How do I find the best stocks and shares Isa?
A stocks and shares Isa isn't an investment itself - it's a type of account in which you can can buy almost any combination of investments for tax-efficient returns.
Here, we give you 10 points to consider when deciding where and how to invest your stocks and shares Isa allowance.
And our two-minute video explains how to find the best stocks and shares Isa for you.
Investing in a stocks and shares Isa on your own vs taking advice
Good financial advice could be the best investment you ever make and, for many investors, there's no substitute for professional help.
A financial adviser will assess your personal circumstances and attitude to risk before making recommendations.
But, increasingly, investors are going it alone and investing in stocks and shares Isas without advice.
For the purposes of this guide, we'll assume that you're interested in making your own decisions, without financial advice.
Understand stocks and shares Isa rules
Your Isa allowance for the 2019-20 tax year is £20,000. Any contributions you make to a cash Isa also come out of your allowance.
So, if you contribute £5,000 to a cash Isa with a bank or building society, you will only be able to put £15,000 towards your stocks and shares Isa in the 2019-20 tax year.
It's also important to remember that you can only open one cash Isa and one stocks and shares Isa in each tax year, although you can have more than one of each type in total if you've opened them in different tax year. If you want to change provider and then make additional contributions, you will need to transfer your Isa first.
Find out more: How to find the best cash Isa - the Which? guide.
The risks of stocks and shares Isas
Investing isn't for everyone and, before you commit to a stocks and shares Isa, it's crucial that you have an understanding of all the risks involved.
Your attitude to risk will determine how you approach most other questions you'll face when negotiating your options.
Find out more: Understanding investment risk - start with the Which? guide
Find the best stocks and shares Isa provider
With cash savings, chances are you'll end up with a familiar banking name, or a building society with a long history. With a stocks and shares Isa on the other hand, you could easily end up with a provider you've never heard of before.
Find out more: Stocks and shares Isa providers reviewed - read our reviews to find out how we rate them
Premium fund supermarkets
The biggest players in the stocks and shares Isa market are Hargreaves Lansdown, a FTSE 100 company based in Bristol, and Fidelity Personal Investing, the UK arm of global investment heavyweight, Fidelity.
These providers are known as fund supermarkets because originally their services allowed investors to choose from a wide range of different investment funds, from different investment management companies such as Invesco Perpetual, M&G and Jupiter, and hold them all together in one account, with one provider.
Now, fund supermarkets offer other types of investment as well, including shares, investment trusts and corporate bonds.
Hargreaves Lansdown and Fidelity, along with other premium providers such as Alliance Trust Savings and Bestinvest, offer plenty of bells and whistles for stocks and shares Isa investors to make use of, including research to help with your investment decisions and online tools to analyse your Isa portfolio.
But you get what you pay for - premium providers can cost significantly more than cheaper alternatives, especially as your portfolio grows in value.
Budget fund supermarkets
The stocks and shares Isa scene also includes a number of providers from a stockbroking tradition, with Interactive Investor and The Share Centre offering plenty of resources for budding stock pickers.
As with fund supermarkets, these brokers will charge you stockbroking commission to buy and sell shares, with additional account-service fees usually added on top.
The best ways to invest in a stocks and shares Isa
There are two ways you can go about investing your stocks and shares Isa allowance, which for the 2019-20 tax year is £20,000.
You can invest with lump-sum contributions, or you can drip feed your money into the markets on a regular basis.
Investing your full contribution in one go will get your money working for you, with any returns compounding from the start.
If you're investing for the long term, meaning at least five, but ideally 10 years or more, timing the market should not be an overriding concern. It's time in the market that matters.
Regular monthly savings
You can invest regularly in one of two ways within a stocks and shares Isa. You could drip feed your allowance in over time, making ad-hoc contributions. Those who adopt this approach often attempt to make their contributions when the market dips - but this is notoriously difficult to get right.
Alternatively, most stocks and shares Isa providers will allow you to set up a monthly direct debit, making monthly contributions of as little as £50, and sometimes less.
One possible advantage of using this approach is that you can adopt a strategy known as 'pound cost averaging' - the theory here is that, as markets will invariably fluctuate over time, some of your monthly investments will take advantage of lower asset prices. The effect is that you will smooth out market volatility.
Find out more: Pound cost averaging - our guide covers the popular regular savings strategy.
Choosing your investment stocks and shares Isa strategy
Investing in a diverse portfolio is key to managing the risks you take in your stocks and shares Isa.
Different assets, such as equities (shares), corporate bonds and gilts and commercial property, move in value at different times and for different reasons, so the theory is that if you achieve a balance portfolio, you will have a degree of protection against falls in any one area of your portfolio.
Find out more: The Which? portfolios - our asset allocation tool can help you find the right mix of assets for you
Active or passive investments for your Isa
Investment funds such as unit trusts and open-ended investment companies (Oeics) offer the opportunity to invest your stocks and shares Isa contributions in diverse portfolios of shares or bonds through a single investment.
Funds differ in terms of where they invest, with some defining their portfolios by a particular geographical region, or by a particular type of company or sector.
But they also differ in another way - some fund managers actively pick shares or bonds according to their strategy in an attempt to beat the market.
Other funds invest passively, meaning they aim to track a particular stock market index such as the FTSE All Share, which includes all of the companies listed on the main London stock exchange.
Find out more: Active and passive investment - the Which? guide.
The trouble with active fund managers is that few manage to successfully beat the market on a consistent basis. And because they take higher charges out of their funds - typically 0.75-0.85% a year - it's likely that many fund managers will disappoint in the future.
As an investor, it is impossible to pick a winner with any degree of certainty.
Those active stock pickers who do deliver market-beating returns consistently - such as Warren Buffett in the US, and Anthony Bolton and Neil Woodford in the UK, are celebrated by investors, but their fame and popularity only goes to highlight how unusual their records are.
Passive 'tracker' funds
If you can't easily beat the market, why not join it? That's the argument made by advocates of passive, 'tracker', or 'index', funds.
The great advantage of index funds is that they come with much lower charges than active funds - as costs are the only thing you can control with any certainty as an investor, this argument is a compelling one.
Index funds, provided by the likes of Fidelity, Legal & General and Vanguard, can come with ongoing charges as low as 0.1%.
Investment trusts for your stocks and shares Isa
One option often overlooked by fund investors is the investment trust. These invest in a range of companies, such as unit trusts and Oeics, but they trade on the stock exchange as companies in their own right.
Many investment trusts have historically performed better than similar actively managed unit trusts and Oeics, in part because of lower charges, but also because it's possible for them to borrow money in order to boost investments and, when it works, returns.
This tactic, known as 'gearing', comes with greater risk.
This out-performance has narrowed recently, however – and, of course, past performance is no indicator of future returns. Note that gearing accentuates both the upside and the downside.
Find out more: What are investment trusts? - the Which? guide.
The best ways to review your stocks and shares Isa
Once you've set up your stocks and shares Isa, it can be tempting to log in and view it in your online account on a regular basis.
The danger with doing this is that you will be drawn into tinkering with your portfolio.
If your original portfolio is set up on a sound basis, you should aim to leave it for the long term, with annual reviews the sensible way to reassess and make sure your investments haven't strayed too far from your desired asset allocation, rebalancing if necessary.
This is what a financial adviser would do for you, after all.
If you deal too often, you risk ending up with a list of random investments rather than a carefully considered portfolio.
How to consolidate your stocks and shares Isas
Having different stocks and shares Isas from different tax years, held through different providers, can make managing your Isa investments unwieldy.
If you decide that one provider suits your needs, you can transfer previous years' investments into the one account - making it easier to monitor and administer your investments.
Find out more: Step-by-step guide to stocks and shares Isa transfers - our six-point guide.