Using tax efficient wrappers, like a Stocks and Shares ISA account, is even more important in the current environment with tax allowances having been chopped or frozen. It only takes a modest level of interest, dividend income, or capital gain to trigger a tax liability.
How does a Stocks and Shares ISA work?
The dividend income tax allowance is now only £500 and from April the basic and higher rates of dividend tax are rising, a blow to many investors receiving dividends outside of tax saving products such as ISAs.
What’s more the annual capital gains tax (CGT) allowance remains at just £3,000 – down from £12,300 just a few years ago. Many of those investing carefully for the long term are being caught in an ever-tightening tax net.
Given the tax benefits, the annual ISA allowance is a vital sanctuary for those wishing to buy stocks and shares in the UK. At £20,000 each tax year under current rules, a couple could shelter as much as £400,000 from tax by using their allowance in full over the course of a decade with all profits and income free from tax.
Where to invest your ISA is up to you and there’s options for everyone. Some like to build their own portfolio, tailored to their own views and personal preferences. Others would like a simple, balanced solution that doesn’t need much attention over the years.
There are also those that aren’t sure right away and opt to secure their ISA allowance as cash first before deciding later. However, take care not to wait in cash too long. Interest on cash in a Stocks & Shares ISA is unlikely to be enough to keep up with increases in the cost of living, and for the longer term you stand to be better rewarded by investing.
Whatever your preference, Charles Stanley Direct has a solution with a wide range of funds and individual shares available to buy. Sometimes it can feel like there is too much choice, so if you are looking for inspiration here’s a selection of investment ideas for your ISA that have been researched by our Collectives Research Team, plus one option for a ready-made portfolio managed by our experts.
These should be considered long-term investments – typically five years or more – and are provided for informational purposes only. They are not personal recommendations or advice on how you should invest.The very broad risk category is indicated.
Before investing in any fund, please read the relevant Key Investor Information Document (KIID) or Key Information Document (KID), along with the Prospectus, to ensure they fit with your objectives, risk appetite and wider portfolio. Always ensure you have sufficient diversification to meet your needs by owning a variety of investments across different asset types and geographies.
The value of investments, and any income derived from them, can fall as well as rise and may be affected by exchange rate variations. Investors may get back less than invested.
Investment ideas for your ISA
Vanguard Global Credit Bond (fund) (medium-low risk)
A falling interest rate environment offers a potential boost for the traditionally less exciting world of fixed interest investments – also known as bonds. Investors in bonds lock in a certain level of return over a set period, provided the issuer of the bond remains creditworthy, which can offer greater certainty than shares.
The past five years have been challenging for the asset class, as expectations of higher inflation and interest rates took their toll. Bond prices can be highly sensitive to rate movements: when rates rise, the fixed level of return they offer becomes less attractive, prompting investors demand a lower price to buy in. Yet, the tide seems to have turned, as major central banks have cut rates and will look to do so further if inflation stays under control.
We believe investment-grade corporate bonds currently offer a happy medium between moderate risk and attractive yields for income seekers. For global exposure, Vanguard Global Credit Bond Fund is worth considering.
Vanguard is one of the world’s largest active fixed income managers, and this fund benefits from its impressive research capability. It invests globally, with a focus on developed markets and relatively secure investment-grade bonds, but with some scope to invest in high yield and emerging market bonds too.
The fund’s broad portfolio of predominantly high-quality bonds should limit default risk during economic downturns. Its yield could provide investors with a solid income return, with the added potential for some capital growth if interest rates expectations subside. Additionally, overseas currency exposure is hedged to remove the additional volatility associated with foreign exchange markets.
Ruffer Investment Trust (Investment trust) (medium risk)
This investment trust’s “all weather” strategy could prove useful for the year ahead amid a landscape of elevated investor expectations and valuations in the dominant US market.
The managers are currently wary of the high prices in many parts of the stock market. To manage this risk, they combine conventional asset classes – global equities, bonds, currencies and gold – with the use of derivatives strategies that serve as protection during market downturns. The overall aim is to preserve capital as well as grow over the long term, so the balance of different elements is designed to pay off in a variety of economic scenarios – rather than concentrate risk in one area.
The current portfolio is characteristically defensive, with around a third invested in equities and gold mining shares. It’s further protected by more sophisticated strategies involving derivatives that offer some insurance against market falls. This approach is completely different to how most portfolios are built today, so it could be an important diversification tool or act as a stable core holding in a portfolio for the long term.
Although this is a more cautious option in terms of the mix of assets, it’s important to note that investment trusts can carry greater share price volatility.
Charles Stanley Multi Asset Moderate (fund) (medium-high risk)
Successful investing starts with diversification. Not having all your eggs in one basket helps reduce risk and means you are not reliant on specific investments or areas performing well. The usual approach is to spread money across different asset classes – a mix of shares, bonds and cash – and possibly other areas, such as property or alternative investments.
If you’re looking to invest in a mix of assets but don't want the hassle of building, monitoring, and rebalancing a portfolio yourself, our Charles Stanley’s Multi Asset Funds could be worth considering. These funds reflect the views of our experienced in-house research team and invest in equities, bonds and other assets, aiming to deliver consistent returns through blending them together and reacting to new opportunities as they emerge.
Each fund is professionally managed and packaged in a single product – which removes the need to continuously monitor the investment. However, investors need to be careful in selecting the fund(s) to ensure they are appropriate for their objectives and risk appetite.
Charles Stanley Multi Asset Moderate Fund takes a balanced approach. This means being willing to tolerate some short-term fluctuations in value to achieve the potential for better long-term returns. It controls risk through holding a broad spread of investments but maintains a bias toward shares. It’s a compromise between maximising long-term returns from the stock market and providing a smoother ride than investing solely in shares.
The annual management charges are also highly competitive, plus our usual platform and trading charges are waived on any of the four Charles Stanley Multi Asset Funds.
Lazard Emerging Markets (fund) (high risk)
Emerging markets could remain in an investment sweet spot having already performed well over the course of 2025.
A weaker US dollar is helping boost investment and share markets remain defined by faster earnings growth compared to the developed world, coupled with attractive valuations. Central banks across the region have also been able to cut interest rates quicker than in the developed world as inflation proved to be less sticky, providing a further fillip to growth.
Yet, the area remains higher risk and prone to sharp ups and downs, not least owing to trade uncertainties. This environment could favour a patient and disciplined ‘value’ approach of buying out-of-favour stocks for the long term.
Step forward Lazard Emerging Markets fund managed by an experienced team headed by the long-serving James Donald. The fund’s investment process has a keen focus on the quality of companies that could help temper the inevitable volatility in these regions.
As with any highly active fund, performance can differ significantly from the broader market. The fund has been through some difficult spells since become a founding constituent of the Charles Stanley Direct Preferred List in 2013. Ultimately, though, it has produced impressive outperformance – especially over the past year. Of course, past performance isn’t a guide to the future.
Donald attributes his successful track record to maintaining discipline with his process. We believe the fund should appeal to those who believe an active manager can outperform through prioritising quality and value, together with avoiding problem companies in what is a varied and often unpredictable investment area.
Gresham House UK Smaller Companies (fund) (high risk)
Smaller companies remain cheap – even within the inexpensive UK market – despite frequently offering decent growth potential. With corporate and private equity buyers continuing to sniff around, there may also be opportunities to benefit from share price uplifts resulting from mergers and acquisitions (M&A).
Funds investing in smaller companies should ideally be large enough to be efficient and lower cost but also be nimble enough to react quickly to opportunities. This is also an area where knowledge and skill – combined with a sound selection process – can make a big difference to long-term returns.
One fund that stands out in this space is the WS Gresham House UK Smaller Companies fund. Gresham House might not be a household name, but it’s highly respected by investors in both market-listed companies and private businesses. This crossover means they apply a private equity perspective to public markets, focusing on high-quality companies with strong management, market positioning and business models. They also fully consider the potential strategic value of the business to potential trade or private equity buyers.
Managed by the experienced Ken Wotton, we believe this fund is something of a hidden gem. However, it’s worth noting that its concentrated approach to investing – holding around 40 to 50 stocks – adds to the risk of an already adventurous area. Smaller companies are typically riskier and less diversified than larger businesses.
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.
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