I want to invest £100 monthly extra, but I am not sure if my ISA represents good value.

15 July 2019

Question by Colin

I have been investing £100 monthly in a Bank of Scotland investor ISA, and this is currently is worth about £20,000. In my wife's name I also contribute £50 monthly in the same investment and this ISA is worth about £12,000. I have about £100 monthly extra I want to invest, but I am not sure if these ISAs represent good value. I thought I could put the money in a higher risk investment, as it is money I can invest over 5-10 years, and had thought Nutmeg might be a good option as I have little investment experience. Am I right in thinking I can only contribute to one Stocks & Shares ISA at a time in my name? I could just put more money into my existing ISAs. What do you think?

Answered by Holly Mackay

Hi Colin,

The charges on the Bank of Scotland ISA look like they are around 0.77% a year all-in. It’s a mixed bag of global assets and managed by Scottish Widows and Aberdeen. Performance in the mid risk range (portfolio 2) was -3.4% last year and 5.5% in 2017.

The Nutmeg equivalent – in their ‘fixed allocation’ model – would cost 0.71% a year all-in. Again it’s a mixed bag of investments and performance in 2018 was -7.1% and 8.4% in 2017.

This is all unsurprising as the Bank of Scotland option has more in less volatile bonds than the Nutmeg portfolio which has more shares in it.

So the basic view here is that it’s all par for the course with nothing dramatic in terms of charges or performance to report. Would I actively suggest the Bank of Scotland ISA to a new investor today? No.

If your timeframe is 5 – 10 years...
...then yes, you could consider taking more risk.

But you have to be sure you won’t be a forced seller if we have some sort of Brexit meltdown slump this year – by way of example (not suggesting this will happen.)

A higher risk portfolio could well go up by 20% one year and down by 20% the next – you have to be able to ride that wave and not freak out! And there are no guarantees, so do have a good think. The time-frames you indicate mean it’s certainly not silly to consider a higher risk option.

You can only pay into one Stocks and Shares ISA in any one tax year. So if you have paid in the Bank of Scotland one this year, you can’t do anything else until April 6th, i.e. next tax year. But after that you could open a new Nutmeg account – or indeed any other one.

As for which option:
Robo advisers are very good for the less interested and the less confident.

I also think you would learn more because their reports, apps and websites are loads better than more traditional bank ones in the main.

Vanguard is an alternative – they are very low-cost and you could choose one of their LifeStrategy funds and hold it with them, inside an ISA. Website and communications are less good but they are pretty low-cost if you just want a ‘set and forget’ choice. Have a look at our Best Buys tables and filter for Beginners and see what you think?

Lots of the robos have a decent website, and it’s worth having a play to see what the extra risk might mean in practice – and working out if you’re comfortable with it.

Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.