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> Stock ISAs - UK Guide
 In a nutshell
An ISA that invests your money in stocks.
Why opt for an ISA
ISAs allow consumers to save and/or invest without being charged tax - so they can benefit any consumer with some savings cash to spare. If you opt for a stocks ISA then you could potentially make much higher ISA returns - which is why these options are so popular.
Expected Return
You can't really predict an accurate return on a stocks ISA as you are gambling on stock market performance here. Generally, stock market returns on investment will be higher over time than standard savings but, conversely, you also risk losing your money if markets do badly. You'll also need to pay charges and, possibly, stamp duty payments with this kind of ISA so that will obviously affect your profits somewhat.
Access
You can generally access your money from a stocks ISA whenever you like but you do need to remember that these are long-term savings vehicles. So, if you withdraw your money early then you may not see such good returns or could even get back less than you paid in.
The risks
You're basically at risk with a stocks ISA because your profits (or losses) are all dependent on stock market returns which can be unpredictable. So, the extremes are that you could make phenomenal profits - or you could lose your original investment entirely. You can spread your risk a little by opting for 'safer' stock market ISA investments rather than riskier ones - however you're then more likely to see less of a return.
How often interest is paid
A stocks ISA is really all about overall growth rather than immediate return, although you can opt for accounts that pay income rather than/as well as growth on your capital. This income is usually paid either monthly or annually.
What to look out for
You should take a look at how any stocks ISA has performed in the past before you buy it - this doesn't guarantee that it'll do well for you but it can be a help. You basically have to be prepared to take a gamble that you may lose money with a stocks ISA - although if you invest your cash for the long-term then this probably won't be so much of an issue. Consumers that opt to take out their money in the early years of a stocks ISA may find that they don't recover their original capital in full or at all. But, if stock markets do well, then so will your investment, so you could turn in much more of a profit than with a basic cash ISA investment. It might be worth your while to consider a CAT standard ISA if you're new to this kind of investment. CAT standards were established by the government to make sure that Charges, Access and Terms were all easily laid out for consumers and that they wouldn't be charged too much for investing in ISAs in the first place. But, conversely, you may find that CAT standard ISAs won't give as good a return as non-CAT ones as they are more restricted in where they can and can't invest. And, CAT standards may well change in 2005 so current terms may not apply to new ISA investments (although they should still apply to existing ones). Although your ISA investment will come tax free you'll be limited in how much money you can actually make by ISA rules. So, for example, your maximum stocks ISA limit at the moment is set at £7,000 for a maxi ISA or £3,000 for a mini account. So, you may make tax free savings but you can only make them on these sums each year. You can't, for example, try to make more savings by opening both a maxi and a mini ISA in the same tax year. And, once you've invested your full allowance you can't invest any more - even if you take out some of your investment during the year it can't be topped back up to your limit again. If you're worried about putting all your eggs into one basket by using your full ISA allowance on a maxi stocks ISA then you can simply go for a 'combi' maxi ISA - here you can invest £3,000 in stocks, £3,000 in cash and £1,000 in insurance. You also need to be aware that ISA investment rules are set to change in 2006. At the moment it is expected that your maximum stocks ISA limit will be set at £5,000 for a maxi ISA from that point. Mini stocks ISA investments may rise to a £4,000 limit, however, as mini insurance ISAs are being integrated into stocks/shares allowances.
Alternatives
If you're interested in the benefits of investing over standard savings then a stocks ISA is probably your best choice given the tax benefits. If risk is an issue then you could consider a tracker ISA which is generally perceived as a lower investment risk. You can also look at a cash ISA or a tax beneficial savings product such as a National Savings account as an alternative.
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