The Scottish Mail on Sunday

Winning without falling for a Wolf

Forget High rolling gamblers, set up a sensible stocks and shares Isa online

- by Holly Mackay FOUNDER OF WEBSITE BORING MONEY

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. 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.

A stocks and shares Isa, managed online, offers a more mainstream – and effective – way to get exposure to a broad mixed bag of investment­s. 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 folng 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 FTSE100 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.

I suggest you look at Moneyfarm or Nutmeg. Alternativ­ely, Wealthify does not require you to complete a questionna­ire but gives you a range of just five products to choose between.

All these providers give a better online journey than traditiona­l oldschool 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-ityourself 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 selfinvest­ed personal pension.

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