There are a host of options available for anyone who is looking to open a stocks and shares ISA. During this tax year, which runs from 6 April 2024 to 5 April 2025, up to £20,000 can be invested in a Stocks and Shares ISA (as well as cash, lifetime and innovative finance ISAs). Income, dividends and capital gains can be accrued free of tax within an ISA portfolio, which is able to hold direct shares, bonds, funds, investment trusts, index funds and ETFs.
The first step is to decide whether you would like to manage your own investments or outsource to a professional. If you want to retain full control of your stocks and shares ISA portfolio, you may consider selecting an array of funds via an online broker, like Hargreaves Lansdown* or Interactive Investor*. DIY investing requires research into the funds, as well as a decision at the outset about how much you wish to allocate to different asset classes, such as equities and bonds. This ‘asset allocation’ framework doesn’t need to be static and can be altered as markets change.
Alternatively, you may feel more comfortable appointing a professional to manage your portfolio on your behalf. This means an investment manager will decide the overall split of investments, select the underlying securities or funds, and monitor them on an ongoing basis. If this is your preferred route, there are a number of options to explore.
Firstly, savers with £100,000 plus to invest might consider using a wealth manager or financial adviser. For those with smaller sums, robo-advisers like Wealthify, Moneyfarm* and Nutmeg represent an alternative. They are online investment managers which use computer models, known as algorithms, to manage portfolios. Their services are lower cost than traditional wealth managers and involve little-to-no human interaction with their customers.
Another option is to buy a multi-asset fund. A multitude of products fall into this category, including traditional multi-asset funds, which invest directly in shares, bonds and alternatives; multi-manager portfolios, which hold other funds, investment trusts and ETFs; alongside passive multi-asset portfolios, comprised of ETFs and index funds.
Multi-Asset funds vs Investment platforms vs Robo-Advisers
The multi-asset/multi-manager fund route
As multi-asset funds offer diversification across a range of asset classes, some investors use them as a ‘one-stop-shop’ for their Stocks and Shares ISA. Each year, new monies can be allocated to the same multi-asset or multi-manager fund within the ISA wrapper.
Meanwhile, others prefer to hold one or multiple multi-asset and multi-manager funds at the core of their Stocks and Shares ISA, complemented with a few funds offering access to more esoteric areas. For example, specialist property, infrastructure, private equity or precious metals. This approach is known as ‘core-satellite’ and is used by many financial advisers.
Multi-asset and multi-manager funds come in a range of shapes and sizes. For example, some are risk-targeted, which means they aim to keep volatility within a certain range, depending on their risk profile. Meanwhile, others have a bias towards a certain style of investing, such as income or growth.
The positioning of a multi-asset fund is typically driven by the fund manager’s asset allocation views and where they are seeing valuation opportunities across asset classes. In addition, multi-managers aim to select funds which have the potential to beat the market.
If you are considering investing in a multi-asset or multi-manager fund, the first step is to think about the purpose of the money and what you want to achieve with it. This will determine the amount of risk you are willing to take. Likewise, how much are you willing to pay in charges? This will influence whether you take an ‘active’ or ‘passive’ investment route.
A number of active multi-asset funds aim to offer downside protection during times of market weakness. They include Troy Trojan, which invests in shares, bonds and other funds. Its ongoing charges figure, a measure of the underlying charges, stands at 0.88%.
If you have a bias towards holding funds rather than direct shares or bonds, there are a number of multi-manager funds available. For example, the BMO MM Navigator fund range, managed by BMO Global Asset Management, includes the income-focused Navigator Distribution fund. This strategy has an ongoing charge of 1.43%.
For investors who prefer passive funds, the Vanguard LifeStrategy fund range is worth considering. Each LifeStrategy fund has a different proportion of shares, ranging from 20% to 100%, with the remainder in bonds and cash. These funds have an ongoing charge averaging 0.20%.
The platform route
Trading platforms also offer their own multi-manager funds. For example, Hargreaves Lansdown* has its own fund range, which includes the HL Multi-Manager Income & Growth fund. This has an ongoing charge of 1.12% and is managed by the company’s in-house investment team.
Another example is Bestinvest*. Its four-strong multi-manager fund range includes the IFSL Tilney Bestinvest Income Portfolio, which has an ongoing charge of 2.11%. Meanwhile, Charles Stanley* offers ten multi-asset funds across different risk profiles, with ongoing charges that range from 0.76% to 1.02%. Its portfolios allow investors to specify investment goals, for example, income, growth or a mix of both, and select a risk profile. The platform then creates a portfolio of suggested funds (which all feature on their preferred Foundation fund list), which can be amended as the investor sees fit.
If you are seeking a more tailored approach, Hargreaves Lansdown* offers investors a choice of 4 ready-made growth portfolios based on their goals and attitude to risk. These portfolios hold different combinations of Hargreaves Lansdown’s multi-manager funds and are available for a minimum investment of £100 or a monthly amount of £25.
The robo-advice route
If you go down the robo-advice route, the first step is to fill in a questionnaire online. This is designed to find out more about your attitude to risk, investment time horizon and personal details. Once this is completed, the robo-adviser will suggest a risk profile – but ultimately it is up to you to select a portfolio from their range which you think best suits your objectives and risk appetite. Once your ISA portfolio is up and running, you will be given access to a personalised online portal. This allows you to continually check how the portfolio is performing against your objectives.
Portfolios that are managed by robo-advisers typically comprise of index funds and ETFs, which helps to keep costs down. For example, Nutmeg offers 10 risk-rated ‘fully managed’ or 'socially responsible' portfolios with exposure to equities, cash and bonds via ETFs. Although they comprise of passive funds, they are actively managed by the investment team - guided by their asset allocation views. For the fully managed service, Nutmeg charges a fee of 0.75% up to £100,000 and 0.35% thereafter. This does not include the underlying charges for the ETFs, which are estimated to be around 0.20% or 0.29% if investing in socially responsible portfolios. There is a minimum initial investment of £500.
Alternatively, the robo-adviser offers five ‘fixed-allocation’ portfolios, where there is no active intervention by the investment team. Here, Nutmeg charges a fee of 0.45% up to £100,000 invested, which then falls to 0.25%. Again, this does not include the underlying charges for the ETFs, which are estimated around 0.20%.
Wealthify also uses ETFs to gain exposure to different markets, including equities, bonds and commodities. It has a total of 10 managed portfolios, five of which are aimed towards ethical investors and each are monitored on an ongoing basis. Wealthify charges a flat fee of 0.60%, irrespective of how much you invest. It estimates that the average cost of an ETF in the portfolio is 0.16% or 0.70% if investing in ethical portfolios.
Check out our robo-adviser best buy table.
How to invest in a ready-made ISA portfolio
Is a ready-made portfolio right for you?
There are a number of factors to consider if you are trying to decide whether a ready-made ISA portfolio is the right option for you. Here are four questions to ask yourself:
Are you comfortable handing over control of the portfolio to somebody else?
Your patience could well be tested during times of market stress, so it is important to trust the investment manager during both good and bad times.
Does the investment manager have a solid track record?
How long is their track record? And have they been tested during difficult periods? It is also worth looking at the experience of the investment team.
What are the charges?
Make sure that all of the charges associated with running the portfolio are clear. When these are considered, does the ready-made portfolio offer value for money?
Do you require a personal service?
The level of service that you receive will depend on the type of ready-made portfolio you go for. If you buy an off-the-shelf multi-asset or multi-manager fund, you will have very little engagement with the investment manager. For example, you can access monthly factsheets and ad-hoc updates.
A robo-adviser, on the other hand, will offer more detailed information on performance and the rationale behind investment decisions. Nevertheless, this pales in comparison to the service you could receive from a financial adviser or wealth manager, who will offer regular updates, phone calls and face-to-face meetings.
The benefits of ready-made portfolios
A ready-made portfolio can function as a one-stop-shop for investors, offering diversification across asset classes. If you are a novice investor or simply don’t have the time to monitor your investments, you can outsource to a professional; they will undertake research, work out the best blend of investments and manage them on an ongoing basis.
When it comes to thinking about charges, try to calculate the potential costs that would be incurred if you managed a diversified ISA portfolio yourself via a platform. In addition, factor in the potential amount of time and effort that would be required to monitor it. It may prove to be more cost-efficient to buy a ready-made portfolio.
The drawbacks of ready-made portfolios
It is important to remember that these portfolios are not bespoke. They are standard, ‘off-the-shelf’ portfolios - and ultimately it is your responsibility to make sure the portfolio you choose matches your risk profile and time horizon.
Also, don’t forget to look under the bonnet. What types of investments are held in the ready-made portfolio? And does this match your requirements? For example, many robo-advisers have a bias towards passive funds, so make sure you are comfortable with this method of investing.
In addition, look into the experience and track record of the investment and research teams who are managing the ready-made portfolio. If you are buying a multi-manager fund, have a look at the largest positions and make sure you are happy to hold these funds. Are there any in there which have experienced prolonged periods of poor performance? Also, get a feel for the types of investments the underlying fund managers hold and whether there is any crossover within the broader multi-manager portfolio.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. The following link can be used if you do not wish to help Money to the Masses or take advantage of any exclusive offers - Hargreaves Lansdown, Interactive Investor, Bestinvest, Charles Stanley