We are blinded by choice when picking the best online home for our stocks and shares Isa.
But with most rates for easy access cash Isas languishing at less than 1.3 per cent, many people are looking to invest, not save.
That doesn’t mean that you have to enter into a Wolf of Wall Street-style high risk world.
A stocks and shares Isa, managed online, offers a more mainstream – and effective – way to get exposure to a broad mixed bag of investments.
Unless you think you are the next Wolf of Wall Street, be wary about buying a handful of shares or purchasing an investment fund exposed to one sector only
Forget Bitcoin and cyber currencies which are akin to gambling – and spectacularly risky.
Also, too-good-to-be-true investment schemes for ‘timber this’ and ‘sea container that’ are usually a con. There is no need to jump out of the frying pan into the investment fire.
Here are the key issues you should consider when picking a stocks and shares Isa provider.
This is not for me. Why not?
Let me start by bashing down a few urban myths.
When talking about a stocks and shares Isa, I am referring to a tax-friendly wrapper where you can start investing from just £25 to £50 a month. This is not mahogany boardroom table stuff only.
You can get access to your money whenever you want so it is not locked away – and if you do not feel confident about picking shares or investments, this does not preclude you from taking part.
There are options available which allow you to outsource investment choices to an expert – removing the need to grapple with lists of investments, wondering which ones are any good.
Be careful about picking winners
I recently did a stint on Sky News and chatted to the make-up lady about her savings. She had invested in the stock market for the first time in a natural resources fund because a friend who worked in oil had suggested it.
Picking individual shares, backing one theme or investing in one stock market, is risky because you are 100 per cent exposed to one or just a few things.
Put crudely, if oil falls in price and you are invested in an energy investment fund it is going to hurt.
Unless you think you are the next Wolf of Wall Street, be wary about buying a handful of shares or purchasing an investment fund exposed to one sector only. Diversification is the mantra.
Many of my Isa provider picks – see below – will pre-assemble a mixed bag of investments for you which are exposed to lots of different countries and invest in a number of different firms.
You could end up with exposure to a few hundred investments but you will not be the one trawling through best-buy lists making these individual decisions.
What could I make and what could I lose?
These are the simple questions the industry avoids because they are so hard to answer and predict.
As a rough guide – simply to provide some parameters – I think you are doing well if a mixed portfolio of shares returns an average of between five and six per cent a year after fees. But, of course, it will be a bumpy ride and there will be both good and bad years.
In 2008, the UK stock market fell by about 30 per cent in value. The following year it made good most of those losses. Last year, it went up by about 12 per cent.
Investment returns depend what you buy and no one has a crystal ball, but at least these numbers provide some context.
If you are investing for at least five years, I would expect the stock market to do better than cash. The longer the time frame, the more certain I feel about this.
So how do I go about it?
The main decision-making factor in arriving at an Isa choice has to be based on your level of confidence and interest.
Do you like the idea of choosing from lists of investment funds or from those companies that comprise the FTSE 100 Index – the country’s top stock market listed firms?
Would you rather research stocks than sit in your armchair and watch Homeland? Or does the whole idea make you want to groan and switch off?
I would rather watch paint dry
If you do not really know what you are doing or choose not to allocate brain space to the finer details, then have a look at a ‘robo adviser’-based Isa – which does all the legwork for you.
Expect a fairly simple online questionnaire which will then allocate you a fully pre-prepared investment portfolio.
All these providers give a better online journey than traditional old-school investment firms – plus decent mobile apps for ongoing management.
I want a well-known brand as my Isa provider
Isa innovators advertise on public transport, on billboards and chase us with adverts online. But many potential customers are still hesitant to set up an Isa with a brand they are unfamiliar with.
Insurer Aviva has a decent do-it-yourself Isa option which is simple enough to navigate and charges are competitive.
Investec Click & Invest is a new-ish service. You need £10,000 to get going so it is not for everyone but it is thorough, easy to navigate and brings a taste of private banking downstream for us mere mortals.
Finally, Vanguard is a huge US investment firm which has a simple low-cost range of products which I think is a great way to get started with minimum fuss.
I like to pick funds
At the other end of the confidence spectrum are those customers who want access to a wide array of investments, picking and blending their own portfolios.
Hargreaves Lansdown has a broad reach which should satisfy most enthusiasts and the customer service remains the best out there. Interactive Investor offers access to more stock markets than most will want and has plenty of discussion bulletins to keep all investment geeks happy.
Their fixed fee makes them the most compelling on cost for Isa portfolios valued at £75,000 and above.
Finally, AJ Bell Youinvest also offers a wide array of investments and has an evident stockbroking heritage and richwebsite content.
These guys know their pensions stuff too – if you fancy running a self-invested personal pension.
The pick of the platforms for every Isa Investor
Pick from one of four pre-assembled investment options.
It is solid, safe and at £7.50 a year for every £1,000 invested, charges are fair.
There is also a decent DIY pension option.
Not the most thrilling, but solid.
Boring Money newcomers rate it well at 7/10 – and 56 per cent of existing customers would recommend it.
‘The Daddy’. A FTSE 100-listed company in its own right.
It has a massive 42 per cent share of the online investment market. They know their stuff and customers rate them.
You can start from £25 a month.
It can overwhelm – and newcomers rated it just 4.5 out of 10 but existing customers rate them well and a healthy 77 per cent would recommend.
All-in fees start from around £7 a year for a ‘passive multi-asset’ option – with £1,000 invested.
Offers a simple questionnaire which once completed puts you into a basket of investments.
Easy to use.
The most established of the bigger innovators but you need at least £500 to start.
Newcomers rate it 8 out of 10. All-in fees will be £9.40 a year for £1,000 in a fully-managed Isa.
The low-cost ‘good guys’ of investing.
The website is not the most user-friendly but you know you can access a simple and sensible investment.
Beginners should opt for the LifeStrategy range which limits your choices to a digestible five.
Minimum investment starts from £100 a month. Novices rate it 7.5 out of 10. Expect to pay £3.70 a year for £1,000 invested in the LifeStrategy funds within an Isa.
You can start from just £1, it is not overwhelming – and it provides a fresh, modern approach to Isa investing.
Expect to pay £8.90 a year for a £1,000 Isa. Aviva is a major shareholder which may reassure some investors.
Boring Money tested it with newcomers to investing and they scored it 8.5 out of 10. Refreshingly different.
This brand is mostly known and used by financial advisers. But it is growing in popularity with DIY consumers.
Can still feel a bit on the complex side, but it has got easier to use and offers lots of choice.
Those who want access to a wide array of investments, picking and blending their own portfolios can do so through online DIY invetsment platforms
Charges for a £1,000 portfolio in their low-cost, ready-made investment range will be £7.50 a year.
Good on pensions too. Some 77 per cent of existing users would recommend the Isa service to others.
If you have more than £50,000 and you accept its focus on a flash website, risk questionnaires and complex apps is mere frilly padding, this platform serves up a no-nonsense experience at an unbeatable cost.
Isa charges are a flat £90 a year. It hosts animated forums for stock market enthusiasts. Not for beginners.
Users rate it highly for value for money – with 64 per cent recommending it to others.
With a minimum of £10,000 this service will guide you through a series of questions to find your most suitable investment portfolio.
The actively managed investments are more expensive than the average at £125 a year for a £10,000 portfolio, but if they do better than the market average, they will be worthwhile.
The user experience is slick and you can set up multiple investment portfolios for different goals. Boring Money has not yet had any reviews from existing users.
The completion of a straightforward questionnaire will allocate you a ready-made collection of investments.
Still growing, with a small customer base, this service does offer a decent website and app. It costs £10 a year for every £1,000 invested and the minimum suggested amount is £1,500 to get a proper mix of investments. Some 79 per cent of existing users say they would recommend it.