Jeremy Gates looks at the nation’s money issues and reveals the best funds for your stocks and shares ISA.

IF they get the timing – and the price – right, an Individual Savings Account (ISA) holding stocks and shares is one of the best investments a small saver ever makes.

The entire personal ISA allowance of £10,200 for 2010-11 can be held in stocks and shares – rising to £10,680 in 2011-12.

Capital gains on equity ISAs are tax free, while income earned is subject only to a ten per cent tax credit deducted from dividends.

According to the Fair Investment Company, a savings and pensions specialist, a couple putting the maximum allowed in stocks and shares ISAs each year since Gordon Brown launched them in 1999 would have invested £87,600 each, or £175,200 in total.

With growth of seven per cent per annum, net of charges, their nest egg of more than £275,000 is now beyond the taxman’s reach.

Money held within this fund can be reinvested in other suitable investments, such as equity income funds, bonds, or funds linked to key commodities like gold, and further profits will also be tax free.

In retirement, savers can take capital and profits earned from an ISA pot, also tax free. That’s why stocks and shares ISAs can make such good long-term investments.

Bold investors who bought stocks and shares ISA in March 2009, when London’s FTSE-100 of top shares was roughly half this week’s level, have seen four-figure gains, totally tax free.

There is another attraction with equity ISAs: savers can drip feed money in by regular payments from their bank account.

Because the unit price of managed funds goes up and down, they invest at a range of prices which can turbo-charge gains when markets hit a strong period of growth.

There is, however, one snag with stocks and shares ISAs: with hundreds of managed funds to choose from, investing in a range of different things and worldwide, how can you find a fund which delivers a decent profit and makes the tax shelter worth having?

The website unbiased.co.uk can suggests three financial advisors in your locality. But advisors require payment, often on an ongoing basis to monitor your investments.

Another option is to buy a ready-made product – M&S Investments, for example, offers Cautious, Dynamic and Balanced options, with portfolios put together by HSBC Global Asset Management to suit individual risk profile.

If you are happy to make your own investment decisions, get a discount brokers to arrange ISAs or on an ‘‘execution- only’’ basis. These brokers usually refund a substantial chunk, and sometimes all, of the initial commission which the funds themselves would charge new investors.

However, these brokers – and most ISA managers, for that matter – do levy an annual charge, typically about 1.5 per cent of portfolio value.

Hargreaves Lansdown, the financial advisor whose own shares have soared this year, produces a monthly edition of its Investment Times. It runs its own Income and Growth fund, which holds stakes in 11 leading funds invested worldwide.

Willis Owen has revamped its approach for 2010- 11 to attract more private investors.

For sheer simplicity, it’s hard to beat the list of 18 funds – from Neptune Greater Russia to the steadfast M&G Recovery Fund – compiled by Financial Discounts Direct.

Savers further from retirement may have more time to wait for growth: prospects here might be more exciting in the emerging markets of the BRICs – Brazil, Russia, China and India – though India’s stock market has fallen back sharply in recent months.

The vital thing with stocks and shares ISAs is to make regular investments, perhaps £100 or £200 per month. In a few years, a valuable savings pot can emerge.

My personal choice is the Standard Life UK Smaller Companies Trust, run by Harry Nimmo. It has doubled my money in five years, with more – I hope – to come. If only my Standard Life pension had enjoyed similar success!