Top 10 stocks and shares ISA investments on Freetrade
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Top 10 stocks and shares ISA investments on Freetrade

With the start of a new tax year fast approaching, we look at what people have been buying with their annual allowance over the past 12 months.
David Kimberley
March 25, 2021

I’m sure all of you are looking forward to April 5th. 

Yes, there’s a bank holiday or something happening that day but who cares about that? 

What everyone’s really excited about is the end of the tax year and the renewal of our annual ISA allowance. Or maybe that’s just us. Who knows.

Anyway, the end of the tax year is a good opportunity to take stock of what you have in your  ISA and think about whether you want to shift things around or leave them as they are.

And to give you something to think about as you do that, we thought we’d reveal 10 of the most popular ISA stocks on Freetrade in the past 12 months. 

Before we do, keep in mind that every investor has their own set of finances, risk tolerance and investment goals. 

Freetrade customers are no different. So remember not to take this list as something to mimic. As past performance is no indicator of future returns, and this list is inherently backward looking, none of this should be taken as a recommendation to buy or sell shares. 

If you feel you genuinely need help with your personal investments, it may be worth speaking to a financial adviser.


Top 10 ISA investments on Freetrade


  1. Tesla
  2. Apple
  3. Vanguard S&P 500 ETF
  4. GameStop
  5. Amazon
  6. iShares Core FTSE 100 ETF
  7. Palantir
  8. iShares Global Clean Energy ETF
  9. Vanguard FTSE All World ETF
  10. Microsoft

1. Tesla


No surprises here. Not for us anyway. Tesla has been extremely popular with investors across the board during the past 12 months. Look back at its performance in that time and it's not hard to see why.

But Tesla was arguably a meme stock before meme stocks became a thing. The company has been trading at wild valuations that often seem totally out of whack when you look at its finances.

That remains the case now, even though the firm has seen a pretty steep decline in its share price so far in 2021. 

Tesla fans will argue that the carmaker’s high valuation is simply a reflection of its long-term prospects. Detractors will argue that it’s all built on hype, memes and clever marketing from CEO Elon Musk.

It’s hard to say who’s right and, of course, the truth could lie somewhere in the middle. Is it good for an ISA investment? We can’t say. Like many things in life, it all depends on which narrative you buy into.


2. Apple


At the time of writing, Apple’s market cap sits at $2.03tn. That’s slightly larger than Italy’s total gross domestic product and would make Apple the 7th largest economy in the world if it was a country.

And at $57bn, the tech firm’s net profit for 2020 was also larger than the total gross domestic product of Uruguay. It also made it the most profitable company in the world. Not bad.

So it’s not surprising that lots of investors have been eager to have a piece of the tech firm in their ISA. 

But as with Tesla and other tech giants, there are question marks as to whether Apple’s shares are now overpriced. It’s also hard to say whether or not the firm will be able to continue the stellar growth it has had over the past decade.


3. Vanguard S&P 500 ETF


ETFs have become a staple of most investors’ portfolios during the past couple of decades.

Hefty fees and often poor results mean people have been less willing to hand their money over to fund managers. Instead they’re happy to track an index and get whatever return comes with it.

This isn’t a bad idea. Index ETFs tend to be less risky than more concentrated portfolios and many of them have provided good returns over the past ten years. 

That latter point is particularly pertinent for S&P 500 ETFs. With the index they track regularly hitting record highs in the past 12 months, you can understand why lots of people want the Vanguard ETF in their stocks and shares ISA.

But beyond the obvious fact that a market can always crash, there is still one big thing to be aware of here. This particular ETF distributes income it receives, meaning you’ll receive any dividends you have exposure to.

Now you might think that’s great because you like dividends or you want income. But the problem is when dividends are paid out, as opposed to being reinvested, you can end up stunting your total return.

Research from GFM Asset Management found that 75% of the total return on the S&P 500 from 1980 to 2019 came from dividends being reinvested. That is a massive amount. 

To put it into perspective, a $100 investment in 1980 with dividends reinvested would have netted you just over $5,000 by 2019. Without reinvesting dividends, that $100 would have been worth less than $2,000. 

Again, you may be happy taking out the dividends but when you look at stats like that, it’s hard to see the benefit of doing so, especially if you’re looking to invest in a stocks and shares ISA for the long term.


4. GameStop


If this list as a whole is supposed to be something you can learn from then let GameStop be an example of what you should try to avoid when investing.

The US video game retailer was front page news earlier this year when Reddit investors swarmed the markets in an effort to buy up its shares.

Some of that was driven by a desire to hurt hedge funds which were shorting the stock. 

Others were playing a game of greater fool theory, hoping to buy and sell quickly before the shares tanked. And many people were probably just looking to alleviate the boredom of COVID lockdown.

At any rate, shares in the group are now worth about a third of what they were during the peak of the madness. 

It may be the case that some people really believe GameStop is going to do well and can justify its rapid rise in price. 

But anyone buying for the lolz or trying to make a quick buck is definitely not on the path to making steady returns over a long period of time. 

5. Amazon


It’s amazing how Amazon has risen over the past decade to become a company that is involved in pretty much every aspect of our lives.

You can now buy your groceries from the tech giant, have your website hosted on its servers or use its tablet device to read a book. 

Like Apple, the company’s success has brought with it lots of investors eager to buy its shares.

And also like Apple, Amazon now has a very high valuation. That may be enough to put off some prospective investors for now.

The problem is that these companies keep delivering major returns and, at least for now, that doesn’t look likely to change. 

As a result, investing in Amazon is less about the business and more about its valuation. What you have to ask is, yes the company is doing well, but is it enough to justify a share price in excess of $3,000?

6. iShares Core FTSE 100 ETF


As we’ve already said, ETFs have become popular alternatives to pricey, underperforming funds over the past couple of decades.

But unlike the S&P 500, the FTSE 100 has seen pretty poor returns over the past five years.

Years of Brexit uncertainty were promptly followed by a punch in the face by the pandemic, with both things helping to keep a lid on growth in the UK stock market.

That may change now but it still seems as though the UK is lagging behind much of the world.

Another problem for any investors in the iShares Core FTSE 100 ETF is the distribution.

Like the Vanguard ETF mentioned above, this particular ETF distributes income, meaning you stand to lose out on a lot of the gains that may come from those dividends being reinvested.

The good news here is that iShares has another ETF which also tracks the FTSE 100 and does reinvest dividends. So if you are looking for reinvestment then this would be a better option for you.

7. Palantir


CIA-funded Palantir is a tech firm that mainly works with government agencies, particularly defence departments and intelligence agencies.

Like many companies in the world of high technology, it has never turned a profit and there don’t seem to be any sign that it will do so in the near future.

None of this has stopped people from piling money into the company. 

Shares in the firm have flip flopped wildly since listing last year, with there probably being some GameStop-esque behaviour going on too.

If you believe the tech company is going to be very successful and make lots of money then obviously buying its shares makes sense.

But it’s definitely a risky bet to make because the company still needs to do a lot before that happens.


8. iShares Global Clean Energy ETF


Green energy companies were attracting a decent number of investors prior to the pandemic but during lockdowns and social distancing, we’ve seen vast sums of cash flow into them.

Naturally many people have chosen a simpler route by putting funds into the iShares Global Clean Energy ETF instead of stock picking.

The ETF was performing exceptionally well for most of 2020 but a sense that many of its constituent firms were overvalued has led to a sharp decline in its price so far in 2021.

There are a couple of things to be wary of here.

For one, it may very well be the case that green energy firms do well in the future. Government support and technological advancements are making that more likely.

But that doesn’t mean every green energy business is going to succeed. And some of the firms in the Clean Energy ETF aren’t even making a profit, including Plug Power — its largest holding.

The main thing here is to not just buy a narrative. Green energy may do well but just make sure this ETF actually has holdings in firms you feel comfortable having a stake in.


9. Vanguard FTSE All World ETF


Yup, another ETF. 

This one tracks an index of companies all over the world, which is good if you want to get a really broad exposure to lots of different countries and industries.

Again, the potential downside here is that dividends are paid out and not reinvested. 

You may be happy if you want to keep those payments as income. If not then you could miss out on future growth opportunities.

If you are looking to reinvest then there is another FTSE All World ETF that does just that.

10. Microsoft


We have another famous tech firm to finish off our 10 popular ISA investments.

In many ways Microsoft has defied expectations over the past 15 years. 

Many people wrote the firm off when Apple enjoyed a renaissance following the successful launch of the iPod and iPhone.

But even though it hasn’t done so well in the mobile phone market, Microsoft has continued to produce a solid return on its investments and made lots of money for shareholders.

Like Amazon and Apple, the questions you have to ask are whether it can continue this growth and if its current share price is justified.

And like all things on this list, there are no clear answers. It’s a wild world out there and, excitingly, you get to decide what you think the right move to make is.

Important Information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Eligibility to invest into an ISA and the value of tax savings depends on personal circumstances and all tax rules may change.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

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