ISA fund ideas for your life stages

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Written by: Adrian Lowcock
31/03/2016
The funds you invest in during your 20s may well be very different from the funds you pick as you approach retirement. Adrian Lowcock of AXA Wealth offers five fund ideas for each decade of your life.

Investing in your 20s

This is all about getting started.  As such diversification is an important starting point. Given the level of investment knowledge will be lower when you first start investing beginning with a diversified fund will help avoid making big investment mistakes early on.

Fidelity Global Dividend:  A global equity income fund is an excellent core investment to any portfolio.  This fund provides diverse exposure to equities combined with an income yield.  Equity income is a great long term investment strategy and tends to be lower risk way to access equities. Further risk can be added as experience and confidence grows.

Manager Dan Roberts aims to deliver dividends 25% greater than the index. The portfolio is constructed using stock picking as the base to find companies with a growing and sustainable level of income with some potential for capital growth. Companies must demonstrate good cash generation and strong cash flow. The fund targets income and income growth primarily with capital growth a secondary importance.

Investing in your 30s

The 30s are the first time many of us realistically have some disposable income which we can use for saving or investing.  Most people investing during this decade are likely to invest for at least 30 years. As such there is the ability to take on more risk and look to ignore short term volatility.

Franklin UK Smaller Companies: While in the short term they can be very volatile, smaller companies funds are an excellent long term investment.  The sector is often under researched allowing for fund managers to identify undervalued opportunities.

The managers, Richard Bullas and Paul Spencer, make long-term investments in companies with attractive risk/reward profiles. They are willing to take a contrarian stance when market mispricing creates outstanding investment opportunities. While economic and industry drivers are important considerations, the fund is built from the bottom up, with each stock included in the portfolio on its own merit.

Investing in your 40s

By the time you reach your 40s you should have established a well-diversified portfolio, however it is easy to forget that you are still likely to be investing for more than 20 years and therefore capable of taking risk. Combining riskier assets with an income theme makes a lot of sense as these two strategies work well over the longer term.

Schroder Asian Income:  Asia is out of favour at the moment, however valuations are already attractive compared with developed markets with some excellent long term opportunities. Investing in this region requires patience and a cautious approach and suits someone with a longer time scale.

Richard Sennitt is a very experienced manager and has been investing in Asia for over 21 years. He has a strong value discipline and won’t buy at any price. He is a stock picker and runs a concentrated portfolio of 60-80 stocks. The fund invests in companies which are financially sound, profitable, with proven management focused on shareholder returns.

Investing in your 50s

In your 50s the focus is likely to begin to change, cash flow should improve as family and mortgage costs fall. This is a period where many people are likely to be able to increase the amount of money they can put away into ISAs or pensions. However, it is also when your time horizon starts to change as retirement looms on the horizon.  How you invest will be determined by whether you plan to remain invested in retirement or considering buying an annuity. Even so the time frame could still be 20 years.

Newton Real Return: Capital preservation is increasingly important as a more volatile portfolio could result in the value staying low at a critical time.  Investing now should be about reducing volatility but not removing it entirely as there is still plenty of time for investments to grow.

Iain Stewart’s first priority is capital protection and he then looks to deliver returns of 4% above cash per year over the longer term.  Stewart runs an unconstrained and flexible approach which initially uses Newton’s thematic research to identify opportunities and to position the portfolio appropriately.

Investing in your 60s

Investing in your 60s is about preparing for retirement, whether that is taking an annuity or drawing an income from your investments. As such reducing volatility further is important as well as diversifying your portfolio further and ensuring that any income the portfolio produces is consistent and reliable.

M&G Corporate Bond: Richard Woolnough is an exceptional fund manager who managed to skilfully navigate the financial crisis. He is supported by a strong research team and runs this fund by analysing the wider economic environment. This fund does not take extreme bets from the benchmark and provides an excellent core bond portfolio.

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