We look at the website options to save brokerage and build a portfolio.
Many investors who have used their tax-free Isa and Pep allowance each year are now sitting on sizeable nest-eggs that in some cases are now worth more than £1m.
But many of these "Isa millionaires" amassed their fortunes by investing in individual shares, rather than funds, which have traditionally been seen as a less risky Isa investment.
It is now far easier to run these self-select Isas, thanks to online brokerage services, which typically offer far lower dealing charges than City-based stockbroking firms.
Most online brokers operate on an "execution-only" basis, which means they do not offer advice as to which share you should buy, or sell. Customers have to deposit money into their account, and the brokerage firm will use this to carry out transactions on your behalf. You also have the option of dictating how high you are willing to go for the price of a particular share, as you would with a traditional broker.
Usually your shares are held in a nominee account which means you don't receive the share certificates or have voting rights. But this can reduce the paperwork involved with share ownership. However, the shares are still in your name, and you still get paid the all-important dividends.
But although these online services have reduced stockbroking charges, there are still a range of fees customers have to pay. This will include set-up fees, ongoing administration costs, plus the charges imposed each time you buy or sell a share. There will be differences in the ways these firms impose such fees (some will charge a flat fee, some a percentage cost) so think about how you plan to use the account when comparing costs.
Some of the best rates are offered by the smaller, less well known names. But as with any kind of transaction, pay careful attention to the small print and check there aren't any extra hidden costs behind an otherwise fantastic deal.
The first thing investors should check is whether this firm is properly authorised by the regulator, the Financial Services Authority (FSA). This will ensure your money is properly protected and ring-fenced from the company's own assets. Remember rogue traders can dress themselves up as brokers, so make sure the site is listed on the FSA's website ( fsa.org.uk) .
While most online brokers don't offer advice, they usually provide a range of additional information, such as share-price graphs and company reports. These enable you to monitor your portfolio, and help with buying and selling decisions, but check whether there are additional charges for such services.
There is a downside to getting up-to-the-minute valuations on your portfolio. Financial adviser Philippa Gee said it encourages "short-termism", and these online customers don't always give an investment sufficient time to prove itself. Clients need to "fully understand the need to sit back and wait", she added.
When selecting a portfolio you need to think about your investment objectives. Greg Davies of Barclays Wealth said: "It's important to look at individual attitudes to risk. People's tolerance to risk declines with age, but we also see an increased tolerance to risk the wealthier customers are. Young people have many years of earning potential ahead. They should take more risk, not less, because they will benefit from compound interest."
Risk can be a powerful motivator (or de-motivator) in an investor's arsenal. It is important to be honest with yourself about your tolerance to losing capital.
Ms Gee added: "Many people are concerned about investing today because of all the negative news they see at the moment. It has put them off any form of risk."
But she says again it can pay to take a longer-term view. "Those investing in the stock market will experience periods of market turbulence, but you have to learn to cope with that, otherwise you will restrict your investment choice and potential."
Those looking for a self-select Isa should consider the following:
Charges Look at both dealing costs and administration charges. The cost of buying and selling shares varies between providers, but remember most brokers will also offer discounts on their dealing charges for more active traders.
Administration charges also vary between broking services. Some providers charge a quarterly account management fee while others charge annually. Plus, if you think you might not trade regularly, avoid accounts with an inactivity charge, which can rack up the costs.
Tools Investors need good tools to track the performance of individual shares, sectors and their own portfolio, as well as researching price history. Look (Munich: 867225 - news) at whether there are extra costs for accessing the broker's charts, graphs, tips, and news. Also worth looking at is the broker's website make sure it's one that's easy to navigate around.
Live prices Most stockbrokers now show the real time prices, but it's definitely worth double-checking beforehand as some online services will have a 15-minute delay from the trading floor.
Markets available If you are keen on having a more international portfolio, or like the idea of a holding a wide spread of different types of investment check the broker offers this facility.
Dividends Typically you can opt to have them reinvested or paid into your current account. Reinvesting does usually incur an additional cost, though, but can work out cheaper in the long-run.
= What do they charge? =
IWeb Share dealing
Charge per trade: None Account admin charge: £10 Webpage: iweb-sharedealing.co.uk
Halifax Share Dealing
Charge per trade: £11.95, 1pc charge on international Account admin charge: None Webpage: halifax.co.uk/sharedealing
Hargreaves Lansdown
Charge per trade: between £5.96 and £11.95 depending on frequency of trades Account admin charge: None Webpage: h-l.co.uk
Jarvis Investment
Charge per trade: £9.50 Account admin charge: £50 a year Webpage: accountjarvisim.co.uk/mainpage
TD Waterhouse
Charge per trade: between £8.95 and £12.50 depending on frequency of trades Account admin charge: £12.50 per quarter if inactive Webpage: tddirectinvesting.co.uk
Barclays Stockbrokers
Charge per trade: £6.95 to £12.95 depending on frequency of trades Account admin charge: £12 quarterly inactivity fee Webpage: stockbrokers.barclays.co.uk
0% initial commission & 1000's of Isa's to choose from with Telegraph Fund Supermarket .
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