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Products Updated May 20, 2021

Investment ISA

An ISA is a chance to grow your money with interest. Within the limit, you can earn interest tax-free. Our experts have compare the top investment ISA accounts from across the marketplace.


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All you need to know about investment ISAs

Investment ISA

Investment ISA

If you want to boost your finances, then there are many options to consider. You may choose to build a nest egg in a savings account, use peer to peer lending platforms or opt for an ISA. An ISA is a chance to grow your money with interest. Within the limit, you can earn interest tax-free. There are many different types of ISA. This guide will focus on Investment ISAs as a way to boost your savings.

What is an investment ISA?

An investment ISA is a savings product that allows you to invest your money into investment opportunities such as stocks and share, properties, bond and other assets. You may find investment ISAs under a different name, such as a stocks and shares ISA. An investment ISA will offer an exemption on capital gains tax, which can help to protect your investment should you choose to sell your assets.

The difference with an investment ISA is that your savings can gain some exposure and may be more lucrative than a savings account. Your investment ISA could be used for;

  • Stock and shares
  • Investment funds and trusts
  • Bonds by companies and governments.

By placing your money into investments, there is a chance that you could generate stronger returns. However, all investments come with a degree of risk. If the investment goes down, you may lose out.

Despite the risk that you may lose money and your investments are guaranteed to generate high returns, there are some advantages of investment ISAs. For example, investment ISAs are tax efficient. You are not charged capital gains or income tax on the investment or income you receive.

Considerations for investment ISAs

1. Timeframe

As investments go up and down, an investment ISA is best suited to those who want to save for a long time. While studies have shown that investment ISAs can outperform many other saving options, they are usually fruitful for those willing to save for more than five years or more. That said, past trends should not predict the future of investment ISAs. Markets are volatile and unpredictable.

2. Investment schedule

An investment ISA works well when money is added regularly. This helps to cushion your investment as it goes both up and down. This also helps to lower the risk of determining the best time to invest all of your money. Instead, a drip-feed method can help to make your investments smooth and less unpredictable.

3. Risk

As with any investment, it is important only to invest your money if you can afford the associated risk. Investing in a range of products can help you in a volatile market as some products will outperform others. You may be wise to spread your investments to ensure you cover a large spread of risk. Alternatively, you will need to do your research and work out what is profitable and accept the risk of exposing yourself to just one investment options.

4. Your personality

As investments require risk, it is important to consider your personality and what the best investments for you are. For example, if you are quite a cautious person, then low-risk investments with long-term goals may be more suitable. For those who like the thrill of risk, high-risk short-term strategies may be more suitable. In some cases, you can opt for a mix of strategies so that all bases are covered,

Advantages of investment ISAs

  • Typically, better returns than cash ISAs and savings accounts
  • Tax free capital gains
  • Low tax on dividends
  • May be covered by the Financial Services Compensation Scheme
  • Choose how to diversify across different types of investments
  • Flexibility and control; you can decide how you want to invest

Disadvantages of investment ISAs

  • Investments at risk and can fall in value
  • Some providers will charge fees and commission which could lower your earnings
  • Markets are volatile and some people may not like the uncertainty and risk
  • No compensation if investment value falls
  • Some ISA providers will not allow transfers in.

Different ISA providers will offer different schemes, advantages and disadvantages. It is essential to shop around and compare all of the deals before finding a provider to suit your needs. With many investment ISAs available, it is well worth taking time to consider all of your options fully. Remember, if you do not wholly understand the nature of your investment, seek help from an independent financial advisor, who can advise you and explain the different aspects, so you stay in control of your investment.

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