Launch your new ISA year: What are investors buying?

April isn’t just a time for lambs, chicks and chocolate eggs – it also marks the start of a new tax year. From 6 April every year, your ISA allowance is reset, giving you a brand new £20,000 quota to invest tax free. March to May is therefore unofficially “ISA season”, and ISA providers set about ensuring that those with enough to save use their annual allowance before the clock strikes midnight on the following 5 April.

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What is a stocks and shares ISA?

Stocks and shares ISAs are a type of investment account to use when saving up over the long term. They let you use your annual ISA allowance, which is the limit that you can save up to in each tax year without having to pay tax on your profits. Some providers will list their ISA as a separate account type, while others ask if you’d like an “ISA wrapper” on your investment account — these are exactly the same. An ISA is nothing more than a checkbox to say you’d like to use your tax-free allowance.

How much does a stocks and shares ISA cost?

With many providers, the cost of the ISA tax wrapper is free — you’ll get to choose between an ISA and a general investment account with your chosen provider, with the only difference often being the tax benefits. There are providers that charge you a monthly fee for holding your stocks in an ISA compared with a general investment account.

The investment charges depend on the platform you choose. Some people are tempted to choose the one that has the biggest list of features, stocks to invest in and tools, but beginner investors don’t use all of these features and tools, and most of the time they’re not interested in the more obscure stock exchanges, either. Choosing these platforms can end up costing you a lot more money. If you decide to take up a new hobby, you don’t usually dive into buying the most expensive equipment, you get a beginner’s kit and upgrade later if you need to.

We have a guide on investment fees if you want to know more about how much investing costs.

What do people invest in around ISA season?

During March to May 2021, investment platform IG found that technology companies, cryptocurrency companies and biotech companies were the most popular types of stock to invest in with a particular lean towards US companies — some popular stocks included Airbnb, Tesla and Coinbase.

In the 2022/2023 tax year, the platform has seen a shift. UK investors have been choosing stocks closer to home, including UK-based energy, oil and gas companies, as well as banks. Sam Dickens, a portfolio manager at IG, suggests that this is due to the rise in inflation. The current surge in energy and fuel costs mean that these companies are potentially earning more money, making them attractive to investors, which he refers to as “owning the problem”.

How did popular stocks perform in the 2021/2022 tax year?

Here’s the annual performance of the top 10 stocks that IG investors bought in ISA season 2021/2022.

The biggest winners of the year were Tesla, Apple and BP. The biggest losers were Coinbase, Palantir and Avacta Group.

• 5 year performance

  IAG

  Tesla

  GameStop

  Palantir

  Rolls-Royce

  Apple

  Coinbase

  Avacta group

  BP

  Lucid Group

How to own the problem

Angry about spending a fortune filling up your car? If you have some money to invest, consider buying into fuel companies or into a greener investment option, such as electric vehicles. When you’re next astonished at your latest energy bill, consider buying stocks in the energy companies. Furious at your mortgage interest rates? Think about shares in a bank.

The idea of this strategy is that these companies are making additional income as a result of rising prices, which generally helps their stock price. They might also pay dividends to their shareholders.

BP live chart

Of course this isn’t a hack or a guaranteed win — there are other factors that impact stock prices, and people might equally be selling their stocks in protest, which could send the stock price the other way. Consider the ongoing crisis between Ukraine and Russia — many investors and fund managers are taking their investments out of Russian companies.

A slightly different way of owning the problem is by investing in companies that are finding solutions. For example, IG has noticed that investors are interested in clean energy investments, including the iShares Global Clean Energy ETF. This exchange-traded fund invests in clean energy companies, which is a great alternative to traditional oil and gas companies.

iShares Clean Energy ETF live chart

Looking to invest in your first ISA? Here’s a top tip from IG:

We asked Sam about his tips for someone looking to open their first ISA.

Sam suggested spreading the risk by diversifying your portfolio, which means splitting your money between lots of different investments. One way to do this is by choosing a ready-made portfolio, which many providers, including IG, offer. These let you invest in a whole bunch of sectors and investment types – it’s a bit like grabbing a fajita meal box from the supermarket rather than buying wraps, chicken, spices, salsa, guacamole and everything else that goes into a great Mexican night.

If ready-made isn’t your jam and you’d like a more active approach, you can choose some shares and create a portfolio. While you’re getting the hang of it, you could split your funds between a ready-made portfolio and your home-made one.

Sam suggests reassessing your options every few months or so – you might need to rebalance or change your approach.