If you have decided to contribute to your ISA before the end of the tax year, the important next step is to think about where to put your hard-earned money to work.
Time to revisit your goals....
This is a good time to review your overall financial situation and check whether your existing investments still align with your goals
, which will invariably change over time.
To begin with, your focus is likely to be on setting up home and, if you have a family, saving for your children’s future. When the children have grown up, your goal may switch to saving to supplement pension income in retirement. For retirees, income may take priority over capital growth.
If necessary, rebalance your portfolio either by allocating new money to areas where you lack exposure or taking profits in areas that have done well. When reviewing individual investments, whether funds or shares, try and identify the reasons behind the performance before making a decision. Has it benefitted from being ‘in vogue’ such as technology or lagged due to a change in process or because the style is out of favour.
....and your attitude to risk
Although your capacity for taking risk
will normally be greater the younger you are, your personal attitude to risk will also have a bearing on your choices. There is no point in investing in areas of high volatility, such as China, if it means you lose sleep with worry.
Anyone uncomfortable with investing, and the possibility of getting back less than they put in, may be better off in cash. Of course, we should all have an emergency reserve for unexpected events; between three and six months of outgoings is often suggested. Cash ISAs, however, have become less popular due to low real interest rates and the introduction of the personal savings allowance.
Even if you are comfortable with more risk, don't let your emotions drive your investment decisions; it's all too easy to follow the crowd for fear of missing out on the latest trends. This works the other way too; with panic selling when prices have fallen sharply.
A well-diversified portfolio, across a range of geographies and asset classes, can help to smooth returns, as not all markets rise and fall at the same time. Shares, property and commodities should offer some inflation protection, while fixed income products may be better at preserving capital.
It's a personal thing
As a nation, we are known for our reluctance to discuss our finances. Lloyds Bank is currently running a national campaign highlighting the importance of talking about money with family. I try to chat with my children about the companies they work for, the products they admire and where they see future trends, to hopefully encourage an interest in investing.
I was asked recently, for a Sunday Times article, to choose four funds for my ISA and it made me consider how my own circumstances are changing; there's a diminishing number of years to accumulate a pot to supplement my pension when I retire! I have long had a bias to UK smaller companies, but I know I need to cast my net wider.
I think the UK and Japan look good value, relative to history, so opted for income funds in these markets (Schroder Income
and Baillie Gifford Japanese Income Growth
). I may have to be patient for markets to rise but hopefully there will be a healthy stream of dividends to reinvest while I wait.
With a bit of luck, I may benefit from the trend to living longer, so I'll need my portfolio to keep growing as well. For this reason, I chose Artemis Global Select
which searches for growth themes of the future (including longevity) and selects companies on reasonable valuations rather than high risk ventures. My final choice was Pacific Assets Investment Trust
as I believe Asia will lead the way in economic growth this century. It's managed by Stewart Investors in line with their responsible and sustainable investing philosophy which appeals to me.
Time in the market
ISAs celebrate their 20th birthday this year and anyone invested in a stocks and shares ISA from the start may well be celebrating. Indeed, there is a growing number of ISA millionaires. The top performing UK open ended fund, Marlborough Special Situations was up a staggering 2,390% (from 06 April 1999 to 28 Feb 2019), while many others have delivered very impressive profits.
Even if your timing was particularly unfortunate, and you invested just before the financial crisis, a UK or global tracker fund would still have handsomely outstripped cash.
If you are investing in a JISA
for a child, remember they usually have a long time horizon, perhaps 18 years or more. This means they can ride out the greater volatility of higher growth asset classes such as emerging markets or smaller companies.
How Willis Owen can help
Whether your preference is for funds, Investment Trusts, ETFs or individual shares you can find a wide range on the Willis Owen platform. Our :explore
centre can help you carry out further research, using the filters provided and Morningstar data. You might also like to take a look at our ISA guide
for some fund ideas.
For anyone newer to investing who finds the number of options daunting, we have introduced starter portfolios
, to begin an investment journey. Alternatively, we highlight some multi-asset funds
for those who prefer to delegate asset allocation to a professional.
If you'd prefer not to invest a lump sum all at once, you can always contribute cash to make the most of your ISA allowance, then drip-feed it into the market. For future tax years, it is straightforward to set up a monthly savings plan.
The worst thing is to do nothing. One of my favourite quotes from legendary investor Warren Buffet is this: "Someone is sitting in the shade today because someone planted a tree a long time ago."
Important Information: We do not give investment advice so you will need to decide if an investment is suitable for you. If you are unsure whether to invest, you should contact a financial adviser.