By ANDREW CORNWELL 22/02/2010
With over 1,500 funds on offer from more than 140 fund management companies through Bestinvest, choosing the funds within your ISA can be daunting. In this article, we suggest how you can make the most of your ISA before 5th April 2010.
- Don’t buy a fund simply because it’s a top performer.
Take the time to understand why a fund has performed well: is it in a booming, but potentially high risk, sector? Or was it due to an exceptional manager who no longer runs the fund? If you’re then still attracted, remember to make sure that the fund meets your investment objectives and fits with the level of risk you’re comfortable with.
- Avoid investment ‘themes’ or ‘fads’ unless they really are appropriate.
Be careful not to buy into the latest fashion until you have considered the contrarian view. If you do go ahead, don’t become overexposed. In an uncertain world, don’t put all your eggs in one basket. Remember you can mix several funds within your Stocks & Shares ISA.
- What are you trying to achieve?
Think carefully about what kind of investor you are. How long do you want to invest? Are you looking to generate an income from your investments? How much appetite do you have to stomach the inevitable downside risk of investing in funds?
- Is your ISA portfolio balanced?
A good investment mix can contribute more to performance than individual fund picks. Overexposure to one market or sector puts you at risk and can mean missing healthy returns elsewhere. Aim to invest across a variety of asset classes that are likely to move in different ways to each other and spread your equity investments globally across large, medium and smaller companies.
- Optimise the tax benefits.
Structure your portfolio so that you optimise the tax benefits of your ISA investments. Put as many as possible of your bond and high-yielding investments in your ISA. If you don’t have new money to invest
in an ISA, consider a ‘Bed and ISA’: sell investments held outside an ISA and reinvest the proceeds inside an ISA (although be careful to consider any capital gains tax liability that might be triggered by selling your investment and switching costs).
- Don’t neglect your existing investments.
Don’t neglect your existing savings and investments. Regularly review your Cash ISAs and be prepared to transfer to a new provider if cash rates are no longer competitive. Consider making your cash work harder by transferring your Cash ISAs to a Stocks and Shares ISA to seek higher yields or capital growth (but remember that your capital is not guaranteed and you cannot transfer money back to a Cash ISA). Don’t forget to monitor your investments: fund manager changes and the need to rebalance your investments in line with your target asset allocation mean regular reviews are vital to keep your portfolio in excellent health.
How we can help you
We provide a wide range of tools on this website to help you make the most of your ISA. Our powerful Fund Search Engine enables you to compare funds on a wide range of criteria and see our top-rated funds. There are links to our Fund Factsheets providing detailed information on the objectives for each fund, insight into how the fund is being managed, performance and charges information and our assessment of the fund manager using Bestinvest’s own Manager Record Index.
If you’re unsure how to create an appropriate blend of funds, why not take a look at our suggested ISA portfolios? These have been constructed from a mix of our top-rated funds to suit the most popular investor requirements. Or, if you’d prefer to leave the monitoring and management of your investment to our experts, consider investing in our best ideas through the IFSL Bestinvest Multi-Asset Portfolio funds.
If you’re already a client, you can also log onto your Client Centre to see an analysis of your existing investments. Please call us if you require a password.
Finally, if you have fund investments valued at £50,000 or more, you may qualify for a free independent review of your ISA investments. Call our Advisers on 020 7189 9999 to discuss how we can help.