What is a self select Isa?

A self-select Isa offers more choice of assets to invest in and negates the charges of a fund manager who may not provide a profit for you anyway.

If you feel that you are ready to go it alone and want to channel your knowledge into what you invest then the do-it-yourself approach may be for you.

It is the freedom to invest in what you want that attracts most people to self-select Isas but to get the most out of your investment you need to be clear on your investment strategy and how this will affect the fees you pay.

With a normal investment ISA you buy an ISA from a fund management company and invest in funds that are offered by that company.

With a self-select ISA ou are free to research and invest in the companies or funds that you decide upon and use more than one provider.

How do you set one up?

Picking the right broker is vital and to do this you need to judge how much you want to invest and how often you want to trade. The amount of trading you do will affect the fees and charges you pay for running your self-select Isa and should also inform the initial choices you make on what type of funds or share dealing platforms you use to run your self-select Isa.

Self-select Isas are available from stockbrokers and share-dealing firms and you can pick from a broad range of investments to build a portfolio that suits your needs.

Who are self-select Isas designed for?

A self-select ISA tends to suit someone with experience in investing directly or who regularly buys and sells shares. Because the investment decisions are yours to make a self-select ISA suits someone who wants to take a more hands-on approach to investing.

Finding the right self-select Isa 

There are many types of funds to choose from and a wide variety of charges depending on the type of self-select Isa you choose and how much trading to do.

Therefore, when selecting a broker or account you need to do your own research. Moneysupermarket.com is one good site for comparing charges and allows you to check the overall cost depending on how you want your funds managed and how often you want to trade.

With such an array of funds it is sensible to think about your attitude to risk before you dive in and select funds and shares for your self-select Isa. Cautious investors should aim for a well diversified fund that invests at least a third of your funds in fixed income or cash.

A medium-risk investor could consider investing in a mix of income and growth funds and western companies that are investing in emerging markets.

If you have an aggressive attitude to risk and can afford to keep your investments for a longer period you could focus more on volatile markets as you will have time to ride out the risk.

If you would like more advice and help running your Isa the Association of Private Client Investment Managers and Stockbrokers has a website that can help you find a firm to run your self-select Isa.

Trading tools

There are many free online trading tools and some allow you to practice for free so you can hone your strategy and get used to how the tools work.

Many brokers and traders allow you to run your self-select Isa yourself on a daily basis, buying and selling as you wish with free trading tools.

These allow investors to set limits on a companies’ share price that rigger when you want to buy at the low end or sell the shares when they reach a certain price.

Limit orders allow you to set a minimum or maximum price for buying or selling shares.

You can also minimise losses by setting up a stop loss which is a mechanism for selling an asset when the price drops to a certain level.

Your trading patterns

If you plan to make low-value trades, below £500 when selling blocks of shares then a standard account will be the cheapest. However, if you plan to trade shares worth £1,000 several times a month then selecting an active trader account which is likely to cost in the region of £12.50 quarterly for a management fee would be the better option.

You can buy and sell shares online, by phone or at branches or offices but buying online is now the cheapest method.

If you are likely to be a regular trader look out for free offers from online share-dealing firms including share tips and free market reports.

Bulk-buy broker options lower the cost of share dealing to as low as £1.50 a trade, however this means you are not in charge of the timing of when shares are purchased.
However, even if you select an account like this, you can still make one-off trades for a higher fee should you feel there is an excellent opportunity that you don’t want to wait for.