I’m looking to open a stocks and shares Isa but I don’t know where to start.
Some of my friends use a DIY platform but I’ve also seen adverts for online wealth managers.
I want to invest with minimal fuss. What is the easiest and quickest way to do this?
There are plenty of options for investors who want to be engaged and those who don’t
Myron Jobson, of This is Money, replies: Not everybody has the time or inclination to research and cherry-pick investments to add to their portfolio.
Some people prefer to put their cash into ‘buy and forget’ propositions they can save into over the long-run.
The good news is there are options for both types of investor.
A DIY investing platform is essentially a hub through which you can buy and sell investments. Typically they offer a wealth of research which you can access through your computer, tablet and smartphone.
Most platforms allow you to choose stocks at your leisure or outsource the process completely by investing in a fund or investment trust.
For a small yearly fee, you could put your money in a tracker fund which aims to replicate the performance of a given index such as the FTSE 100. This means rises and crashes in the index would be mirrored by the fund.
The other option is to invest in an active fund which attempts to beat the index, but the reverse can happen if the fund manager makes a poor decision. They have a greater administrative burden and are therefore more expensive than trackers.
The choice is yours but nothing is stopping you from choosing both strategies. The most seasoned investors do, giving a greater allocation to the strategy they back to deliver the best results over the long-term.
The good news is that many DIY investing platforms offer best fund lists, model portfolios and fund-picking tools that can get you started. You can find four that This is Money editor recommends here.
Alternatively, if you want to take a more hands off approach to investing, you can entrust your cash to an online wealth service.
Some allow you to choose from a selection of risk-rated portfolios which are managed and rebalanced periodically, and others offers advice – typically a simplified version – constructing a portfolio best suited to your circumstances.
To help you on your way, we’ve asked an investment expert to provide some guidance.
Mike Barrett, consulting director at investment platform consultancy The Lang Cat, says: If you’re looking to invest in a stocks and shares Isa, you’ve have never had more choice.
There are over 50 providers offering a range of services and investment solutions. Of course, with so many options there is the challenge of ensuring you choose the service that best meets your needs.
And that’s a very important thing to remember. The time it takes to open an Isa might be one consideration, but it’s not the most important point.
I bought a TV recently and I’d estimate I spent a couple of hours doing some online price comparisons and research, then I went to an electronic retailer and spent another hour browsing and speaking to a sales assistant before I made my purchase.
And that was for something that cost me less than £1,000 and is guaranteed to depreciate in value.
So, if you’re thinking about investing thousands of pounds, you really do owe it to yourself to put some time into the decision. Remember the aphorism: ‘Act in haste, repent at leisure.’
The direct investing market can be broken down into three broad segments: do it yourself, do it for me and do it with me.
Robo-assistance: Some online wealth services use clever algorithms to construct a portfolio
A DIY investor will be someone who knows why they are investing, how much they can afford to invest, their attitude to risk, and their ability to handle potential losses.
They will also be comfortable researching investment options and building a portfolio from the myriad of funds, exchange traded funds, stocks and investment trusts.
And finally, having done all of that, a DIY investor will be comfortable keeping track of the portfolio to ensure it’s performing as expected.
If that sounds a bit daunting, then help is available from the ‘do it for me’ providers.
If you would rather put your investment decisions in the hands of experts, you can go for a full advice proposition.
These digital services can provide fully regulated advice, so you can be comfortable you are investing at a level of risk you’re financially and emotionally able to tolerate.
These providers will also typically take on the responsibility of managing your investments on an ongoing basis, helping ensure they are performing in line with your agreed level of risk.
The third option, ‘do it with me’ strikes a balance between the two extremes. The investment decisions are still yours to make, but you are given some help or guidance along the way to help you find a suitable solution.
This could come in the form of a selected funds list, and/or some suggested portfolios.
You also might find your bank, such as Santander is able to give you a similar offering.
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