What is the best considering fee charges etc and performance stocks and shares ISA?

Hi Melliea,

Thanks for your question.

If you haven't used your Share ISA allowance yet this tax year it is a sensible starting point because gains and income are tax-free. However, before you invest capital there are other questions to consider:

- Have you got sufficient savings to act as an emergency fund? For example, if you are unable to work or have an unforeseen expense you need to cover. A helpful rule-of-thumb guide is to have 3-6 months' worth of essential expenditure in a savings account.

- Also, do you have any debts via personal loans or credit cards? If you think about the money you have to invest, if you are paying high levels of interest on loans the investment returns will have to beat them to make efficient use of your money (what economists call an opportunity cost). Investment returns can't be guaranteed, especially in the short-term, but saving money through reduced debt can be.

If you have both of the above covered then a Share ISA may well be appropriate to you. Depending upon your situation you could also contribute to a pension to benefit from tax-relief.

Another important point to make is that a Share ISA is simply a tax efficient wrapper (bucket) for your money. How it performs will depend entirely upon the investment funds you choose to invest in within the ISA and the degree of investment risk you are willing to take. The higher the investment risk (exposure to global stock markets) the greater potential returns but you may have to wait a number of years before you start benefiting. Stock markets can fall sharply in the short-term so investors need to have patience and discipline to enjoy long-term returns.

The fees you pay will depend upon the ISA provider and also the type of investment you choose. This website provides a useful comparison of the different ISA providers and their charges. Fees for underlying charges vary greatly from low-cost index tracker (passive) funds to more expensive 'active' funds in which you pay a fund manager more money to decide which companies to buy, sell and hold. There is a strong body of evidence to show the more you pay for investment funds DOES NOT equate to higher returns.

I hope this helps.

Andrew