How to invest your first stocks and shares ISA - Video script

Find out the easy way to invest your ISA and beat the returns on cash.

This is a script of a Lovemoney.com video. instead of reading it, why not watch the video instead? You can find the video here

I'm Jane Baker for lovemoney.com. Today I'm going to be talking about how to boost your returns by investing your ISA allowance.

What's wrong with cash ISAs?

ISA providers have been heavily criticised lately for paying even lower rates on cash ISAs than ordinary taxable savings accounts. No matter which way you look at it, it's hard to get excited about rates of 3% or less - even if they are tax-free.

If you want a better return for your money, think about investing your ISA allowance as well. Luckily, you can take the effort out of stock picking by choosing an index-tracking ISA.

What's an index-tracker?

An index-tracker is a simple way to put money into the stock market without having to choose shares yourself. If you choose a FTSE 100 index tracker, for example, your money with be invested in all the companies quoted on the FTSE 100 index.

If the UK market performs well and the FTSE 100 rises, the value of your ISA will increase to. But the reverse is also true. If the market collapses, your ISA will be taken down with it. But you shouldn't panic about the peaks and troughs. Volatility is all part of stock market investing.

Which tracker should I choose?

Trackers which invest in the same index should perform in roughly the same way, so you need to go for one with low charges. HSBC, for example, offers funds which track the FTSE 100, the FTSE 250 and the FTSE All Share indices with ultra low charges of just 0.27%. Meanwhile the popular Fidelity MoneyBuilder UK Index fund charges 0.30%.

Are trackers right for you?

If you're risk averse I suggest you stick with the relative safety of cash ISAs. For the more adventurous, there's certainly potential for trackers to boost your returns if the market performs well. After all, the FTSE 100 has grown more than 30% in the last 12 months. But you should always remember past performance is never a guide to the future, and stocks can go down as well as up.

That's it from me today. Thanks for watching Grow your Wealth on lovemoney.com. See you next time.

This is a script of a Lovemoney.com video. instead of reading it, why not watch the video instead? You can find the video here