ISA or Index Tracker

jazzyjustlaw

I wonder if anyone can help me. I currently save around £100.00 per month in an ISA and another £100.00 in another account. I want to invest another £100.00 per month into an Index tracker. Does a tracker produce more than an Isa or should I utilise my ISA and just put £3,000 a year into that to make use of it. I do not want an ISA Tracker but I would like to invest in a Tracker itself but not if the interest equates to less than an ISA.

leaphaze

I assume when you say you have an ISA you're referring to a cash ISA.

A Cash ISA is just a savings a/c where interest is paid tax free. The risk to your capital is minimal, unless the institution running the Cash ISA goes belly-up. The interest rate is stated and you get your interest monthly or yearly.

A Tracker, however, just tracks a bucket of shares on the stockmarket, either here, or abroad. With a tracker there is no guarantee on return, and you could get back less than you put in, if you choose the wrong stockmarket index to track. But you may get a better return than a cash ISA.

So it's a question of risk.

dunstonh

I do not want an ISA Tracker but I would like to invest in a Tracker itself but not if the interest equates to less than an ISA.

So you want a plain unit trust or OEIC but not an ISA UT or ISA Oeic even though you have the allowance to do it. Why?

As for return, who knows. Over 5 years active funds and cash deposits have beaten trackers but over 10 years trackers have been best. Its all a matter of how long you intend to save for and what the purpose of the money is.