Stocks and shares ISAs

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I am saving for a house deposit and am putting £250 into a work investment scheme. I can also afford to put £250 into an ISA. Can someone give me the lowdown on what I need to look out for?

Fees vary enormously. Check out the Martin Lewis site for the latest lowdown.

I use TDdirectinvesting.co.uk for a regular investor account. Its a good one for me because you can vary your investment monthly with a minimum investment of £20 or the option of not investing, but you get allocated an investment day and the shares you buy on that day ony have a £1.50 trade charge per type so if you buy £100 worth you're not loosing big chunks in fees. Other trades on other days are £12.50.

Frequent investors pay more like £8/ trade but thats when you're doing many trades per month. Once you have I think its £3600 in the account. Theres no annual admin charge either.

So my advice is work out how you want to trade. Do you want to so regular, lump sums, frequent buying and selling?

Look at isa plan managers like legal and general, fidelity, m&g etc

They usually have quite low charges for index tracking funds and allow you to spread your risk by investing in different funds which each invest in many different companies, bonds etc.

Stocks and shares are best as a medium to long term investment, remember not to panic and withdraw if the markets fall (if you can afford it this is the best time to put in more money!)

When do you want to buy the house? If in a couple of years, find yourself a savings account with a decent interest rate. Stocks and shares are for the medium - long term.

£250 isn't much for a stocks and shares ISA. Fees to buy shares are often a fixed amount no matter how many you buy so you lose proportionally more on small amounts. If I was saving for a deposit and had filled up my cash ISA I'd just look at savings accounts.

I assume that you are wanting something discretionary managed which includes trading fees rather than self-investing (which would be expensive)

Check out Nutmeg.

If you are a basic rate taxpayer, investing a modest amount, there's no harm is using an ISA, but actually no immediate benefit.

Share dividends ar taxed at 10% before you gt them, and your ISA can't claim the tax back (neither can you) so there will be no saving there, even if you are not a taxpayer.

Capital Gains tax is unlikely to affect you, so no saving there.

It is terrribly important to use a scheme with very low fees and expenses, otherwise more of the gains will be going into other people's pockets than into yours. Hence avoid "structured" or "guaranteed" schemes, since it will be you paying for the structure and the guarantee.

Equally you don't want a scheme that an IFA will make (your) money out of. So an IFA won't want to sell you such a scheme. So an IFA is no use to you.

I'd suggest the savings scheme of a simple and unadventurous Investment Trust but no doubt there will be other ideas.

You want all the income to be reinvested at low cost. You don't want anyone to earn any commission out of your money.

Any equity-linked investment runs the risk that teh day you want to take your money oput, the market may have fallen into a trough so prices will be low.