Best Performing Stocks And Shares ISA

If you’re looking for the best performing stocks and shares ISA then you’re already on a rocky road.

We’ve all been there, or at least I certainly was. Choosing a stocks and shares ISA is a great way to start investing. But of course with such a large variety of options out there, how do you decide which one to go for? The obvious answer is of course performance, or more specifically, financial gains.

But those financial gains are largely meaningless. They are vanity metrics. Just because an ISA has beaten the competition in one year leaves no guarantees for the future.

I was in the same boat when I looked into my first robo-advisor. With Nutmeg, Wealthify, Moneybox and a host more managed portfolios I was keen to know which hands-off strategy worked the best.

But as a lot of economists say – stocks take the stairs up and the elevator, or even the window, down. Markets are unpredictable and a drop of 50 – 70% could always be just round the corner.

Now if you’re looking for the best performing stocks and shares ISA you are probably already well informed about asset allocation and diversification. Hopefully you intend to mix in some bonds with your ISA – as many Stocks and Shares ISA readymade portfolios do. But don’t forget you are still potentially heavily invested in a very volatile asset class.

Of course volatility is normal and is fine if you can stand it. Most financial experts recommend a 5-year period for investing. That means if you need the money within five years then don’t invest. But if you can leave it and potentially watch it drop 60% (hint – don’t watch it if you want to have a good life) and wait for the recovery then you should be alright.

Many retail investors are very short term – hence they look for the best performing stocks and shares ISA by looking at the performance over the last five years. In reality, they should be looking at 20, 30 or even 50 years.

But there’s something even more important to watch when it comes to the best performing stocks and shares ISA – and that is fees.

While it is almost impossible to really control the markets and the performance of your portfolio, one thing you can totally control is the fees you pay on your stocks and shares ISA.

Most people look past these because they are normally below 1% – surely a negligible amount. But when it comes to your portfolio this is significant. In a good year you could happily make roughly a 10% return on the S&P 500. So that 1% is 10% of your return gone. And as your portfolio grows over time that amount is only going to keep growing.

Your broker taking 10% of your returns for a job well done might not seem that big a deal. But when we’re talking about investing we’re never talking about just one year. Your investment is compounding, and fees eat away at that compounding effect significantly by taking away your ammunition. It is an opportunity cost. That means you don’t notice it because its money you never really had, but if you weren’t paying fees theres a good chance you would have a lot more when all those fees taken away each year could have stayed in the investment for decades.

But here’s the real scam. Humans have natural tendencies to be impressed by brands and gurus – especially if those brands and gurus have a high price. But the humans who are those brands and gurus have their own natural tendencies that make them poor investors who fail to consistently beat the market. On the other hand it is very easy to match the market with low-cost investment vehicles.

Let’s underline that. The people who charge the most fail to beat the market. And yet you can match the market for much less?

Yes – so when looking for the best performing stocks and shares ISA, costs should be your top concern and not the annualised returns of the past five years.

Stewart Vickers
Latest posts by Stewart Vickers (see all)