Interest rates for easy-access cash ISAs are lower than a depressed limbo champion. The best you can get is 1.45%, which is less than the rate of inflation (2.1%). That means your savings actually lose some of their buying power over time. Not ideal, so maybe it's time to look at the alternative: stocks and shares.
If you don’t feel confident picking your own shares, you don’t have to. If anything, choosing a company here and a company there – tying your fortunes to the fate of a few – is a lot riskier than spreading out your investments across a variety of countries and markets.
Many of the ISAs below will do all this picking for you. They’ll give you the chance to set some preferences – such as how much risk you’re willing to take in exchange for greater returns, or how ethical you want the businesses you invest in to be – and then suggest a ready-made portfolio that’s suitable for you. All the benefits, none of the work.
With an average, well-mixed portfolio of shares, you’re doing well if you make around 5%–6% a year after fees. A lot more than a cash ISA. But – and there’s always a but – you have to be prepared to ride out the highs and the lows. One year the stock market might soar, the next it might tumble, so you need to play a long game.
In 2008 the UK market fell by around 30%. Then the next year it made most of it back.
In 2017 the UK market rose by around 12%. Then last year it fell by about the same again.
Nobody knows for sure what’s going to happen with the stock market, but it’s clear to see it takes patience. If you’re investing for at least 5 years, shares are likely to do better than cash. 10 years, even more likely. In fact, the longer the time frame, the greater the certainty. But nothing is ever guaranteed.
Rather glug bleach than read the financial pages? You’d do well with a robo-advisor, which builds your portfolio for you and provides helpful tools and videos to get you started.
I suggest Nutmeg, Wealthify or Vanguard for an easy, warm welcome to investing. Or Investec Click & Invest for a touch of the private banking brand experience from £2,500. They’re not the cheapest but they adopt an active investment stance which means you stand a chance of beating the average – but that comes with a risk of them picking duds and you doing worse than the average too.
It’s now pretty simple to make sure you’re invested in companies and schemes that fit with your views. That doesn’t just mean boycotting fags and AK47s, it can be investing positively in environmental projects or companies that champion minorities.
Again, Wealthify and Nutmeg are top of the honours list here, each with a range of ready-made, socially responsible portfolios to match your appetite for risk. Or, if you’d prefer to pick your own investments, AJ Bell Youinvest has a list of funds (basically stocks and shares multipacks) with a handy ethical filter.
For more control over your portfolio, Hargreaves Lansdown has a broad range of investments to choose from and market-leading customer service. They, along with AJ Bell Youinvest and Fidelity, are great for small to medium DIY portfolios.
If you’re looking to invest £50,000 or more, you might also want to consider Interactive Investor. Their fixed fee structure means you’ll pay less compared to other providers the larger your portfolio gets. But it’s not really for first-timers.
Check out our independent Best Buys for ratings, reviews and summaries of top investment platforms and robo advisors. There’s even an ethical filter to keep your money moral.