Updated: January 24, 2020

Are Investment ISAs a Good Idea?

Unsure whether an investment ISA is the right choice for you? Read up on their advantages and disadvantages in our guide to get a clearer idea

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: January 24, 2020

Individual Savings Accounts (ISAs) allow you to hold your assets in a tax-efficient way, but there are several varieties of this product.

This article will help you decide whether an investment ISA is the right option for you by highlighting their main advantages and disadvantages.

You’ll find the following topics covered below…

Are stocks and shares ISAs a safe investment?

With a stocks and shares ISA, the value of your assets can rise or fall, so they are generally geared towards investors with an appetite for risk and a long-term outlook.

Investment ISAs have the potential to generate higher returns than a cash ISA. At the time of writing, stocks and shares ISAs are outperforming cash ISAs, but keep in mind that this could change.

Are they worth the risk?

This is a question you should put to a financial advisor, but if you’re the kind of investor who has a high appetite for risk and can invest your money for at least five years, a stocks and shares ISA could be a more lucrative option than a cash ISA. The length of time in the market is vitally important.

A financial advisor can also suggest ways that you can offset the risk involved in the investment, such as drip-feeding your money into the ISA to ride out any periods of decline.

Make an enquiry and we’ll introduce you to a financial advisor who can help you choose the most suitable ISA, depending on your investment goals and appetite for risk. The experts we work with can also forecast how your investments are likely to perform and help you make informed decisions based on this.

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What are the pros and cons?

To make an informed decision about whether an investment ISA is the right savings solution for you, reading up on their advantages and disadvantages is essential.

This section offers an overview of the potential pros and cons, but you should speak to an advisor to discuss them in more detail and receive bespoke advice on whether they’re likely to apply to you.

The advantages

Investors might choose a stocks and shares ISA over the alternatives for the following reasons…

  • You don’t pay tax on your returns:
    You should speak to an advisor to find out what the tax breaks are and how important they would be for an investor with your profile.
  • The potential for higher returns:
    Generally speaking, investment ISAs have delivered higher returns than cash ISAs in the UK – just keep in mind that there’s a risk of this changing.
  • Investment ISAs are transferable:
    If you aren’t happy with the way your ISA is performing, it’s possible to transfer over to another provider. If you have more than one ISA, you also have the option to transfer them all into one place for easy management and to avoid paying multiple sets of fees. Just be sure to speak to an expert before going ahead with a transfer.
  • Flexibility:
    It’s not just stocks and shares that can be held in investment ISAs. You can also hold bonds, unit trusts and other assets. You are in control of where your money is invested.

Potential pitfalls

It’s important to be aware of the potential drawbacks of an investment ISA before taking the plunge, but keep in mind that not all of the ones listed below will apply to you.

You should also consider that an independent financial advisor can help you safeguard yourself against the pitfalls.

  • Fees and charges:
    Investment ISA providers will charge a fee to look after your money and this can take a sizeable chunk out of your profits. Although there are low-cost options available, the bottom line should be choosing the best overall product. A financial advisor can compare the whole market on your behalf, in search of the right ISA for you.
  • Your investments could fall in value:
    This is the main reason an investment ISA is not without risk. During periods of stock market volatility, they could even decline significantly, so it’s important to seek professional advice before making any big decisions.
  • May be unsuitable for short-term investors:
    Most experts will tell you that you need to invest your money in a stocks and shares ISA for at least five years. If you need access to it sooner, a cash ISA or another alternative could be worth considering instead.
  • Investments need to be monitored:
    Investment ISAs tend to be more hands-on than the cash variety. You need to keep an eye on your investments since they have the potential to rise and fall. Some shares might need to be offloaded and others bought, so if this is a complication you could do without, the simplicity of a cash ISA might appeal.

The above information aims to offer a digestible snapshot of the advantages and disadvantages of investment ISAs. They won’t apply to everyone and there may be others that a customer with your needs and circumstances should be aware of.

We work with independent investment experts who can give you bespoke advice about how the pros and cons may affect you and your investment goals.

Speak to an advisor

While it’s important to do some background research into the pros and cons of stocks and shares ISAs, you should always seek professional advice before signing up for one of these products.

The independent ISA advisors we work with will look at your needs and circumstances and help you make the right investment decision based on this information, as well as your appetite for risk.

Call 0808 189 0463 or make an enquiry online and we’ll introduce you to a financial advisor who could save you time, money and potential disappointment in the long run.

Ask A Quick Question

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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