What's the cheapest way to build my ISA portfolio?
Q: I want to invest £100 a month into eight different investment trusts with five different providers within an ISA. What is the cheapest way of investing in investment trusts with various fund managers on a monthly basis within an ISA?
Rebecca O'Keeffe is head of investment products at Interactive Investor.
A: You should certainly be able to invest in a range of investment trusts from different managers with many of the major online stockbrokers, and do so within an ISA.
However, I should start with one caveat: if you've already contributed to your existing ISA for this tax year, you'll either have to wait until the next tax year or transfer this year's holdings to a new stocks and shares ISA provider before starting your new investment.
You can't contribute to two stocks and shares ISAs in one tax year, even if you don't intend to exceed the overall ISA limits.
Some brokers offer a regular investment option that, for a nominal fee, allows you to invest in a range of Crest (the electronic payment system for securities traded on the stock exchange) eligible shares, ETFs and investment trusts on a monthly basis, which would appear to fit the bill.
For example, with Interactive Investor's regular investment option, Portfolio Builder, you pay £1.50 for each investment. In your case, this will mean eight lots of £1.50, or £12 a month, to invest in your chosen eight investment trusts. The Portfolio Builder option is available within an ISA or SIPP.
Other brokers offering a similar service include TD Waterhouse and Selftrade, whose regular investment service also costs £1.50 for each investment purchase.
The set-up required is generally very straightforward. You simply make your investment choices and select your monthly investment date. You then set up a corresponding payment plan, and you can amend, pause or delete these instructions whenever you want.
First, however, you should do your research on which broker would work best in your circumstances. In addition to the regular investment option, you may want to investigate brokers who don't charge any ISA fees either.
Like a self-select ISA but for pensions, self-invested personal pension is a registered pension plan that gives you a flexible and tax-efficient method of preparing for your retirement. It gives you all sorts of options on how you put money in, how you invest it and how it’s paid out and offers a greater number of investment opportunities than if the fund was managed by a pension company. SIPPs are very flexible and allow investments such as quoted and unquoted shares, investment funds, cash deposits, commercial property and intangible property (i.e. copyrights, royalties, patents or carbon offsets). Not permitted are loans to members or people or companies connected to the SIPP holder, tangible moveable property (with the exception of tradable gold) and residential property.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.