1) An investment company ISA scheme
These are ISAs which are run by the managers of investment companies. They can be very cost effective and flexible, but often limit you to choosing investment companies run by that manager.
2) A ‘self-select’ ISA
These are ISAs which are run by independent providers and which normally offer access to a wide range of different investments. There are many ISAs offered by online brokers, and the charges for holding investment companies can be lower than for other funds.
Because there’s no tax to pay, ISAs let you keep more of the returns you make
Visit the AIC website for details of investment company ISAs
Investment companies offer a unique combination of features that can benefit both income and growth investors
Investment companies offer a range of valuable features to ISA investors.
Investment companies can be more risky, particularly in the short term, but often outperform in the long term. Their closed-ended structure allows managers to plan ahead, and they do not have to worry about holding cash to meet redemptions.
Investment companies offer a wider choice of investments than other types of investment fund. This can help you choose a level of risk that you are happy with, or build a balanced portfolio over time.
If you are looking for a regular income from your ISA, and can accept the risks, investment companies have some unique advantages that can allow them to generate a higher or growing income. Bear in mind that the income is not guaranteed, and your capital is at risk, so investment companies are not a substitute for cash-based investments.
Investment companies can borrow money to make additional investments (‘gearing’). Gearing increases the risks, but can boost income and capital profits over the long term. Bear in mind that not all investment companies use gearing and most only use modest levels.
Investment company ISA schemes will normally allow you to invest small sums on a regular basis. Saving on a regular basis not only helps to spread the cost, it also helps to smooth out some of the ups and downs in the market.