Sarah Coles considers the options available to those who want to choose their own ISA investments

The stock market is struggling to deliver a few things at the moment – like security, certainty and shortterm profit. But what it is delivering are opportunities, and plenty of them.

As Mark Dampier, head of research at Hargreaves Lansdown, says, ‘It is hard to think of any sector where there aren’t good long-term investments to be made at the moment.’

Assuming you have the stomach for the insecurity, this is a time to be free to invest in whatever funds and shares offer the right opportunities for you. In fact, it is a time for a self-select ISA.

These are accounts in which you put your ISA allowance but then you choose which investments your cash is invested in, rather than having to go with a fund chosen by the ISA provider.

Lots to choose from
A usual first port of call is buying collective investments, such as unit trusts or investment trusts. Most providers offer a choice of around 1,000 collective funds.

Alternatively, they can be used to buy other assets directly, such as shares. Investors can choose from the full universe of shares listed on the London Stock Exchange Main Market (i.e. excluding those listed on the Alternative Investment Market), and some offer access to certain overseas stock markets too.

Money can even be held as cash, although HM Revenue and Customs isn’t keen on large sums staying in cash within what is supposed to be the ‘stocks and shares’ element of an ISA for significant periods.

But investors can pick both shares and funds, and as many of each as they like, up to the £7,200 annual limit.

Self-select ISAs are a cost-effective way to trade, and offer much simpler administration than was available before the advent of online trading.

Danny Cox, head of financial advice at Hargreaves Lansdown, says, ‘Previously, if you had six different investments, you would have six different bits of paperwork and six calls to make if you wanted a valuation. The self-select ISA brings it all together in one place, where you can get an instant online valuation or make changes to your investments simply and easily.’

Getting the right provider
There is a huge number of self-select schemes on the market, offered by a variety of firms. There are traditional stockbrokers, such as Hoodless Brennan and TD Waterhouse, and specific execution-only brokers such as E*TRADE and the The Share Centre, for whom these are a natural extension of sharedealing accounts they already offer.

Then there are IFAs, such as Hargreaves Lansdown, and fund management companies such as Fidelity, for whom such plans are an extension of existing fund supermarket businesses.

Despite their different origins, the services have much in common, but there are several key differences it is worth exploring before you make your choice. First is the variation in the number of funds listed. Hargreaves Lansdown’s Vantage platform, for example, boasts access to over 1,700, compared with Skandia’s Selestia, which says it has over 900.

As with a fund supermarket, fund investors pay an initial charge, which tends to be discounted. However, the discount available on each fund is negotiated individually between the fund management firm and the ISA provider, so there are big variations. For example, if you were to buy the Schroder European fund directly from Schroders, you would pay the full 5.25 per cent initial charge.

Alternatively, you could have it discounted to 1.25 per cent with Fidelity FundsNetwork, and as low as one per cent with Interactive Investor. Likewise, if you were to buy the Gartmore UK Equity Income fund direct, you would charges £9 per trade, E*TRADE £8.95, Hoodless Brennan £8 and The Share Centre £7.50. Some come in higher, including Selftrade at £12.50 and Alliance Trust at £15.

The regular trading cost tends to be a couple of pounds cheaper, so Hoodless Brennan, for example, drops to £6.50.

The firms have different rules for who qualifies as a regular trader. Hoodless Brennan charges less for anyone trading more than 30 times a quarter, while TD Waterhouse requires just ten or more trades a quarter. Some also put a price on administration. They may do this as a flat fee. Hoodless Brennan charges £50 a year while Fidelity FundsNetwork charges £5 a month.

Alternatively, they may ask for a percentage of the portfolio. The Share Centre charges 0.125 per cent per quarter of the part of the portfolio that’s in shares (nothing for any part that is invested in funds).

Other providers don’t have this cost, including Interactive Investor, TD Waterhouse (as long as you have more than £3,600 in the account) and Alliance Trust. Extra options All of the above providers have a list of additional services that they charge for, such as for statements, duplicate dividend vouchers, hard copies of annual reports, audit collections, transfers between accounts and transfers of overseas holdings.

Most users will never have to pay these, and they are usually not excessive, but it is useful to know that they exist. It is also worth checking the cost of those services most people eventually do use, such as closing the account. TD Waterhouse and Barclays Stockbrokers, for example, charge £50, and Halifax £40.

You may also want to look at the price of transferring a stock out of the ISA. TD Waterhouse charges £20 for every stock transferred out while Barclays and Halifax charge £15.

Also considered to be effectively a charge pay a five per cent initial charge. However, you would pay just two per cent with Fidelity FundsNetwork and one per cent with Interactive Investor.

Keeping an eye on costs
Unfortunately, no single provider is most competitive across the board, so when comparing initial charges, it is worth looking for those that are cheaper for the funds you have in mind, and remembering that, unfortunately, when you switch funds further down the line, they may not be cheapest.

It is also worth looking at annual charges. Hargreaves Lansdown, for example, will refund a portion of these, in what it calls a ‘loyalty bonus’. When it comes to buying and selling shares, there are variations in cost here too.Most of these ISAs have two charges – one for normal online trading and another for investors who trade very regularly.

The normal cost is usually somewhere around £10. Fidelity are the low interest rates on cash in many self-select ISAs. For example, TD Waterhouse and Halifax offer just 0.1 per cent on cash balances, while Hoodless Brennan offers two per cent below the Bank of England base rate or zero, whichever is greater. So it is worth checking the rate offered by your chosen provider.

Once you know the basics, it is also worth looking at the extras offered by the company you choose.Most self-select providers offer access to market news, research and information about stocks and funds, free of charge.

Many also have expert commentary about what this news means for investors. Barclays Stockbrokers has online seminars and podcasts where experts will explain everything from the workings of an ISA to the current global market conditions, while Hargreaves Lansdown offers articles from their experts and fund managers.

The Share Centre, meanwhile, has a buy, sell or hold recommendation for every share in the FTSE 100, along with an explanation of why it deserves its tag.

A helping hand
For those who require a little more help, there are tools to help investors decide what sort of investor they are and which highlight the kind of funds and stocks that suit that kind of investor.

Ian Benning, product development manager at The Share Centre, says, ‘We have a share picker and a fund picker, with which investors select that meet the needs of certain types of investor. So, for example, we have a British growth portfolio, British income portfolio, and a “Hot Spots” one. There is a “buy it now” button, which allows people to buy the four funds together.’

For sophisticated investors who want to do in-depth research, there are also facilities that allow you to filter stocks. E*TRADE, for example, lets you hunt for stocks using a huge variety of variables, including market capitalisation, operating profit, p/e ratio, price-to-sales ratio, beta (market return) and average dividend growth.

Interactive Investor, meanwhile, allows filtering by fundamentals, ratios and broker forecasts, among other things. They offer instant valuations, so you can see how your investments are progressing, but there are other ways to analyse your portfolio, such as the Hargreaves Lansdown portfolio xray tools, which show the exposure an investor has to various parts of the world economy and sectors.

Danny Cox says, ‘You may, for example, have a global growth fund with a high concentration in emerging markets which has more overlap with your emerging markets funds than you are aware of. This tool will alert you to that kind of thing.’

Staying alert
Some services also let you keep tabs on your investment automatically. Interactive Investor, for example, will send an email or text alert if any of your stocks hit a particular price – whether that is a target at the top or a stoploss at the bottom. They also allow you to set up automatic sells, which won’t just send an email, they’ll make the trade too.

Some of these services, particularly the news and some of the less involved tools, are available to everyone, whereas others are reserved for registered customers of the firms concerned, so they are worth exploring when you are choosing a provider.

One unusual offering is from The Share Centre, which allows you to call a qualified stockbroker and discuss stock choices. They will offer an opinion at no extra charge. Benning says, ‘People find it useful to call and talk through their ideas with a professional.’

These variations mean it is worth taking the time to explore those providers that have the combination of reasonable charges, plenty of investment options and useful tools. It may seem a bit of an effort for a £7,200 investment, but if you make the right choice, the current ISA rules – with their greater flexibility – mean you can amalgamate former shares ISAs, former cash ISAs and any future ISA allowances into this one platform.

This can can give you complete investment freedom with a sizeable portfolio, so you can take advantage of all the best opportunities in the market. their attitude to risk – whether they are looking for income or growth, for example – and the tool will give the top five buys we are currently recommending for that kind of investor.’