One young investor, Josh Paradise, 26, from Swindon, is feeling bullish. He’s still aiming to build his investment wealth and retire early, despite stock market volatility.

“Why I’m not worried about a stock market crash”

Josh Paradise isn’t worried about a stock market crash because his plan is all about long-term investment.

He’s holding his nerve with current market volatility. He explains, “as my investment experience has grown, I’ve learned to handle the fact that markets go up and down.” He adds, “volatility doesn’t phase me as much as it did when I first started.”

As a long-term investor, he’s committed to maintaining his current level of contributions. He’s investing £250 per month in his Freetrade Stocks and Shares ISA.

Josh is also aiming to diversify his portfolio. He’s planning “to make sure I have a diversified enough portfolio to help handle market volatility.” Holding a variety of assets in different classes and geographies can counteract some of the stock market’s volatility.

He’s also sticking to his long term investments aims. He explains, “For me, it’s all about staying true to your investing goals, no matter what the market is doing. The main thing is time in the market, not timing the market.”

“I’m aiming for a green portfolio”

Like many investors, Josh is slightly adjusting his investment portfolio and focusing on green energy. The green investing movement is now estimated to be worth £30 trillion globally. And it’s expected to grow rapidly in the coming years. Many investors have adjusted their choices amid climate change concerns, energy security worries and spiralling oil prices.

He believes geopolitical events will ultimately reduce the West’s reliance on harmful fossil fuels and that the case for a shift towards renewables is fast becoming overwhelming. “Looking ahead, I really see governments moving towards green energy quicker than originally intended. It will mean they don’t have to rely on imports from abroad.” 

Josh adds, “whilst their prices might not be where I’d like them to be right now, I still feel like they are the right investments for the future and will eventually benefit me in the long run. Currently, I have investments in alternative energy sources such as ITM Power and Plug Power, as well as investments in electric vehicle companies NIO and Tesla.”

Josh Paradise’s plan for several income streams

But Josh isn’t just relying on the stock market for the future. As well as his stocks and shares ISA, he also aims to add a couple of rental properties to his investment portfolio.

He explains, “My ISA goal is to achieve financial freedom for when I retire. I’m currently paying into a workplace pension.” But he’s not stopping there. He intends “to get a buy-to-let property or two in the future so I’ve got as many sources of income as possible.”

Should ordinary investors worry about a stock market crash?

If you’re worried about a stock market crash, then how should you approach your investments?

According to Dan Lane of Freetrade, “it’s important to have a sufficiently diversified portfolio and continue to focus on the long term.”

Dan feels that investing regularly can help reduce investment risk. That’s because “pound-cost averaging through buying investments regularly in small amounts can also help to smooth out volatility.”

If you’re extremely nervous about any investment risk, then opting for cash could be more suitable. But you could miss out on potential rising stock market prices in the future.

Dan Lane explains, “with equity risk comes the opportunity to outperform cash and inflation over the long term. History tells us stock markets do go up over time.” 

Simon Jones, CEO of InvestingReviews.co.uk, adds, “Investors with long-term horizons shouldn’t allow themselves to be rattled.” He explains, “Those who retreat from the market at the first sign of volatility risk losing out when conditions improve later.”

Where can you invest in a stocks and shares ISA?

There are only a couple of weeks left to use your £20,000 stocks and shares ISA allowance. If you want some ideas about where to invest, then check out our top-rated stocks and shares ISAs. Even saving a small amount each month can help you build towards a comfortable retirement.

The post Confident ISA investor: “Why I’m not worried about a stock market crash” appeared first on The Motley Fool UK.

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There’s so much unregulated information about investing out there that it’s sometimes hard to distinguish the facts from the fiction.

Here, I take a look at some common investing myths and try to unpick the truth from the lies. If you’ve heard them before and wondered whether they were true, then you’re certainly not alone!

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Myth 1: investing in shares is like gambling

Now, this is one of the most frustrating investing myths. I’ve heard many people talk about investing being like gambling. They say that buying shares is a bit like betting money on the horses.

But it’s simply a myth! Yes, there is a lot of risk in investing. It’s possible for some companies to go out of business and potential for shares to lose their value. But that doesn’t mean it’s like gambling.

The reason investing is not at all like gambling is because, as a shareholder, you’re actually buying an asset. Buying a share means you’re buying a small part of a company, so you can benefit from the growth of that company in the future. As a shareholder, you’ll own a tiny part of a business like Tesco, Shell or Greggs. And you’ll hopefully receive dividend income when the companies pay out part of their profits to shareholders.

Investing is more like buying a rental property and hoping that it will go up in value. Your dividend income is like the rent you’d receive and the growth in share price is like the value of you’re property increasing. And nobody would ever say investing in property is a gamble.

Myth 2: you’ll get rich quick from investing

At the other end of the spectrum, there’s a common myth that it’s easy to get rich quickly from investing. Some social media stars give the impression that making money is easy and you’ll soon be earning six figures from your dividend income alone.

Again, it’s a big myth. It actually takes a long time to build up wealth from investing. But that doesn’t mean it’s not worth doing! If you invest £500 per month for 40 years and your investment growth averages 4%, your pot will be worth £590,980 by the time you retire.

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Myth 3: it’s not worth investing in a pension

Again, I’ve heard this myth so many times. Many people think that it’s not worth starting a pension. They say that they’re better off investing in property or downsizing when they’re older.

But the figures don’t lie! Due to auto-enrolment rules, investing in a workplace pension means you’ll immediate double your investment. Yes, you did hear that right, you will immediately double your investment!

If you invest £80 in your workplace pension, you’ll receive an extra £20 in tax relief and a further £60 boost from your employer’s contributions. That means if you don’t open a workplace pension, you’re basically throwing away free money. 

If you earn £30,000 per year and contribute 5% to your workplace pension, it will only cost you £1,500 per year to add £3,000 to your pension pot. If you contribute for 40 years and your investment growth averages 4%, your pot will be worth £290,112 by the time you retire. If the stock market does slightly better and you average 6% returns, your pot will be worth £484,329. That’s not a bad return on your investment.

And finally

Investing can be rewarding, but it’s a long journey with many ups and downs. Starting young and putting money aside regularly in a workplace pension is one of the best ways to build up retirement income.

Don’t forget that you can still invest up to £20,000 in a stocks and shares ISA before the end of the tax year.

If you’re considering opening an ISA before the end of the tax year, then take a look at our list of top-rated stocks and shares ISAs.

The post Do you believe these 3 common investing myths? appeared first on The Motley Fool UK.

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Saving for retirement is a huge undertaking. And with all those years of dedication and hard work, it would be gutting to receive a lower retirement income due to making some pension mistakes.

Here, I take a look at five common pension mistakes that could inflict some serious damage on your retirement income and how you can avoid them.

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1. Not using your workplace pension scheme

If your workplace has a pension scheme and you haven’t joined, you’re losing out on a lot of free money.

That’s because, under auto-enrolment rules, your employer has to contribute a minimum of 3% to your pension scheme.

Employer contributions and tax relief rules mean that it only costs £80 to contribute £160 to your workplace pension scheme. If you’re a basic rate taxpayer, when you contribute £80, the government adds £20 in tax relief and your employer adds £60.

That means you’re immediately doubling your investment!

If you earn £30,000 and don’t join your workplace pension scheme, you could be reducing your pension pot by £111,852 due to missed employers’ contributions alone (based on 3% contributions and 5% investment growth in your pension).

2. Staying in the default pension fund

Even if you’ve joined your workplace pension, it’s easy to forget about your investments and not check your fund choices. Recent research from the Pensions Regulator shows that as many as 95% of us stay invested in the default pension fund in our workplace pension scheme.

Unfortunately, the default fund you’re automatically invested in isn’t always the best choice.

The problem is that default funds have a one-size-fits-all approach and no two investors are the same. Default funds are often invested cautiously, assuming you have a medium attitude to risk.

If you start paying into a pension when you’re young then you have a long time before retirement. This means you may be able to afford a more adventurous fund choice to hopefully get a bigger retirement return.

Investing in a cautious fund that grows at 3% per year rather than 5% could mean reducing your pot by £145,545 by retirement (based on you earning £30,000, contributing 5% and your employer contributing 3%).

3. Not checking your pension fees

Fees can also have a huge impact on your pension pot and retirement income over time.

Many workplace schemes automatically have 1% management fees, but it’s possible to get fees of around 0.4% if you shop around with other providers.

It may be worth considering transferring old workplace pension schemes to a cheaper provider to save on fees.

Saving just 0.5% in fees could mean an extra £106,005 in your pension pot by retirement (based on you earning £30,000, contributing 5% and your employer contributing 3%).

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4. Not diversifying your portfolio

Most experts agree that you shouldn’t put all your eggs in one basket when it comes to investment.

That’s because investing in one or two companies will leave you exposed if those companies fail. You could end up seriously harming your retirement income.

Instead, consider investing in an index tracker fund and make sure you are invested across many geographies and in many sectors.

5. Not shopping around for a retirement annuity

When you get to retirement, it’s easy to automatically buy an annuity from your current provider. But they may not provide the best value option for you. You should consider shopping around to make sure you’re getting good value for money.

You may get a bigger retirement income if you keep your pension invested and go for income drawdown rather than buying an annuity. However, you should bear in mind that drawdown income isn’t guaranteed. You’ll still be invested in the stock market, and that can go down as well as up.

When you’re nearing retirement, it’s a good idea to get financial advice on your options. How you set up your retirement income is a big decision that could massively affect your wealth in retirement.

And finally

If you’re on a low income in retirement, then don’t forget to check out whether you’re eligible for Pension Credit. Recent research shows that many eligible retirees don’t apply and may be entitled to a bigger retirement income.

The post 5 pension mistakes that could hit your retirement income appeared first on The Motley Fool UK.

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Passive investment funds are increasingly popular with savvy investors. They allow investors to gain exposure to a whole share index with low fund fees. Here, I take a look at the six most popular passive funds in February, according to figures from Interactive Investor, and explore what passive funds can add to your portfolio.

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What are passive investment funds?

Passive investment funds are different to actively managed funds. They invest in a whole share index, whereas active funds involve fund managers picking and choosing which stocks to buy. For example, a UK passive fund invests in the whole of the FTSE 100 index or the whole of the FTSE All-Share index. Passive funds are also sometimes called tracker funds because they aim to track a whole share index.

Because passive investment funds don’t need an active fund manager, they’re often a lot cheaper to buy than traditional funds. You can invest in a passive fund from around 0.06% to 0.2% in annual fund fees.

The most popular passive investment funds

Vanguard takes four of the top five spots for the most popular passive investment funds in February. They’re known for their passive funds and offer a choice of over 70 funds. The most popular are their LifeStrategy funds. These funds aim to replicate a balanced investment portfolio with just one fund. 

They track a range of different share indices and are diversified across many geographies.

1. Vanguard LifeStrategy 80% Equity (3-year return: 30.1%)

This Vanguard fund is the first of three LifeStrategy funds in the top six. This fund invests 80% in equities and 20% in bonds. Bond prices tend to grow less than equity over time, but they also benefit from more price stability and usually hold their price when there’s a stock market crash.

The equity portion of this fund is diversified across indexes in the US, UK, Europe, Japan, the Pacific region and emerging markets.

2. Vanguard LifeStrategy 100% Equity (3-year return: 36.1%)

This fund is second on the top of the pops for passive investment funds. It is designed for more adventurous investors that want to be invested 100% in equity, rather than owning any bonds.

Like the 80% fund, your investments will be diversified across indexes in the US, Europe, UK, Japan, the Pacific region and emerging markets.

3. Vanguard LifeStrategy 60% Equity (3-year return: 24.1%)

For more cautious investors, the Vanguard LifeStrategy 60% Equity fund is extremely popular. This fund is popular with cautious investors that want a traditional 60%/40% split between equities and bonds. It’s likely to fluctuate less than the 100% fund but may also increase less in price over time.

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4. L&G Global Technology Index (3-year return: 110%)

This technology fund has slipped down from second place in January. It tracks the shares in technology companies from the developed and advanced emerging markets that are included in the FTSE World Index.

The fall in investment may reflect investors’ growing caution about tech stocks as some experts think they may be overvalued.

5. Vanguard FTSE Global All Cap Index (3-year return: 41.1%)

This Vanguard fund, currently sitting in fifth place, is a fund that tracks the Global All Cap index. That means it’s diversified across North America, Europe, the Pacific region, the Middle East and emerging markets.

It could be a low-cost way to spread your investment risk across many geographies and companies with one simple fund.

6. Vanguard FTSE UK Equity Income Index (3-year return: 17%)

Yet another Vanguard fund is in sixth place. It’s a UK-based fund and invests in shares listed on the London Stock Exchange that are expected to pay higher dividends than average. That means you may benefit from high dividend income as well as, hopefully, share price growth.

Why are passive investment funds so popular?

Passive funds have been growing in popularity for several reasons, including:

• Low cost: annual fund fees start at around 0.06%.
• Diversified: passive funds are invested in a whole index rather than just a few companies.
• Less room for human error: passive investing funds aren’t prone to the risk that comes from fund managers sometimes picking the wrong shares.

However, like any equity investments, passive funds may not be suitable for short-term investors. That’s because share prices fluctuate significantly over time and short-term investors won’t have time to wait for the market to bounce back from a slump.

How can you invest in passive income funds?

You can invest in passive investment funds through a stocks and shares ISA, a share dealing account or a pension scheme.

There’s still time to use your £20,000 stocks and shares ISA allowance before 5 April. If you want some ideas, then check out our top-rated stocks and shares ISAs. Whether you’re an experienced investor or just starting out, we have reviewed ISAs that may be suitable for you.

The post These were the six most popular passive investment funds in February appeared first on The Motley Fool UK.

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Wouldn’t it be great to become an ISA millionaire? Recent research shows that it’s a dream that many young investors share, and 14% of young people are actively planning to become ISA millionaires.

We take a look at that research and reveal the plans of one ambitious young investor who’s rejected cash and is investing in his stocks and shares ISA with the aim of being able to retire early.

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Matt Roberts’ plan to become an ISA millionaire

Like many young investors, Matt Roberts, a 28-year-old scientific researcher, has ambitious plans. He’s revealed how he’s planning to become a young ISA millionaire long before retirement age. He’s rejected cash savings and is planning to grow his stocks and shares ISA by targeting a bold investment plan.

Matt explains how the Covid-19 pandemic made him reassess his priorities. “Like a lot of young people, I started taking a bigger interest in my finances during lockdown. I wasn’t happy about the returns on offer from my cash savings, so I decided to invest in a stocks and shares ISA instead.”

He’s starting small but is planning to up his contributions as his wage increases. He explains, “Right now, I’ve got just over £20,000 in my pot, and I want to grow that into £1 million. At the moment, I’m paying in £550 monthly, but it would be nice to be able to max out my allowance when I’m older.”

He’s got ambitious growth targets for his investments. He says, “I’m targeting a return of 9% per annum, which might seem ambitious right now with all the volatility there is. But I’m committed to staying invested for the long run. I don’t want to be still working when I’m 65 if I don’t have to, and it would be nice to have the option of retiring early someday.”

Matt’s dream of financial freedom depends on him staying the course. Based on his current pot and contributions, Matt could expect to reach millionaires’ row aged 55. That’s assuming he actually manages to achieve a 9% annual return.

Are Matt’s aims realistic?

But are Matt’s plans to become a stocks and shares ISA millionaire realistic? Let’s crunch the numbers!

A 9% investment return is pretty ambitious and might be unrealistic. But even with a more modest 7% return, it may be possible for Matt to achieve £1 million while he’s still young.

If Matt ups his monthly contributions to £700, he could achieve £1 million by the time he’s 58. That’s assuming he achieves a 7% return on his investment.

If Matt increases his contributions to £1,000 per month, he could hit £1 million by the age of 54.

If he maxes out his ISA allowance and saves £20,000 per year, he could have a cool £1 million in just 21 years, by the age of 49 with 7% returns.

14% of young people aim to become ISA millionaires

Matt’s not the only one thinking big. Recent research shows that more young people than ever are aiming to become ISA millionaires. A poll of 1,000 ISA holders conducted by Freetrade and InvestingReviews revealed that 14% of 18 to 24-year-olds expect to have a £1 million fortune by retirement, compared with 4% across all age brackets.

According to Simon Jones, CEO of Investing Reviews, “It’s reassuring to see there’s a new tribe of young investors who recognise the tremendous wealth-building powers of the stocks and shares ISA.”

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How some ISA investors have become millionaires

The key to growing your investment wealth at any age is consistent, regular investing. 

As Dan Lane, senior analyst at Freetrade, explains, “Hitting the seven-figure mark in your stocks and shares ISA is … all about doing the simple stuff well and consistently.” According to Dan, investors should focus on “the basic habits of monthly investing in a diversified portfolio informed by your financial goals.”

He cautions young investors to do their research and be realistic about their investing goals. He explains, “Getting starry-eyed at the big prize and not focusing enough on the groundwork may lead to decisions that are overly informed by short-termism.”

And finally

If you want to know more about how to build your wealth with regular investing, then check out our guide to how stocks and shares ISAs work. If you’re keen to get started on your investing journey, then a good place to start is by checking out our top-rated stocks and shares ISAs.

Keep in mind that investing puts your capital at risk. Shares and dividends may fall as well as rise, and returns are not guaranteed, so you may get back less than you invested. You should not invest any money you cannot afford to lose.

The post Young investor: ‘my plan to become an ISA millionaire and retire early’ appeared first on The Motley Fool UK.

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• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Do you dream of being an ISA millionaire? I certainly wouldn’t say no! The UK currently has more than 2,000 ISA millionaires, and the average investment pot is worth £1.4 million according to the latest figures from HMRC.

Of those 2,000 ISA millionaires, only 80 investment pots are worth more than £2 million and a further 60 investors have pots worth more than £3 million.

For those investors, the best part is that they won’t have to pay any tax when they draw their income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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Who is the richest ISA millionaire?

It’s all well and good knowing that there are lots of ISA millionaires out there, but who is the richest? Our research reveals a couple of prime contenders.

1. Balbir Bagria

Balbir Bagria retired at the age of 39 back in 2000, and he’s been living on his ISA income ever since. He and his wife contributed a total of £176,000 into PEPs, which were the predecessor of ISAs. They stopped adding money to their ISAs in 2000 but the funds continued to grow with amazing success.

Balbir Bagria managed to achieve an astonishing average return of around 25% per year through choosing a portfolio of only around 10 to 15 stocks. He chose companies that delivered consistently high profits of around 15% to 20% annual earnings.

His amazing investing success means that if you’d given him £10,000 to invest in 1993, it would have grown to £2.9 million by 2016. That kind of return is virtually unheard of – even amongst professional investors.

2. Lord John Lee

Another contender for the title of the richest ISA millionaire is Lord John Lee. He became the UK’s first known ISA millionaire back in 2003. He too started his saving journey many years ago, opening a PEP in 1987.

Lord Lee also invested in a limited portfolio of around 10 stocks. He built up his wealth by never taking anything out of his ISA and always reinvesting dividend cash in new shares. He aims to hold onto a share for at least five years and only invests in profitable companies with consistent financial results and whose businesses he understands.

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What else do we know about ISA millionaires?

Most ISA millionaires tend to have been investing for a long time. According to research from Citywire, the average age of ISA millionaires is between 69 and 71.

According to Moira O’Neill, head of personal finance at Interactive Investor, “Most will have started out with Personal Equity Plans (PEPs) when ISAs were just a twinkle in policymakers’ eyes. So, the number one lesson is patience – even the millionaires didn’t get there fast.”

So the main lesson is not to lose heart if it’s taking a while to reach your investment goals. To become an ISA millionaire may take a while.

What are the main strategies used by ISA millionaires?

So, can ordinary investors learn anything from ISA millionaires? Here are some of the strategies they employ:

• Be consistent: if you want to become an ISA millionaire, then it’s important to invest consistently and get used to living within your means.
• Max out your stocks and shares ISA every year: if you can afford to, then it’s a good idea to try and max out your ISA each year. If you invest your full £20,000 ISA allowance every year for 40 years, it could grow to £1.9 million by the time you retire (that’s assuming your investment grows at 4% per year).
• Re-invest dividend income: this will give your ISA a boost as you’ll add in the extra dividend income on top of your £20,000 year ISA allowance.
• Buy value stocks: this means buying stocks that are undervalued. It’s hard to do as most undervalued stocks will already have been picked up by other investors. It is possible to invest in funds that focus on value companies.
• Buy and hold stocks for a long time: holding stocks for a long period of time is historically the best way to build investment wealth. You’ll have time for gains to build up through compounding.
• Buy equities rather than bonds: equities are generally considered more risky than bonds as share values fluctuate significantly. However, ISA millionaires usually concentrate their investments on equity investment. That’s because equities tend to seriously outperform bonds over a long time period.

How to invest in ISAs

It’s a good time to get started on ISA investing as you’ll be able to invest £20,000 now and another £20,000 after the end of the tax year.

If you’re ready to jump in and start investing then take a look at some of our top-rated stocks and shares ISAs for inspiration. We also have handy guide for beginning new ISA investors to help you get started.

The post Who is the richest ISA millionaire? appeared first on The Motley Fool UK.

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• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

With the April ISA deadline just around the corner, it’s a race against time to invest your £20,000 annual ISA allowance before the end of the tax year. I take a look at the six hot funds that were most popular with UK investors during February 2022, according to figures from Interactive Investor.

Investment funds can be a great way to spread your investment risk across many different companies rather than relying too heavily on the fortunes of just one or two.

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The six most popular funds in February

Retaining its status as first choice among popular funds is Fundsmith Equity. It’s been a consistent performer over many years and is regularly recommended by experts. The L&G Global Technology Index has slipped down the list from third place in January to sixth in February, suggesting that technology stocks may be falling out of favour with investors.

1. Fundsmith Equity

Fundsmith equity is consistently one of the most popular funds. It’s a Warren Buffet-style fund that focuses on long-term investment. It’s performed well, growing at 44% over the last three years and 86% over the last five years. It invests in some of the biggest companies in the world, including Microsoft, L’Oreal and PayPal.

This fund is heavily weighted towards the US, with 74% invested in US equities. Because it’s a managed fund (rather than a passive fund that tracks the whole market) it has fairly high fees of 0.95%.

2. Vanguard lifestyle strategy 80%

This is one of three Vanguard funds in the list of popular funds. Vanguard is known for its low-fee passive investment funds that invest in the whole of a share index. You can own this fund for fees of as little as 0.22% per year as part of your stocks and shares ISA or pension fund.

This 80% fund invests 80% in equity and 20% in bonds and gilts, so it’s designed for investors who want slightly less exposure to the ups and downs of the stock market.

The fund has grown 29% in the last three years and 42% in the last five years.

3. Vanguard lifestyle strategy 100%

This is another Vanguard fund but with a different asset split. This is the 100% equity version of the company’s lifestyle strategy fund. It’s popular with long-term investors who have an appetite for higher risk and don’t want to invest in bonds.

This fund has grown 35% in the last three years and 51% in the last five years. Not bad for a fund that only charges 0.22% in fees!

4. Vanguard lifestyle strategy 60%

Yet another Vanguard fund is in fourth place in the list of popular funds. It invests 60% in equity and 40% in bonds and gilts. It’s a popular choice for investors who want a slightly lower risk investment portfolio with less exposure to stocks and shares. 

This fund has grown 23% in the last three years and 33% in the last five years.

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5. Baillie Gifford American

This fund is another regular favourite among investors who want exposure to US equity. It’s an actively managed fund that aims to outperform the S&P 500 index. It’s heavily focused on tech stocks, with large holdings in Shopify, Tesla and Amazon.

The fund has enjoyed price growth of 64% in the last three years and an amazing 144% in the past five years. Because it’s actively managed, you’ll pay relatively high fund fees of around 1.52%.

6. L&G Global Technology Index 

This fund has slipped down the list from third place in January. It perhaps suggests that investors are becoming more nervous about having all their eggs in one basket and just investing in tech stocks.

The fund has enjoyed amazing price growth of 111% over the last three years and an eye-watering 173% over the last five years.

How to invest in funds

You can invest in funds through a stock and shares ISA. It’s a great way to protect your wealth from the taxman as you’ll be able to invest up to £20,000 each tax year with no tax to pay on any income.

If you’re looking for an ISA provider, then take a look at our top-rated stocks and shares ISAs. And if you’re new to investing, we’ve written a handy guide to stocks and shares ISAs for beginner investors.

The post Six popular funds investors are currently buying appeared first on The Motley Fool UK.

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• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Here, I take a look at how stocks and shares ISA fees work and how they could maul your investment wealth.

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How much are stocks and shares ISA fees?

Stocks and Shares ISA fees vary significantly between providers. And to make things more complicated, many providers charge several different fees.

Platform fees vary depending on your ISA provider, and funds fees vary depending on the chosen funds within your ISA.

A well-known provider charges platform fees of 0.45% per year for funds under £250,000. That drops to 0.25% per year for funds worth between £250,000 and £1 million and 0.1% per year for funds valued at over £1 million.

But that’s not all. There are also fund fees, and these could seriously eat into your investment wealth. This same provider charges 1.39% per year for investing in its ‘adventurous growth’ model portfolio.

Platform fees and fund fees are both charged on your portfolio. For example, if you had £100,000 invested with this provider you would be charged platform fees of £450 per year (0.45% of £100,000) and fund fees of £1,390 per year (1.39% of £100,000).

How much do fees cost over time?

I’m going to show how much these fees mount up over time.

If an investor used their maximum £20,000 ISA allowance and invested in an adventurous portfolio (with a fund fee of 1.39% per year), they would pay £368 in fees for their first year. But it’s the effect of fees over time that’s shocking!

If that same investor put away £20,000 every year for 40 years, they might pay a grand total of around £400,000 in fees over the course of their investing journey!

I’ve assumed that their investments grow at an average of 5% per year.

Are there cheaper stocks and shares ISA options?

The answer is yes! Even, sticking with the same provider but changing your fund choices could make a huge difference to your investment wealth over time.

Some low-cost index funds that track a whole share index cost as little as 0.06% per year. 

If you invested £20,000 in a low-cost tracker fund every year for 40 years, you could end up paying fees of around £69,000 in total. That’s a huge saving compared with £400,000.

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What about a modest investor?

But what about more modest investors? Not all of us can afford to save £20,000 per year for 40 years. That’s true, but even more modest investors could still save a lot over time by watching their stocks and shares ISA fees. 

If you save £2,000 per year in a stocks and shares ISA for 40 years, you could save around £31,000 in fees by picking a low-cost tracker fund rather than an expensive model portfolio. Not too bad at all!

That’s assuming you invest in a low-cost index tracker fund with a fund charge of 0.06% rather than a model portfolio that charges 1.39% per year.

How to pick a stocks and shares ISA

So, if you’re thinking of opening a stocks and share ISA, it’s really worth looking at the small print. What are the platform fees and fund charges? What are the charges for the funds you’re picking? If you need some help, then take a look at our top-rated stocks and shares ISAs. We compare the fees and features and give our overall verdict.

The post Stocks and shares ISA: avoid this fee trap to save £331k appeared first on The Motley Fool UK.

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The FTSE 100 index has plunged 3.3% following the tragic news of Putin’s invasion of Ukraine. Stock markets have been jittery about the situation for weeks, and now Putin’s intentions are clear. Ukraine’s foreign minister has said that Russia has launched a “full-scale war” on the Eastern border of Europe.

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How has it affected the FTSE 100?

The FTSE 100 index, which contains the UK’s 100 biggest companies, is down over 3% already. Shares in mining companies Evraz and Polymetal are down 26% and 37%, respectively. They both have operations in Russia and could be directly affected by the conflict.

Shares in other companies are less severely affected as investors wait to see how the situation develops.

What’s happened to world stock markets?

It’s not just the FTSE 100 that’s affected by the Russian conflict. Stock markets around the world are feeling the shock, with the German DAX down 5.0% and the Paris-based CAC also down 4.7%.

The US markets have yet to open at the time of writing, but the prospects don’t look good. It follows a dismal week, where the S&P has already dropped over 5% in the last five days.

How have investors reacted?

The FTSE 100 sell-off reflects a common pattern when stock prices drop. Investors often flee to safety and pile into safer investments like gold and bonds. That pattern seems to be repeating itself, with gold prices up 6% this week.

Is this the end of the bull market?

The stock market is notoriously hard to predict. And market forecasts can often prove embarrassingly wrong. 

For a stock market dip to turn into a full-blown bear market, FTSE 100 prices would need to plunge more than 20% and stay depressed for more than two months. This would signal the end of the recent bull market. Whether that happens will depend largely on how the situation develops in Ukraine.

If the conflict is short-lived, there may not be a significant long-term correction. Mohir Kumar at Jefferies comments that the 2014 Crimea crisis “did not produce any lasting market impact”. 

However, there are already signs that the ripple effect from this conflict may be far greater as Ukrainian and Russian forces enter a full-blown conflict.

There are other clouds on the horizon for the stock market. Escalating global inflation and increasing interest rates could have a long-term chilling effect on corporate profits as companies struggle to grow.

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Should investors sell their FTSE 100 shares?

It’s an uncertain time, but unless you need the cash soon, it may make sense to hold onto your FTSE 100 shares.  That’s because, even if the FTSE 100 plunges, history tells us that prices are likely to climb back up over time.

If you sell when prices are low, then you will crystallise your loss. But as long as you can afford to hold onto your shares, then you don’t need to worry that prices are temporarily depressed.

How does dollar-cost averaging work when the stock market slumps?

When the stock market plunges, it’s a good idea to go back to basics and remember the principles of long-term investing. One of those principles is dollar-cost averaging. That means investors carry on investing regularly whatever the stock market and the FTSE 100 are doing.

It’s a great idea because investing when the stock market drops is better value in the long run. Investors buying a FTSE 100 fund when prices have dropped can buy more for their money. That can lead to greater investment wealth once prices start to climb again.

If you’re thinking of opening a stocks and shares ISA before the end of the tax year, then take a look at our top-rated Stocks and Shares ISAs.

The post FTSE 100 in freefall: is this the end of the bull market? appeared first on The Motley Fool UK.

More reading

• Starting with nothing? Here’s why now is the perfect time to start building a passive income
• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?

Sustainable investment funds and ESG funds are big news! More of us than ever want to make sure our investments are ethical and that we support companies that are doing good in the world. We want to avoid companies that damage the environment and don’t improve people’s quality of life.

Here, I take a look at the five most popular sustainable investment funds, according to pension company Interactive Investor. These funds are all part of Interactive Investor’s ethical long list and were the most popular funds between 16 April 2021 and 16 February 2022. I examine where these funds choose to invest and whether they have decent historic performance. Is it possible to invest in sustainable funds or ESG funds and still enjoy great investment performance?

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5 most-bought sustainable investment funds

1. Baillie Gifford Positive Change (Investment fund)

This popular sustainable investment fund is often included in best buy lists. The investment managers pick companies based on four criteria. For the fund managers to invest, a company has to “deliver positive change in one of four areas: Social Inclusion and Education, Environment and Resource Needs, Healthcare and Quality of Life.”

Some of the fund’s largest holdings include Dutch tech company AMSL, the pharmaceuticals firm Moderna and electric car company Tesla. The fund has performed very well, growing at 90.2% over the past three years and 187.1% over the past five years.

2. iShares Global Clean Energy (ETF)

This sustainable investment fund tracks the S&P Global Clean Energy Index. It invests in 30 companies involved in “clean energy-related businesses, comprising a diversified mix of clean energy production and clean energy equipment and technology companies.”

The price of this fund has grown 164.6% in the past three years and 191.2% in the past five years.

The fund is an exchange-traded fund (ETF), which means that shares in the fund are traded on the stock exchange. Most ETFs are passive funds, so they invest in an underlying share index instead of cherry-picking companies to invest in.

3. Greencoat UK Wind PLC (investment trust)

Greencoat Capital LLP is a specialist manager dedicated to investing in the renewable energy infrastructure sector.

The fund has increased in value by 19.1% in the past three years and 53.2% in the past five years. 

This fund is an investment trust, which means that shares in the fund are traded on the stock exchange. Investment trusts are closed-ended (they don’t issue more shares), so you can only buy shares if someone else is selling.

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4. Impax Environmental Markets (investment trust)

This sustainable investment fund invests in mainly quoted companies that work in “alternative energy and energy efficiency, water treatment and pollution control, and waste technology and resource management.”

The fund has enjoyed impressive price growth of 60.0% in the past three years and 105.3% in the past five years.

This fund is also an investment trust.

5. Gore Street Energy Storage Plc (investment trust)

This sustainable investment fund invests in a portfolio of energy storage projects, mainly located in the UK. “The Company seeks to provide investors with a sustainable and attractive dividend.” It does this by “investing in a diversified portfolio of utility-scale energy storage projects primarily located in the UK.”

The fund has increased in value by 15.0% in the past three years and 45.6% in the past five years.

This fund is also an investment trust.

Where to invest in sustainable investment funds

You can invest in sustainable investment funds by using a share dealing account, a stocks and shares ISA or a pension fund. Check with your provider as some offer more investment options than others.

Many investment companies are starting to provide more information, so you can select funds based on your own criteria. Some providers allow you to select sustainable investment funds, which can help you to narrow down your selection. 

If you’re ready to invest, then a great way to start is to check out our list of top-rated stocks and shares ISAs.

The post These are the five most-bought sustainable investment funds in the last year appeared first on The Motley Fool UK.

More reading

• Starting with nothing? Here’s why now is the perfect time to start building a passive income
• Decided not to bother with a Stocks and Shares ISA? You might be missing these 3 things!
• Why is everyone buying GSK shares?
• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?