Cookie policy
Follow this topicFollow this topic Knowledge » ISAs

The UK's best Stocks and Shares ISAs

Ed Bowsher
by Lovemoney Staff Ed Bowsher on 25 March 2013  |  Comments 11 comments

Here's the lowdown on the best Stocks and Shares ISAs right now.

The UK's best Stocks and Shares ISAs

If you have some spare cash that you won’t need for a while, I’d urge you to at least consider opening a Stocks and Shares ISA. Investing in the stock market is a great way to build long-term wealth, and a Stocks and Shares ISA enables you to invest without paying any tax.

Before I recommend some ISA investments, let’s just do a quick recap of the rules. The maximum investment in a Cash ISA is £5,640. If you don’t open a Cash ISA, you can invest up to £11,280 in a Stocks and Shares ISA during the current tax year.

If you’ve already opened a Cash ISA, take the total amount you’ve placed in the Cash ISA and subtract that from £11,280. That gives the amount you can invest in a Stocks and Shares ISA this year.

How to invest

So now we can ask: Which Stocks and Shares ISA should you go for?

These days it makes sense to run your ISA via one of the online investment platforms, also known as ‘fund supermarkets'. These platforms give you a wide range of possible investments and you can also monitor your investments without any hassle. The charges are normally really low too.

Hargreaves Lansdown is probably the best known investment platform for private individuals, but I prefer some of the lesser known players such as Alliance Trust Savings, rplan and Cavendish Online. Mainly because they’re all cheaper!

Read more in The cheapest investment platforms – rivals to Hargreaves Lansdown.

Actual investments

The next decision is to choose some actual investments for your Stocks and Shares ISA.

Perhaps surprisingly, the rules for Stocks and Shares ISAs don’t restrict you to just investing in stocks and shares. You can also invest in corporate bonds and gilts as well as investment funds such as OEICs, unit trusts and investment trusts.

I’m a strong believer that index trackers are the best kind of investment funds. These are funds that replicate a particular stock market index such as London’s FTSE All-share index. So if the FTSE All-Share rises by 10%, a FTSE All-share tracker fund should rise by roughly 10% too.

The charges for index trackers are nearly always on the low side because you’re not having to pay for an expensive City fund manager to pick stocks, a computer does it instead.

A portfolio with just two or three tracker funds is fine for most people. Here are my five favourite index tracker funds:

Five top index trackers

Fund

Index that is being tracked

Total expense ratio (TER)

Vanguard FTSE UK Index

FTSE All Share index

0.15%

HSBC FTSE All Share

FTSE All Share index

0.27%

Fidelity MoneyBuilder UK Index

FTSE All Share index

0.3%

Vanguard FTSE Developed World ex UK Equity Index

FTSE All World Developed ex UK index

0.3%

Fidelity MoneyBuilder World Index

MSCI World Index

0.3%

So if you want to take a really simple approach, you could put half of your ISA cash in the Vanguard FTSE UK Index fund, and half in the Vanguard FTSE Developed World ex UK Equity Index Fund.

The first Vanguard fund is purely invested in companies listed on the London stock market. The second Vanguard fund is invested in all the main stock markets around the world apart from London.

So putting your money in these two funds gives you a nice spread of investments around the world and the charges are really cheap.

Let’s imagine you invested your full ISA allowance in these two Vanguard funds via the Alliance Trust Savings platform. That would work out at £5,640 in each fund.

You’d only have to pay three charges for this investment. Firstly, a one-off dealing charge of £12.50 to Alliance Trust (£25 in total). Secondly a £12 quarterly charge to Alliance Trust Savings (£48 a year.) And thirdly, a 0.15% annual charge to Vanguard which works out at £16.92 a year for your total ISA investment in both funds.

Admittedly, Alliance Trust Savings isn’t the cheapest investment platform out there, but I think it’s the cheapest of those that offer the Vanguard funds.

You can find out more about the leading tracker funds in Top 10 index trackers.

More excitement

If you want a bit more excitement, you could also invest some of your money in one or two investment trusts. Most investment trusts are actively managed, but the charges are cheaper than for many unit trusts and OEICs, and there are some good trusts out there.

My two favourite investment trusts at the moment are the Throgmorton Trust and the Templeton Emerging Markets trust. The Throgmorton Trust invests in smaller UK companies, has two excellent managers and is far too cheap at the moment.

The Templeton Emerging Markets Trust invests in growing emerging markets such as China and India. I’m convinced that these are the markets where you’re going to get the most growth over the next ten or twenty years.

The manager of this trust, Dr Mark Mobius, is a true investment star. So I’m very happy to have some of my pension in this trust. It could work well for you as part of your ISA.

You can read more about these two trusts in Five top investment trusts.

Individual shares

You may want to try your hand at investing in individual companies. This is riskier than putting your money in a fund, but the rewards can be great and you may enjoy it!

If you’re tempted, I’d urge you to do some reading first. I like a book called Shares Made Simple – it’s a good introduction. This video is also worth watching and you could also get some great ideas on The Motley Fool website.

Check out our video: Should you be scared of the stock market?

This is a classic article that is regularly updated

Compare ISAs

More on ISAs and investing:
Why you should invest in shares
Five top investment trusts
The best Cash ISAs
Top Cash ISA catches to watch out for
Don’t just focus on the Footsie

Enjoyed this? Show it some love

Twitter
General

Comments (11)

  • BGM
    Love rating 6
    BGM said

    just starting to get involved with investing really.. expect to do it in anger next financial year once the student loan is paid off, but for now, can you trickle feed these?

    Report on 13 March 2012  |  Love thisLove  0 loves
  • Mike10613
    Love rating 599
    Mike10613 said

    @BGM, you can put your money into a stocks and shares ISA and then buy whatever you want later. You just need to put the cash into the account initially.

    Report on 03 April 2012  |  Love thisLove  0 loves
  • RocketSteve
    Love rating 30
    RocketSteve said

    I just opened an H&L S&S ISA. The options for money were: 'lump sum', 'regular investment' or 'lump sum & regular investment'. Hope that helps!

    Took minutes to set up, but I have a pension with them.

    I noted from the 'reinvestment' section that reinvestments were stored until reaching £200 and then invested, with commission.

    One thing you can do is contribute to a Cash ISA first and then transfer/change that into a S&S ISA.

    Report on 03 April 2012  |  Love thisLove  0 loves
  • dc1957
    Love rating 4
    dc1957 said

    Timing is everything. I am not so hot with investing, but I learnt that 75% fund managers fail to beat the sector averages, however if you invested in a tracker in the year 2000 the FTSE was around 6600, today it is 5800, so you would be losing, and paying money for the priviledge as well. Of course that is the extreme, but again it peaked at around 6200 in 2007, so again you would be losing. The other side of the coin said if you invested in March 2009 at 3500 you would be on the way to doubling your money. So you need a guru to tell you the right timing, but they do not exist, you get a lucky chappie who appears to be good, take a Neil Woodford, a darling who could not lose money if he tried, until the last couple of years! good, bad, or just lucky. He has the exact opposite view to Warren Buffet over Tesco (Buffet buys, Woodford sells). Who is right, time will tell. Both are meant to be good, so one will be lucky. If I knew of an honest certaincy to double my wealth, and shared it with everybody, it would negate my advantage, so why share, unless I am trying to con you all? These days all you here is of doom & gloom, European woes, UK & USA finished as nations as the East takes over, difficult to find reasons to invest in a tracker, for everyone that is good, there is one that is bad...Sorry for waffling on

    Report on 04 April 2012  |  Love thisLove  1 love
  • Ed Bowsher
    Love rating 79
    Ed Bowsher said

    Hi DC,

    Thanks for your comments. I agree with a lot of what you say. Timing can make a huge difference to your returns.

    Trouble is, it's hard to do. In hindsight, it's obvious that 2000 was a bad time to invest in the stock market, but it wasn't quite as obvious at the time - not to everyone anyway.l

    One way round this is to invest gradually. If you gradually feed money into the market over a period of, say, five years, you'll at least invest some of your cash when markets are low. (Assuming markets fall at some point during the five years.) This strategy would have worked well for any five year period during the noughties.

    One more point: you say the market was 6600 in 2000, 5800 now, so you lose if you invested in 2000. Your numbers are correct, but, in reality, things wouldn't have been quite as bad as your number suggest.

    That's because your returns as a shareholder would also have included dividends. Once you add dividends into the picture, you'd still have made a profit if you had invested a lump sum in 2000. (But you would still have done much better if you had invested a lump sum in 2002 rather than 2000.)

    I also agree that neil Woodford is a fantastic manager. I've had money in his funds in the past. It's just hard to spot other managers of that calibre. So I'm happy to go with trackers. But if you do better with actively managed funds, good luck to you!

    Happy Easter!

    Ed

    Report on 04 April 2012  |  Love thisLove  0 loves
  • Offa
    Love rating 40
    Offa said

    Do not ignore Investment Trusts. These get forgotton by those taking up ISAs but are available and often are better value than Unit Trusts. They have some good ones that have dome well over time.

    All the publicity seems to concern Unit Trusts - proably they pay better commission to those that feed them their leads?

    Report on 04 April 2012  |  Love thisLove  0 loves
  • Ed Bowsher
    Love rating 79
    Ed Bowsher said

    Hello Offa,

    Yes, you're right, investment trusts can be great. The charges are normally lower than unit trusts. I wrote about investment trusts a while ago in this article:

    http://www.lovemoney.com/news/savings-investments-pensions/investments/11859/a-great-way-to-invest

    Regards,

    Ed

    Report on 05 April 2012  |  Love thisLove  0 loves
  • Carl Leonard
    Love rating 1
    Carl Leonard said

    Several fundamental errors here people.

    1. The 'trackers' you recommend Ed dont generally pay dvividends, which could well have been the difference between success and failure over this period.

    2. Fund manager should not be judged solely on performance against an index, but the intnetion of the fund. If a manger matches the index with less risk/volatility, beats the index with the same or less volatility or even underperform the index whilst offering relative low volatility these all better measure.s

    3. Commission on retail investment products no longer exists....

    Maybe you should all look for advice.....

    Report on 21 March 2013  |  Love thisLove  0 loves
  • lenpannett
    Love rating 1
    lenpannett said

    Confusing article - when I saw the headline, I was working on the premise that the Stocks and Shares ISA was the vehicle into which one would invest, not the investment itself. It would be good to see a side-by-side comparison of the vehicles offered by, for example, H-L, Fidelity, the banks, etc, examining admin costs, ranges to choose from, international exchanges, etc. It would also be good to see some pressure on the Government to open up AIM for ISA investment...

    Report on 21 March 2013  |  Love thisLove  0 loves
  • Geoff Carse
    Love rating 6
    Geoff Carse said

    I phoned HSBC directly regarding their S&S ISA, as their TER was significantly lower than who I'm with at the moment - Legal & General.

    However I discovered I would first of all need to open a current or savings account with them in order to access their Global Investment Centre, and only then would I be able to transfer my ISA to them.

    Secondly I was told they don't at present allow standing orders so effectively I would need to manually transfer my money each month. Though not a show stopper it is a bit of a hassle when you're used to money being drip fed automatically.

    In the end I was a little put off by the awkwardness of it all. Can anyone suggest an easier way to not only transfer my ISA but also make regular contributions a little more hassle free?

    Report on 21 March 2013  |  Love thisLove  0 loves
  • LastChip
    Love rating 92
    LastChip said

    I don't agree that "share prices look cheap at the moment". Many of the "safer" stocks are very fully valued and I wouldn't venture into the market right now. But maybe that's because this article is about a year old. Just prior to the end of the ISA season is normally a bad time anyway, as investors top up for the tax year and fund managers are forced to buy, pushing up prices artificially.

    I would also like to comment on the Vanguard 0.5% dilution levy. The article (to me) infers this is some sort of extra charge that investors shouldn't have to pay, (in fairness to Ed, he doesn't actually say that) .

    When you understand it, it's a perfectly fair way of apportioning costs to the tracker. The tracker is backed by equities. When investors add money to their tracker, Vanguard has to pay 0.5% stamp duty on the underling equities - the same as the rest of us. The 0.5% you are charged, covers that government tax.

    Rather than absorbing it in incomprehensible fund charges, they charge it at the point of entry, so it's completely transparent to the investor. If you are a long term investor, then you never pay it again. Contrast however, short term investors, in and out of the market. Every time they choose to trade out and then back in to the market, they will suffer that 0.5% transaction cost. This means long term investors are not subsidising short term traders.

    In the interests of disclosure, I do hold Vanguard funds, but am not associated in any way with the investment house.

    If anyone is interested, I would also look at Best Invest as a platform for holding those funds. Although I don't use them (the platform I use is through a wealth management concern), the last time I checked, they offered the best deal.

    Report on 22 March 2013  |  Love thisLove  0 loves

Post a comment

Sign in or register to post a reply.

Related content

Our top deals

Provider & account name AER/Gross Interest paid Apply
now

Aldermore
1 Year Fixed Rate Account

1.85% /
1.85%		 On Maturity Apply

Derbyshire BS
Derbyshire NetSaver Issue 11

1.70% /
1.70%		 Yearly Apply

Nationwide BS
MySave Online Plus

1.70% /
1.69%		 Monthly Apply
W3C  Thank you for using CGWEBLIV2