Investing in shares vs funds in an ISA

Many people think the name 'stocks & shares ISA' implies you can only hold stocks and shares in the account....

Authored on
30 Jan 2024
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Category
Why invest?
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Read time
  4 minute read

Around these parts we like to keep things simple, so we call it an investment ISA because you can actually hold loads of other cool assets. You can choose to put your money in shares, or in funds and themed investments, or go crazy and do a mix and match – the decision is entirely up to you. 😎

Stocks, shares – potato, potahto 🥔

With both stocks and shares you’re buying a stake in a company. With Dodl, you can choose from some huge names like Coca-Cola, Tesla, McDonald’s, and Apple, just to name a few. You make your moolah if the shares end up being worth more when you sell them versus what you originally paid. 💸

Some companies are even kind enough to pay dividends every three to six months, which is essentially a nice little cash reward they’ll give you in return for investing in them. You don’t have to pay any tax on the gains you make on investments, or on the income you receive from dividends on shares or funds held in an ISA. How sweet is that? 🧁

Funds – the multipack of investing

A fund is a bit different to a share. It’s a bit like buying a multipack of crisps – you buy one big bag and inside are lots of different packets and flavours. Instead of crisp flavours, a fund is packed with stakes in various companies or other assets like bonds.

For example, you might buy a global share fund – this means you’re investing in a fund that holds stakes in companies listed on stock markets around the world 🌍. Or maybe a technology fund which would only invest in tech companies; or a healthcare fund which would only invest in drug companies or firms which provide goods and services to medical facilities 🏥. You get the idea – the possibilities are endless!

Risky business ⛑

Whether you choose shares or funds (or a mixture) will depend on how much risk you are willing to take. Investing in an individual company can be higher risk than a fund because you are completely exposed if something goes wrong. 😨

Imagine you’re watching the Tour de France – let’s say you can either invest in one cyclist or in a team of them. If you go for a single cyclist, they could do brilliantly, but one bad crash and it's game over. If you invest in a cycling team, they aren’t all going to move at the same pace but even if one falls short, others pedal strong, lessening the bumps.

With a fund, your risks are spread across the multiple holdings in the fund portfolio, so if one of the holdings goes through a bad patch, you’ve got the other holdings to act as a cushion and hopefully minimise the pain for you. 😷

Lots of people like funds because even if it means they might get slightly lower returns, it’s easy to spread those risks like butter on toast. 🧈

There’s no right way to do things…

No-one can say with certainty that one thing is going to do better than another, so you still need to spend a little bit of time to understand what you’re investing in. ⏳

If you’re unsure about anything, you can always head to the Dodl learn tab, and if you still have more questions, you can chat to Team Dodl anytime in the app. 📲

 

Sound like the investment ISA might be a bit of you?

 

 

🔔 Just remember, Dodl doesn’t give advice so we cannot tell you where to invest – you have to make all the decisions yourself. If you’re not comfortable doing this, it might be worth speaking to a qualified independent financial adviser about your options. The value of investments can change, meaning you could get back less than you originally invested.

 


It's important to know

You have to be a UK resident for tax purposes to open an account with Dodl.

The past performance of investments isn't an indicator of their future performance and their value can go down as well as up. This means you could get back less than you originally invested. 

Dodl doesn’t offer any advice so if you’re not sure about the risks involved with investing, you should speak to a suitable financial adviser. 

How you're taxed depends on your circumstances, and tax rules can change in future.