As we draw ever closer to 5th April and the end of the tax year, you’ll probably be noticing huge numbers of adverts for ISAs. That’s right folks, its the great ISA stampede, when all the fund managers take out double page spreads in The Times encouraging you to invest your unused ISA allowance with them. This is fine and dandy, but if you haven’t used your allowance for this year, what should you be looking for?
My first suggestion is to ignore the adverts, other than as a reminder that you need to get cracking. Secondly, think about what goals you have for your savings or investments.
If you are trying to save for a house deposit in the next couple of years, or you want to go to New York on a shopping spree before Christmas, you probably want a savings account. The current best buy for a plain vanilla ISA savings account is with Kent Reliance Building Society – as a bonus they are also pretty consistent with their rates.
On the other hand, if you’ve got money you can tie up for the medium to long term (think five years or more) an investment account will give you a good chance of getting a higher return. I think there are two key things to consider in choosing.
- How does this account work?
- How much will it cost me?
I understand how unit trusts work – they basically collect together a bunch of people’s money and invest it in a variety of stockmarket shares, bonds or other investments – so I would consider investing in one of those. In particular I understand how index tracker unit trusts pick investments – they try to mimic the pattern of the index so they invest in shares in the companies that make it up. I think this makes them a good choice for a beginner investor, but as long as you research and understand, anything goes.
Investments are generally not free, I would always look for the cheapest way of buying it. With unit trusts, you will generally pay an initial fee and an annual fee. You should be able get the initial fee discounted to 0%. If you chose to invest in a plain vanilla FTSE tracker, you should be able to get an annual fee of 0.5% or lower. Good providers are Hargreaves Landsdown and Fidelity, but there are others. The key thing to remember is that the lower the fees, for the same investment the better.
- choosing mutual funds
- answering some questions: friendly societies, record keeping and more
- basic guide to Stocks and Shares ISAs part 6: all about providers