How to Choose a Stocks and Shares ISA

POSTED ON Wednesday, 26 February, 2020

You want to open an Investment ISA, but are unsure of how to choose an account. Our step-by-step guide breaks down the questions you need to be asking yourself when looking to open a Stocks and Shares ISA. 

Anyone can invest in a Stocks and Shares ISA – but not everyone knows how to find the best account for them. There are various considerations that you should be thinking about if you are looking to open a stocks and shares ISA.

Here is our easy step-by-step guide for a first-time investor to open a Stocks and Shares ISA.

Step 1: Look at your finances and answer some key questions

Sit down with a pen and paper and look at your finances. Think about how much you have and what you want to achieve with your investments.

Consider the following questions:

  1. How much you want to invest?
  2. Have you invested before?
  3. Have you used any of your tax allowance?
  4. If so, how much do you have left?
  5. Do you have any debt?
  6. If so, is it under control/do you have a sustainable repayment plan?
  7. Do you have other accessible savings?
  8. What are your long-term finance goals?

Once you know where you stand, and you’re sure you want to press on with opening a Stocks and Shares ISA, you can move onto step two.

Step 2: Choose your preferred management style

Depending on who you are, you might suit a more passive or active management style.

Are you looking for a do-it-yourself style account where you can confidently, actively manage your investment yourself?

Or are you wanting a fund manager to manage your account for you?

We’ve done an in-depth look at each of these styles in our “How to Open a Stocks and Shares ISA” blog. We’ve covered DIY accounts, pre-packaged “fund of funds”, and using a “robo-adviser” investment manager.

Step 3: Think about your risk profile

Your attitude to risk is one of the biggest factors in deciding which account to choose. No Investment ISA is 100% safe, as the stock market fluctuates. So if you have a poorly performing investment, you could end up getting back less than you put in.

Some providers might have risk profile questionnaires you can fill out to get an idea of what suits you.

If you are a really risk-averse person, then a Stocks and Shares ISA might not be for you. In this case, consider opening a Cash ISA instead. While the returns are lower, these accounts offer less risk than Investment ISAs.

Step 4: Shop around

You can only open one Investment ISA per tax year, so making the right choice for you is important as if you’re unhappy with your selection, you can’t open a different account until the next tax year.

Many Investment ISAs will have charges, including:

  1. Administration charges
  2. Fund charges
  3. Switch charges
  4. Buying & selling charges
  5. Bid/offer spread charges
  6. Transfer fees

Step 5: Choose your account

You can read through our Investment ISA Comparisons to look at many different options available.

Make sure you look at the range of investments available with each provider. Does your chosen account/provider offer the range of investments you want? These might include:

  1. Funds
  2. Investment trusts
  3. Index funds
  4. ETFs
  5. Direct shares
  6. Bonds

Step 6: Approach your provider and open your account

In order to open an account, you will need:

  1. Proof of address
  2. Your nationality
  3. Date of birth
  4. Contact number
  5. National insurance number
  6. ID

Once the provider has verified your details, your account will be opened and go live.

You can then put your money into the ISA and start investing! 

Read more on Stocks and Shares ISAs and Cash ISAs.