Three funds I am buying in my 2020 ISA
Posted by Adrian Lowcock in Press releases category on 27 Mar 20
“It is important to make investment choices based on your goals and not on the short-term noise that often permeates stock markets. So, when choosing the investments for my 2020 I have to think about my situation. I am 44 years old and my ISAs form part of my long-term goals, which is a combination of retirement and possibly providing some money for my two young children when they grow up. Therefore, any ISA investment decision I make is done so on the basis that I am unlikely to need the money for at least 10 years, and probably longer as I plan to stay invested through my retirement.”
“This longer-term time horizon gives me a different perspective on markets. The Coronavirus crash is a perfect example of this. Falling markets provide excellent investment opportunities as, in the past when markets have fallen, they have always recovered, even if it has taken a while.”
“Investing for 20 years means I can look at the long term performance and returns. For this reason, equity income plays a significant role in my portfolio. The power of compounding is huge but you only really see the benefits after doing it for several years.”
“I can also afford to be patient; I often top up my holdings in Asia and Emerging Markets even though the regions have been out of favour and lagged some developed markets. I recognise they can remain unpopular for some time however, valuations are not expensive and there are some attractive dividends which when reinvested will contribute to the long-term performance of my portfolio.”
“Smaller companies also feature significantly in my ISA portfolio. This is an area of the market where, in the UK, we have some exceptional stock pickers who can consistently and considerably outperform the market. Smaller companies can be very volatile and in a downturn, you could see some big falls in values, but this doesn’t mean you should turn away from them.”
My ISA Picks
Schroder Asian Income - This is a top on an existing holding in my ISA. Asia has struggled recently as trade wars impacted sentiment towards the region, however, valuations are attractive compared to developed markets with some excellent long-term opportunities. Investing in this region requires patience and a cautious approach. I consider this a holding not just for 2020, but for a longer timeframe and as such am adding small amounts regularly.
Richard Sennitt is a very experienced manager and has been investing in Asia for over 23 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.
Merian UK Mid Cap - The UK was beginning to come out from under a cloud for the past 3 years because of Brexit. That uncertainty had weighed on the country’s economy and its stock market. The recent crash in markets has hit the UK hard but means there are some attractive opportunities. Most importantly there are companies which take greater control of their destiny and are better placed to grow their business in any market.
Richard Watts has managed the fund since January 2009 and is supported by one of the largest and most respected teams in the mid and small-cap space. The core philosophy is to capture under-appreciated growth. Watts combines a broad economic outlook with detailed company analysis. He has a flexible approach and adapts the portfolio for the stage of the economic cycle. Companies selected must demonstrate either: above-average earnings growth; the scope for a positive surprise; or the potential to be re-rated relative to the market. Watts monitors the benchmark construction but will take high conviction positions in individual stocks. This is a top-up to an existing holding.
Threadneedle UK Equity Income - The landscape for UK dividends is a mess, companies are quickly cutting their payouts. Given the magnitude of the crisis, few company dividends are safe, in the short term at least. However, some payouts will survive and for those willing to do the work and sift through the businesses some yields are eye-wateringly attractive.
This is where the likes of Richard Colwell comes in. He is an experienced equity income manager and has been responsible for this fund since 2010. His focus is on stock selection, and he holds a blend of quality companies and out-of-favour businesses with recovery potential. The high-quality investments have strong cash generation, which can fund both dividends and long-term growth. The recovery selections may not currently pay a dividend but he believes they have the potential to provide income and grow the value of the business in the future. The fund is unconstrained but is mainly invested in large blue-chip companies.