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So, you’re out in the financial wilds, looking for something to do with your annual £20,000 ISA allowance. You want to make the most of it, but what? Whip out your Field Guide to ISAs, and see which ISA you want to track down
In 2018-19 over 10 million of these were subscribed to1, so you should be able to spot one easily. Here’s what to expect if you come across one of these in the wild:
They’re highly approachable. Many cash ISAs can be started with just a small amount of money.
They offer low, but steady and predictable returns.
They don’t bite. Like all savings accounts, they are covered by the Financial Services Compensation Scheme for up to £85,000 per provider.
Stocks and Shares ISA
Peer through the leaves and you might catch sight of a Stocks and Shares ISA.
They’re a bit rarer, but there were still well over 2 million of them in the UK in 2018-19, so you’ll be able to find one without much difficulty. Here’s what to expect:
Highly sensitive to their environment. Your stocks and shares investments can go up or down, depending on how what’s happening in the world affects the market. In general, stability is good, but uncertainty as bad. There is always the risk you could end up with less money than you started with.
If the conditions are right, they can offer high returns. But remember – past performance is no guarantee of how they’ll do in the future.
You need a bit of capital to start off. When you invest, it’s best to spread your funds across multiple shares to spread the risk. This means you often need a minimum amount to start investing.
These are volatile beasts, who should only be handled by people with financial expertise. Approach with care.
The Innovative Finance ISA
Rumours of a new ISA started back in 2015, but the first ones were only seen in the wild in 2017, when Zopa launched its balanced risk and return Innovative Finance ISA.
If you spot one, make sure you examine it closely. While the other ISAs say what they do, the Innovative Finance ISA could actually be any number of products, from peer-to-peer investments to crowdfunding.
This means they behave differently, depending on what’s inside. For example, you could have spotted one containing a high risk, high return crowdfunding product or it might be something that’s a bit less risky, like our balanced risk and return peer-to-peer product.
Currently quite rare, but they’re a growing species.
You can find out more about the Zopa IFISA here. Remember, with peer-to-peer lending your investments can go up as well as down, and your capital is at risk. Zopa investments aren’t covered by FSCS.