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Ideas for your ISA: six fund picks for over-50s investors

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Written by: Paloma Kubiak
08/02/2016
Three in four ISA holders aged 55 and over hold their savings in cash products that pay out just 85p interest for every £100 in the account, according to Saga Investment Services.

With ISA season in full swing – the time of year where savers are encouraged to use up their remaining tax-free allowance before the 5 April deadline (£15,240 for 2015/16) – Saga suggests older savers kick their addiction to cash and get more from their money with investment funds.

Here, Gareth Shaw from Saga Investment Services, shares six fund picks specifically for the over 50 novice investor:

JPM Global Macro Opportunities: We think more cautious investors might want to consider funds in the targeted absolute return sector. This fund is the flagship fund from JP Morgan’s multi-asset team: it will invest across stock and bond markets, as well as cash with the aim of achieving returns of +7% over cash before fees over the medium term.

Ardevora UK Income: It has delivered consistent performance since it launched back in 2011 – up 80% compared to a 45% return on the average fund in the IA UK Equity Income sector. This fund focuses on the numbers and they never meet companies, which they believe would introduce a source of bias into their thinking. They look for companies where management teams are not taking too much risk and where the market has underestimated the prospects of a business.

Unicorn UK Income: UK equity income funds have long been the mainstay of private investor portfolios and rightly so, as over the long term, dividend pay-outs have generated most of the overall return from UK shares. The Unicorn UK Income fund predominantly invests in smaller companies. Instead of the usual big banks, pharmaceutical companies and utilities held in most income funds, Unicorn UK Income invests in the likes of movie chain Cineworld and pub operator Marston’s.

Baring Europe Select: We favour the European equity market in 2016 – it will continue to have an extended period of low interest rates; the European Central Bank is engaged in a stimulus programme and the low price of oil is a boon to Europe, which has to import much of its energy. Baring Europe Select focuses on small and medium sized companies and is highly diversified with over 100 holdings. Nick Williams has a clear interest in the industrial sector, with a third of the fund in various industrial companies, but has diversified across retail, logistics and consumer sectors.

F&C UK Property: Commercial property funds invest in offices, warehouses and shopping locations, renting them out to businesses and generating an attractive source of income. The F&C UK Property fund owns buildings across the UK regions. Sites it owns include car showrooms in London and Milton Keynes and a B&Q store in Falmouth. Manager Guy Glover looks for buildings with sensible values which are on long-term leases and can maintain good performance.

Royal London Corporate Bond: Bonds are an important component of many retirees’ investments, generating income but also typically being less volatile than shares. Royal London’s bond fund is the flagship fixed income fund, and sets itself apart from others in its peer group as it includes a weighting in unrated bonds and asset-back securities alongside its main focus on high quality bonds. It’s currently generating a 3.6% income yield.

All funds are available on the Saga Select list.

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