A review of the individual savings account (ISA) market, led by chancellor Rachel Reeves, is reportedly expected to start soon in a bid to encourage more UK savers to invest.
The government said in the Spring Statement in March that it wants to ensure the ISA regime offers the right balance between cash and shares to help savers “earn better returns”.
If you’re new to investing, the idea of moving from a cash ISA to a stocks and shares ISA might seem daunting, but lots of UK savers are considering the switch.
A survey by Boring Money of 2,680 savers found that 43% are considering investing in the future1, although there are still some misconceptions about investing that discourage savers from taking their first steps. These range from savers thinking they don’t have enough money to get started to overestimating the risk of losing money.
But as we show below, you might not need as much as you think to start investing and there are plenty of steps you can take to try to offset some of the risks.
Remember, too, cash is not risk-free. While cash can provide some security, its value can be eroded by inflation, which means your money could buy you a lot less in the future than it can today.
For example, £10,000 saved in cash in 2004 would be worth only £4,314 in “real” terms today – that’s 57% less. The same amount invested in the global stock market would be worth £70,253 in today’s money – a 600% increase2. Past performance isn’t a guarantee of future results, but it’s a compelling example of the power of investing.
To help you get started, here are four things to consider when investing in a stocks and shares ISA.
1) How much should I invest?
You might think you need thousands of pounds to begin investing, but even a small amount can help you get started and learn the ropes.
Before you start, it’s important to have a solid foundation. This means paying off expensive debts and ensuring you have sufficient cash savings to cover emergencies, such as unexpected bills or a period of unemployment.
For one-off expenses, one rule of thumb is to keep the greater of £2,000 or half a month’s expenses in a bank account. When it comes to an income shock, we generally suggest holding three to six months’ worth of expenses in an accessible account.
Once you have your emergency fund in place, you can decide how much of your remaining savings to invest in a stocks and shares ISA. Consider your financial goals and how long you’re investing for. If you need to access your money within five years, cash is a safer choice because there is less risk of your money declining in value just before you need to access it. For longer-term goals, investing gives your money the chance to grow in value and weather any stock market fluctuations.
2) Should I invest my money all at once?
Putting a lump sum of money into the market all at once can be better in the long run because you’re invested from the start. However, if you're new to investing you might feel more comfortable spreading out your investment by investing smaller, fixed amounts at regular intervals. This strategy, known as pound-cost averaging, can help you stay calm when markets fluctuate because you’re not worrying about the ‘right’ time to invest.
If you don’t have a lump sum of money to invest, you can set up a regular investment instead. The money will be automatically taken from your bank account each month, so you don’t need to worry about remembering to make a payment.
Whichever approach you choose, remember your annual ISA allowance is £20,0003.
3) What should I invest in?
Choosing where to invest might seem daunting, but it boils down to how long you’re investing for and how much investment risk you’re willing to take (your attitude to risk).
If your goal is far off, such as retirement in a few decades, you can afford to take on more risk because there is longer to ride out the fluctuations in the market. In this case, you could consider investing a greater proportion of your portfolio in shares, which have historically offered higher returns over the long term. If your goal is closer or you’re more risk-averse, you might prefer to invest more in bonds4, which typically offer lower but more stable returns over the long term. Read more on keeping a balanced portfolio.
It’s important to spread your investments across different industries and regions of the world. This can help to reduce the impact of downturns in specific parts of the market, leading to more stable returns over time.
A simple way to do this is to invest in funds. Funds invest in hundreds, if not thousands, of different companies, providing instant diversification. As Vanguard’s founder, Jack Bogle, once said: “Don’t look for the needle in the haystack. Just buy the haystack.” This means investing in a broad fund rather than trying to pick individual high-performing stocks, which can be unpredictable.
4) How do I get started?
At Vanguard, we offer a range of services to help you get started.
You can build your own portfolio from our range of over 85 low-cost funds. Or you can keep things simple with an all-in-one solution, such as our LifeStrategy funds, which combine different types of investments in one ready-made portfolio.
If you don’t want to choose and manage funds yourself, our Managed ISA can do this for you. We’ll select a portfolio of investments for you based on your attitude to investment risk and manage your portfolio moving forwards. Our Managed ISA is designed to take the guesswork out of investing, allowing you to focus on what matters most – reaching your financial goals.
No matter which option you choose, the key is to start now and stay disciplined. Even a small investment today can make a big difference to your future.
1 Source: 2025 Boring Money Online Investing Report.
2 Cash returns represented by the UK Sterling Overnight Index Average benchmark (SONIA) and global shares by the FTSE All-World Index with dividends reinvested; and inflation by the UK Retail Price Index (RPI). SONIA reflects the average rate of interest banks pay to borrow overnight. Vanguard calculations based on period 31 December 2003 to 31 December 2024.
3 £20,000 is the most you can currently invest in ISAs in a tax year, which runs from 6 April to 5 April the following year. This limit covers all types of ISAs, so if you invest £10,000 in cash ISAs you can only invest up to £10,000 in stocks and shares ISAs in the same tax year. The allowance resets on 6 April and you can’t carry over any unused allowance into the following tax year.
4 Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Past performance is not a reliable indicator of future results.
The Vanguard LifeStrategy® Funds and Vanguard Target Retirement Funds may invest in Exchange Traded Fund (ETF) shares. ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.
For further information on risks please see the “Risk Factors” section of the prospectus on our website.
The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.
Important information
Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.
This is designed for use by, and is directed only at persons resident in the UK.
The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information does not constitute legal, tax, or investment advice. You must not, therefore, rely on it when making any investment decisions.
The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.
For investors in UK domiciled funds, see our summary of investor rights which is available in English.
Vanguard will manage your investments in the Managed ISA on your behalf. You will not be able to place trades on your own account.
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