Should I invest in a Stocks and Shares ISA or a Robo Advisor, or both?
29 April 2019
Question by Kate
I'm a 30 year old woman earning a reasonable salary, but mainly have a relatively low cost lifestyle (no kids etc.). I have built up savings of almost £8,000 over the past 18 months and want to start investing. I like the idea of using a robo-investor like Wealthify, but I'm not sure if it's better to start with a Stocks and Shares ISA instead? I also plan on going travelling in the next 6-12 months, hence the savings, but want to start planning for my financial future as well. I could easily put up to £1000 in as a lump sum, and then between £50 - £150 pm for the next year, even if I travel I think this is achievable. So, Stocks and Shares ISA or Robo Advisor or both? Thanks
Answered by Pete Matthew
Congrats on getting yourself into a position where you can think about investing - you're already ahead of the majority of people!
We need to start by clarifying your terminology
An ISA is what financial advisers call a tax-wrapper, but is better understood simply as an account (That's what the 'A' in ISA stands for!).
It's a notional 'box' that you keep money inside. The underlying investment - the things you hold in the box - are the Stocks and Shares. You're right in thinking that a Stocks and Shares ISA is generally an excellent place to invest for the medium to longer term. Now you have to decide how to invest within your ISA.
For new investors...
Robo-advisers are a good idea because they offer a fire-and-forget solution. They will assess your risk profile and ask about the intended term of your investment, and then will build a portfolio for you - they will choose what goes in the box. They will manage the investments and tweak them where necessary, and you don't need to be involved at all. You just sit back and watch the money do its thing.
It may be that, in time, you develop an interest in investing and decide that you would like to be more involved in choosing what you invest you money into.
For that, you would need to open an ISA with one of the many excellent platforms available. These platforms offer lots of different kinds of accounts, including ISAs, and access to hundreds or even thousands of investments to choose from. They also provide recommended fund lists, and lots of tools to help you build your own investment portfolio.
So you see, the ISA decision is an easy one.
The real decision is how to invest within that account.
If you like the idea of Wealthify or one of the other robo-investors, then open an ISA there and see how you get on.
One last thought - you don't say whether you own your own home. If not, and you hope to do so one day, then consider a Lifetime ISA, where the government offers you a 25% bonus on top of your savings, as long as you use the money towards buying your first home (or you don't touch the money till after age 60).
Take your time, do your homework and good luck!
Chartered Financial Planner
Pete is a Chartered and Certified Financial Planner and serves as Managing Director of Jacksons Wealth Management in Cornwall. He is also a prolific financial blogger and podcaster at MeaningfulMoney.tv with a desire to get decent financial information out to everyone who needs it.