Money experts lift the lid on their ISA investments
There are just a few weeks left to go until the end of the tax year, which means you don’t have long to use up your ISA allowance. Remember, you can put up to £20,000 into an ISA each tax year but you can’t roll any unused allowance over – so use it or lose it.
Deciding what to do with your money is never simple, so to give you some inspiration, we asked a selection of investment pros what they’ve done with their ISA allowance this year.
Rebecca O’Connor, personal finance specialist at Royal London
This year I’m spreading my ISA investments between the Lifetime ISA – for a bit of extra retirement cash – and a regular stocks and shares ISA. I also put £50 a month into two junior ISAs for my sons, who are 4 and 7. The stocks and shares ISA is also for them – but at least I will still have control of that when they reach 18, unlike the junior ISAs. The thought of them getting hold of the cash when they are 18 does worry me slightly.
I only invest in sustainability funds. It’s a rule in our house – we recycle, we limit car journeys, use 100% renewable electricity and do lots of other small things for the environment – but the most impact we can have as a family is with our investments and using your ISA allowance to save the world as well as making a return is perhaps the most you can do to do your bit.
Plus, as my investments are for my children, it makes no sense for me to invest unsustainably – I would feel ashamed. Royal London has a range of sustainability funds and I invest in the Sustainable Leaders fund through my stocks and shares ISA, but also Liontrust Sustainable Futures and WHEB Sustainability.
Laith Khalaf, senior analyst at Hargreaves Lansdown
I’m usually pretty meticulous about investing my ISA at the beginning of each tax year, but for one reason or another I didn’t get round to it in 2018/19, and so like many other people I’ve left myself facing a last minute rush.
This means I will probably contribute to my ISA to secure my allowance, and make use of the ability to hold cash for the time being, and invest it once I’ve spent a bit more time considering my options. I still like the long term growth potential of emerging markets, and valuations look reasonable so JPMorgan Emerging Markets is on my shopping list. The managers invest in companies with healthy finances and sustainable earnings that have the potential to grow year after year, and their approach has delivered significant long term outperformance.
I also think the UK is unloved and worthy of some attention, and I like Jupiter Income in this space, run by Ben Whitmore who is a disciplined value investor. Given I’m investing for retirement, I’m not afraid to take a bit of risk and so I’ll also be looking to add some smaller companies exposure, probably though Marlborough UK Micro Cap Growth. The fortunes of these sorts of companies tend to depend more on their own development, rather than the wider economy, and the smaller end of the market is a rich hunting ground for seasoned stock pickers like Giles Hargreave who runs this fund.
Smaller companies funds
Patrick Connolly, chartered financial planner at Chase de Vere Independent Financial Advisers
This year I moved my ISA portfolio to Charles Stanley, as the charges on my previous platform were too high. Typically, they then raised their annual charge from 0.25% t0 0.35%.
I was concerned about valuations and so held most of my ISA in diversified funds such as Newton Real Return and Investec Cautious Managed. However, for new money, where I’m investing regular premiums, I’m prepared to take high risks and have been splitting this between Liontrust UK Micro Cap and Miton UK Smaller Companies.
Smaller companies typically out-perform in the longer-term and the Miton fund has an experienced manager in Gervais Williams, while the Liontrust fund benefits from an excellent investment team and a strong process. Both funds were hit hard in the fourth quarter of 2018, although I’m not concerned considering the amount I have invested and because I will continue to add regular premiums. I will hopefully be in a better position if and when the funds bounce back.
Following the market falls I did make a change to my existing holdings. I moved some money from safer funds into the HSBC FTSE All Share Index. A positive Brexit outcome could see sterling strengthen, which would be bad for companies with high levels of overseas earnings, but buying the UK stock market when the FTSE-100 was at about 6,750 should pay off.
High-quality income in a low-interest-rate world
Tom Stevenson, investment director at Fidelity Personal Investing
My four fund recommendations this year focus on three aspects of today’s financial markets.
First, I have looked for a source of high-quality income in what I expect to be a low-interest-rate world. With the Federal Reserve reining in its interest-rate tightening programme and other central banks yet to begin raising rates, I expect the relatively attractive dividend yields available in many markets to remain compelling. The Fidelity Global Dividend Fund is my preferred play.
With plenty of political uncertainty, especially around trade, I’m also looking for stability and diversification. The Fidelity Select 50 Balanced Fund offers a useful mix of both, with bonds and equities providing balance and a global spread of assets putting investors’ eggs in a variety of baskets.
Finally, I have opted for two contrarian plays in out-of-favour markets. The first of these is Baillie Gifford’s Japanese Fund, which benefits from a focus on areas of competitive advantage for Japan like automation. But the fund in which I have the biggest personal holding is the Lindsell Train UK Equity Fund, which focuses on high-quality shares listed in a market which, because of Brexit uncertainty, is more unloved than any at the moment.
Putting my money where my mouth is
James Norton, senior investment planner at Vanguard
This year I added to my holding of the Vanguard LifeStrategy 80% Equity fund. The reason I buy this fund is simple. Vanguard has over 40 years’ experience of managing investments, and the LifeStrategy range of funds embody our best thinking around goals, balance, cost and discipline.
My goal is retirement, and with an 80% equity allocation this works for me. It has the exposure to equities that I hope will provide the growth I need. But given my future lifestyle depends on it, I didn’t want the risk of 100% equity exposure. As far as diversification goes, it ticks the boxes as well. At the end of December 2018, it had over 18,000 underlying holdings. And it’s extremely cost effective – I get this exposure for a cost of 0.22% a year. And finally discipline. The fund does all the rebalancing keeping the equity, bond exposure correct. That means I don’t have to do it.
Over 80% of my accumulated ISA investments are held in this fund, and before you ask . . . I’ll probably buy it again next year. I don’t want excitement from my investments, I want something that works.