The best ISA for you depends on a number of factors such as how much you have to invest, how much access you’d like to your money and the level of risk you’re willing to take in order to get the best returns.
An investment management company such as Nutmeg can help you set up stocks and shares ISA in under 10 minutes and you can create as many funds as you like within your ISA. Here, we explain some of the different types of ISAs available, to help you make up your mind, as to which may be right for you.
Stocks and Shares ISAs
While these do carry a certain amount of risk, many people would argue they are the best way to get a better return on your money, especially with interest rates as low as they are at the moment. Last year, some people got up to 50% returns on their investments.
There are two kinds of ISA – stocks and shares ISA and a cash ISA – which one you choose depends on your grasp of the financial markets and how much control you want over your money.
There are a number of trading platforms available to those who want to manage their own investments. Some people may find that spreading their investments across a wide range of industries is the best way to manage the risk.
If you don’t have the knowledge or time to manage your own stocks and shares ISA, it’s usually best to speak to a discretionary manager who will be able to spread the risk of your investments for you and place your money where they believe it will give you the best results.
Cash ISA
For someone who wants peace of mind, a cash ISA is often the safest bet. You might be suited to this type of investment if you want to know your money is safe at all times, or just need a tax free savings account to invest some money while you save.
Because interest rates are relatively low at the moment, you’re not going to get a huge return on your investment. It is, therefore, a good idea to shop around for the best rate. A lot of providers will offer deals if you’re willing to lock your money away for two years or more. This can be an attractive prospect for anyone who knows they’re not going to need to touch their money for a while.
While cash ISAs don’t carry the same risks as stocks and shares ISA, the interest rate tends to be lower than inflation, this means while you might not lose money, your investment may go down in value.
Whatever you choose, it’s generally a good idea to consider which ISA might be right for you then shop around for the best rates. It’s often best to look around before the cut off date of April 5 as this is when different providers will be offering the best rates to try and entice new customers.
PS: I have stocks and shares ISA account with Nutmeg. Sometimes more recently, I wish I didn’t – it has been losing value but Nutmeg is not to blame; this is how the stock market has been behaving since August 2015. Whatever you decide should be based on your assessment as to how much risk you can take with your hard-earned cash.
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