowing which assets to invest in can be tricky, especially since many providers tend to have so many to choose from. To ensure that you pick the best investments, speak with an expert financial advisor. They can walk you through your options and find the best investment ISA for your needs.

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How do I get the best returns from stocks and shares ISA?

In order to earn the biggest possible income from your investments, there are many factors which come into play, including:

  • Whether you invest in a ready-made fund or want to pick your own assets
  • How much you want to invest per year (max £20k for tax year 2019/2020)
  • Asset mix and the performance of these investments
  • What the dividends are
  • How long you invest for
  • Your appetite for risk vs reward

The longer you can leave your money invested, the higher yields you’re likely to return as the interest will compound over time. Compounding is where your returns generate further returns. For example, if you open an ISA with a £5,000 investment that pays 6% dividends (see our definition below) each year, the first year’s profit would be £300, or £5,300 overall. In year two, your profit would be 6% of £318, giving you a total of £5,618.

Although your money isn’t locked away, you could slow any potential growth if you decide to withdraw early, which is why stocks and shares ISAs are considered a medium to long-term proposition. It’s recommended that you invest between five to ten years in order to make a profit. A long-term plan could also help you weather any market downturns if your investment falls short, as there would be time to recoup any losses.

While a guaranteed rate of return isn’t always possible for a stocks and shares ISA, you could maximise your chances of getting the best income possible by working with an independent financial advisor. Make an enquiry and we’ll match you with an expert who can find ISAs with great predicted rates of return.

What are the risks?

Fluctuations in the investment market mean that while your investments could go up, they could also come right down. For example, if you put £5,000 into an investment ISA with a growth rate of 5% only for UK shares to go down by 20%, you’d be sitting on around £4,200. However, you could recoup your losses by leaving it invested over a long-term period.

This is also why many experts recommend making smaller, regular monthly deposits instead of a lump sum. If you instead broke down that £5,000 lump sum from the previous example into six monthly payments of £834, you could avoid investing at the wrong time and keep hold of your funds until the market recovers.

You could also spread the risk by building a diversified portfolio of multiple single stocks listed on major stock exchanges around the world. This is ideal if you’re looking to get higher returns while reducing risk as a portfolio is typically designed with assets that don’t correlate with each other. This is in order to prevent them all being affected by the same economic includent.

For example, the FTSE All-World High Dividend Yield invests in over 1,600 different funds, and while these aren’t the lowest-risk investments you could get through an ISA, funds invested through tens or even hundreds of stocks could reduce your overall risk.

Bear in mind that some investments are riskier than others, which is why it’s important to assess their risk profiles before you choose which ones to invest in. An experienced finance broker could help you identify any potential risks in an investment – get in touch and we’ll connect you with someone shortly.

What are dividends and how can they boost my overall returns?

Dividends are the payments shareholders receive from the profits of a corporation. These profits would typically be taxed, though with an ISA you’d get to keep the total amount as ISAs are exempt from tax.

UK taxpayers currently have an annual tax-free dividend allowance of up to £2,000. However, if you have a stocks and shares ISA with dividends below £2,000, it’s worth keeping as your dividends may rise over time. Dividends can also boost your returns though compounding, and you can reinvest any extra cash you earn.

Transferring funds from one ISA into a stocks and shares ISA

If you have an existing ISA, you may be able to transfer it into your stocks and shares ISA and yield a higher rate of return with the increased income. By doing this, your funds won’t count towards your annual ISA allowance, so long as the funds held in your existing ISA account were paid in during the previous tax year.

Which UK providers are offering the top deals in 2020?

With thousands of stocks and shares investments available in the UK, finding the right ISA provider can be tricky. Stocks and shares ISAs are available from most banks and building societies, as well as select supermarket banks and even through the Post Office.

Below are just ten of the most well-known providers which offer stocks and shares ISAs in the UK:

  • Prudential
  • Fidelity Personal Investing
  • Scottish Widows
  • Hargreaves Lansdown
  • Legal & General
  • AJ Bell Youinvest
  • Barclays
  • Lloyds
  • Natwest
  • Standard Life

Whether any of the providers listed above would be the best option for you comes down to your own personal circumstances. You can find out which provider would suit you best by getting in touch with an expert. See below for more information.

Speak to an expert

While you may be looking for the best-performing investment ISA, don’t take them at face-value as there are many other factors that could affect how well it performs for you. Finding the right ISA for your needs requires careful thought and consideration, which is why working with a financial expert could be lucrative.

The experts we work with can use their market access to find the best stocks and shares ISAs based on your individual requirements. Make an enquiry and we’ll match you with an advisor for a free, no-obligation chat about your investment options.

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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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