However, the biggest problem for many investors is deciding where to put it. Investment platforms offer an amazing array of options, and the choice can be baffling.
One way of coming to a decision is to look at what you want your money to do for you. Here, we’ve suggested a range of options for different types of investors as they look for somewhere to grow their last-minute ISA cash.
Generating an income
One of the key selling points of an ISA is the ability to generate a tax-free income stream. By directing your ISA capital towards an income-generating investment, you’ll have a little bit extra to deal with those higher water, energy or council tax bills coming down the line in April (or you could switch them all off and flee the country, the choice is yours).
Income-generating investments have been generally undervalued by investors amid a relentless pursuit of the gains from AI. This has left many areas looking cheap. You could go for one of these overlooked areas in the hope of a recovery – and receive a high income while you wait. The VT Gravis UK Infrastructure Income Fund, for example, has a trailing yield of 6.6%, and focuses on a sector that has been really unloved by investors.
One alternative is to let someone else do the heavy lifting for you. The Jupiter Merlin Income Fund blends stock market funds, bonds and alternative assets. This has a lower yield, currently 3.3%, but the income is more diversified and the capital returns may be more stable.
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Diversifying from the US
The early signs are that Europe is the place to look from here, and capital coming out of the US technology sector has been gravitating towards Europe. The theory is that Donald Trump’s push for Europe to stand on its own two feet may galvanise Government spending across the region and drive growth. This has already been seen with the announcement of a large fiscal stimulus package from Germany, aimed at defence spending and infrastructure. It helps that European stock markets were cheap and unloved.
Nevertheless, there are still plenty of risks. Trump tariffs continue to loom over companies across the region, and economic growth remains lacklustre. The CT European Select Fund, led by manager Ben Moore, prioritises companies with strong competitive positions in industries with high barriers to entry. The fund has proved defensive in more difficult conditions and should be a good choice amid the current uncertainty. It should participate in any upside in Europe, while protecting against some of the downside.
Exploring new markets
The large cap technology trade has absorbed a lot of market oxygen, leaving other, equally fast-growing, markets largely neglected by investors. Nowhere is this more true than in Asia. Asia is home to many of the same growth opportunities seen elsewhere in the world – AI, reshoring, clean energy, digitisation – but at a fraction of the price. As money flows out of the US, Asia might start to command more attention.
We like the Fidelity Asia Pacific Opportunities Fund, managed by Anthony Srom. It backs just 25-35 best ideas. It has an eclectic range of companies in its top 10 holdings, and looks very different to the benchmark. It has companies such as smartphone group Samsung, fibre cement group James Hardie Industries and sleep apnoea treatment maker ResMed. Its highest exposure is in China – at 23% – so it should participate in any recovery there, but it also has high weights in Australia and India.
Hiding until the coast is clear
These are turbulent times. Investors would be forgiven for wanting to keep their savings under the bed until the coast is clear, until the tariff regime is known and there is some resolution in the scary geopolitical situation. However, hiding in cash is seldom a good strategy for the long term. Investors often miss out on key days in markets, which can make a real dent in their long-term returns.
Research from JPMorgan Private Bank finds that over the past 20 years, seven of the stock market’s 10 best days occurred within just 15 days of one of the market’s 10 worst days. It states: “If an investor missed those 10 best days because they were attempting to dodge the down days that surrounded them, their average annualised return amounted to +5.7%. But what if that same investor stayed invested throughout the entire period, taking the bad days with the good? Their annualised return was +9.9%.”
However, there are ways to turn down the heat a little. The Premier Miton Strategic Monthly Income Bond Fund has delivered a steady and growing income with only minimal capital losses, even in very difficult markets. In 2022, for example, when bond and equity markets were experiencing double-digit losses, the fund fell just 4.5%, compared with a loss of 11% for the sector. This may be a good way to manage the uncomfortable feeling brought about by difficult markets.
Investors have to be in it to win it. Making the most of your annual ISA allowance is one of the smartest ways to create financial resilience in the long term, so make the most of your allowance before it disappears.
Darius McDermott is managing director of FundCalibre and Chelsea Financial Services
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’ views are his own and do not constitute financial advice.
