ISA Portfolios
What is an ISA (Individual Savings Account)?
There are two types of ISA:
- cash
- investment
Investment ISAs which invest in open ended investment companies and unit trusts. An ISA is not an investment on its own, it's a wrapper you put around an investment to protect it from income and capital gains tax. There is a limit on how much you can put into an ISA in each tax year.
Stakeholder ISAs
The government introduced 'stakeholder' ISAs that meet certain standards for charges, minimum investments, access and terms.
For example, stakeholder investment ISAs cannot charge you more than 1.5% a year for the first 10 years, and 1% thereafter. No other charges are allowed.
Remember, stakeholder:
- does not mean the government guarantees the product
- does not mean the government recommends or endorses the product
- does not mean the product is necessarily suitable for you
- does not mean the product is the best deal available
Open ended investment companies
If you invest in an open ended investment company (OEIC) ISA your money is placed in a 'pooled fund' with money from other investors. The fund is then invested on your behalf in the stockmarket, government bonds or other fixed interest investments, property, cash and other investments. This all depends on the type of fund you have chosen. OEICs are not normally for a specific time or have an end date – your money stays in the fund for as long as you want it to. However, you should ideally hold an OEIC for the medium to long term (usually at least five years).
What kinds of funds are there?
Our tables include the six largest fund sectors covering most unit trust and OEIC ISAs bought each year. The fund sectors are defined by the Investment Management Association (IMA) the trade body for the UK's asset management industry.
There are other fund sectors, covering funds that specialise in different countries, or different kinds of investment. When choosing a fund, you will need to think about:
- how long you intend to invest for
- the investment strategy you are comfortable with
- the level of risk you are prepared to take with your money
