Is an ISA of this kind worth it for a portfolio < £2000? If so, are Stocks and Shares ISAs subject to any not-so-obvious fees for someone without previous experience (i.e. overnight fees)?
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2 Answers
Is an ISA of this kind worth it for a portfolio < £2000?
Not really. The only difference between any ISA and a regular account is that you won't ever have to pay taxes on the benefits you made out of the money you put in.
In the UK, at the moment we have a free personal allowance of £11000 for capital gains (e.g. buy/sell stocks, mutual funds...) and 2000£ for dividends. And you would need a portfolio way more bigger than <£2000 to top your annual allowances, so in your situation is it not worth to "waste" your ISA on that.
In general, you should try to use your ISA allowance in the larger part of your portfolio (or in the one that is more likely to attract taxes); for example, if most of your money is in cash accounts/deposits, then a cash ISA may be much more desirable (specially ir you are earning more than £1000/£500 a year on interest).
If so, are Stocks and Shares ISAs subject to any not-so-obvious fees for someone without previous experience (i.e. overnight fees)?
In general, no. ISAs work like any other account. There are some restrictions on how many ISAs can you have/open within a year, and there is an overall rule that says that you cannot put inside more than £20000 (at least in 2019/2020), but that is. However, the specific product you buy inside the ISA might have all sort of fees, so it is always worth having a good read at all the available documentation to clarify.
There are many different types of Stocks & Shares ISAs. I'm assuming here that you're thinking of investing in a fund, rather than picking your own shares.
Generally, the fees that are charged to your account are reasonably transparent. There may be a single fee, or alternatively a "platform fee" levied by the people you invest through, and a fund fee for the actual fund you're investing in. You can bypass the platform fee by investing in a fund directly, but that fund will almost certainly charge a higher fee to allow for the increased work of having you as a direct retail customer.
What is never documented anywhere that a customer can see is all the fees that the fund pays to other people, for instance stockbrokers' fees when buying or selling shares. But these fees all come out of the total value of the fund. All you can really do is look at the historical growth of that fund, and compare it with similar ones. One that generally does badly may be making bad investment decisions, or may be carrying out lots of pointless transactions which are racking up huge hidden fees.
