Spring 2018 suggestions for advanced Isa investors
This article assumes that its reader already has some basic fund investments either within or outside a tax-saving Isa account and is looking to add to their collection before the end of the tax year.
Basic or core investments include UK tracker funds (run by computer, see our guide here) or UK funds of shares managed by humans with the aim of growing your money or earning an income on it. Once you’re happy that you’ve got the UK growth and income sectors covered, you could consider widening into different areas.
That might mean choosing a Europe or US fund, or even going as far afield as Asia or the emerging markets. This is good for spreading your nest eggs between baskets and you might get a boost in returns. However, there is more chance of losing money by doing so because you have a different currency and some companies (and stock markets) are not as well-regulated as in the UK.
Bonds (the government and company IOU variety) are more difficult to understand than shares. Their return is linked to general interest rates which are unattractively low currently and many investment professionals aren’t recommending them. Bonds are supposed to be less risky than shares: you can lose money but probably not the whole house. For this reason, they’re an important part of any properly balanced portfolio and, boring as they are, they should form part of yours.
Remember you should have a cash cushion worth three to six months of salary (or living costs) before considering investing. Don’t forget to use up your Isa tax-perk allowance and that small, regular amounts (eg a monthly plan) avoid the situation where you dump a large sum in the market just before a downturn.
We’ve asked fund experts Jason Hollands at Bestinvest and Laith Khalaf at Hargreaves Lansdown for some recommendations to help you build your portfolio. I’ve listed just the names of the funds but if you want more information, go to either of these firms’ websites (www.bestinvest.co.uk or www.hl.co.uk) where there’s stacks of data on them all. Our experts have put in tracker funds too where appropriate because they’re cheap and it saves on fees over the long term.
I’ve listed the categories roughly in risk order. Everyone gets very het up about risk and what it means but it’s actually common sense. Are you going to put £50 in Tesco shares and £5,000 in some tiny tech firm in India you’ve never heard of but might be the next Apple? No, it’s the other way around and that’s how you should treat your portfolio. Put most of your eggs in a (relatively) known quantity like UK firms and a few which you don’t mind being broken in more exotic places. The general rule of thumb for sectors such as emerging markets is no more than 5% of your whole portfolio.
I firmly believe it’s possible to manage your own money using funds but (WARNING KLAXON) if you’re really not confident choosing yourself, pay for someone to help you or at least start you off. See our guide to finding a financial adviser here.
Jason picks: TwentyFour Dynamic Bond
Laith picks: Artemis Strategic Bond
2. UK income
Jason picks: Evenlode Income
Laith picks: Jupiter Income
3. UK growth
Jason picks: Liontrust Special Situations
Laith picks: AXA WF Framlington UK
Jason picks: FP Crux European Special Situations
Laith picks: Sanditon European
5. US (our experts feel share prices are over-priced currently so tread carefully)
Jason picks: Loomis Sayles US Equity Leaders
Laith picks: L&G US Index
6. Global growth
Jason picks: Lindsell Train Global Equity
Laith picks: L&G International Index
Jason picks: Morant Wright Nippon Yield
Laith picks: First State Asia Focus
8. Emerging markets
Jason picks: Fidelity Emerging Markets
Laith picks: ishares Emerging Markets Equity Index
Last updated 8 March 2018.