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It is never easy to decide how to top up your Isa investments, but this year is harder than most as we emerge from the pandemic and the crisis in Ukraine deepens.
To give you some ideas, we’ve spoken to a panel of investment experts to find out how they will be using up their annual Isa allowance.
Laith Khalaf at AJ Bell is going to invest in gold for the first time
LAITH KHALAF, head of investment analysis at wealth manager AJ Bell
I’m going to invest in gold for the first time. I think that in these troubled times it makes sense to hold an asset that behaves a bit differently to others, though it will represent only a small part of my overall portfolio.
I will invest through exchange traded fund iShares Physical Gold, which tracks the price of gold and has an annual charge of 0.15 per cent.
I will then probably look at buying low-cost index funds giving me broad exposure to the UK stock market.
I still think the UK stock market has potential to grow, so I will probably put some money into iShares UK Equity Index fund.
This is a fund that tracks the performance of the FTSE All-Share Index and has an annual ongoing charge of just 0.05 per cent. It has returned 7.6 per cent over the past three years.
DENNIS HALL, chartered financial planner, Yellowtail Financial Planning
A long-term investment favourite of mine is investment trust HgCapital. I’ve held it for around 20 years and I wish I’d invested more in it as it’s been one of my best performing investments.
It invests in unquoted companies, with an emphasis on software companies. It has more than doubled your money over the past three years.
The fact that the trust is stock market listed means shares can always be bought and sold [even in times of turmoil].
I’m also a fan of investment trust Scottish Mortgage, run by Edinburgh- based investment house Baillie Gifford. It’s made money for me despite the recent (significant) falls – more than 40 per cent over the past three months. I’ll use this opportunity to buy more shares.
ANNABEL BRODIE-SMITH, director, Association of Investment Companies
I’m looking for an Isa that will spread my investment risk and offer some protection from raging inflation. With markets remaining volatile following the invasion of Ukraine, having a well-diversified global portfolio has never seemed so important.
So I will split my Isa contributions in the coming weeks.
Half will go into a big global investment trust with a strong track record of dividend growth.
I’m not going to say which one I am going for, but some of these trusts have 50 or more years of annual dividend growth behind them – the likes of Bankers, Alliance, Brunner and F&C. Such investment trusts have a long history behind them.
They have survived the First and Second World Wars; the high inflation of the 1970s; the Black Monday stock market crash in October 1987; the technology bubble and its bursting in 2000; the 2008 financial crisis; and the pandemic. So they clearly have staying power.
With the other half of my Isa I will be more adventurous and invest in a commercial property investment trust.
Following the pandemic, these companies are still out of favour and their shares do not fully reflect the value of their underlying assets.
They also offer investors attractive income – the sector average is around 4.7 per cent a year.
Although I haven’t made my mind up about which trust to go for, there are some big commercial property trusts out there – the likes of BMO Commercial Property [which holds a number of properties in the West End including the trendy St Christopher’s Place shopping centre], Supermarket Income and UK Commercial Property. Decisions, decisions.
‘I spot a buying opportunity as Asia firms dip’
EMMA WALL, head of investment analysis at investment platform Hargreaves Lansdown
It’s confession time. I have yet to decide what to do with my Isa in the coming months. But I do know where I am putting my son’s Junior Isa money – I’m splitting it between funds L&G Future World ESG Developed Index and ASI Asia Pacific.
The L&G fund invests in companies in developed markets that score highly on environmental, social and governance factors. The ASI fund invests in companies listed in Asia – in my opinion, the best area in the emerging markets space.
Emerging market: Emma Wall of Hargreaves Lansdown invests in companies listed in Asia
Both funds are higher risk, but for a Junior Isa you can afford to have a long-term investment horizon.
L&G Future World Developed Index has produced one-year returns of 11.7 per cent – it was only launched in 2019. ASI Asia Pacific has returned 21.9 per cent over three years, but has fallen by more than 12 per cent over the past year.
A buying opportunity? Methinks so.
‘A global index is my pick for times of doubt’
EMMA-LOU MONTGOMERY, personal investment expert at asset manager Fidelity International
I tend to invest mostly in individual stocks in my Isa. I like being able to pick and choose exactly which companies I invest in. And I’ve had some fun – and success – spotting and investing in the changing trends brought about by the pandemic.
Unusually for me though, because of all the uncertainty of the past two years and with even more uncertainty brought about by the situation in Ukraine, I’ve decided to bolster my Isa by putting a decent chunk of money into Fidelity World Index Fund.
It invests in hundreds of companies around the globe. It is low-cost, low-maintenance, yet highly-diversified and it gives me some much-needed breathing space. The other fund I have decided to dabble in is Baillie Gifford Positive Change.
I chose it because it offers something innovative – it lets you see the impact of your investment on the world. It shows how your investment is helping to cut carbon emissions, improve health and tackle social issues.
This takes investment transparency to a new level and one that has potential to prove there is added value in sustainable investing.
And a contrary, cautious view
BRIAN DENNEHY, managing director, FundExpert
The rules of investing are changing. A 40-year downward trend in interest rates is ending and a not coincidental upward trend in major stock markets is under threat.
Massive overvaluations in the US stock market are a danger to investors. The pandemic has left us with inflation, supply chain and energy shocks. The war in Ukraine has inflamed these. Market vulnerability is now on steroids.
It is no longer adequate to take a Racing Post approach to your Isa investment choices. So what should you do?
Start by treading carefully. Then look for clues among investments which are working well right now.
The past ten years has been a graveyard for commodity funds. The worm is now turning.
JPM Natural Resources is the grandaddy in its sector and has exposure to oil, mining and metals.
After a turgid decade, it began to recover in 2019 and 2020 – and the upward trend is now accelerating. Over the past year, it has delivered a return of 34 per cent.
There is more to come. Buy. The fund’s total annual charges are 0.83 per cent.
Also, buy fund ASI Global Inflation-Linked Bond. We often think of inflation as being a British disease, but war in Ukraine has highlighted a global inflation problem – around energy, metals and food. So I choose protection at a global level.
As inflation goes up, so should the value of the bonds in this fund. It has generated a steady return of 7 per cent over the past year, 21 per cent over the past five. Total annual charges are 0.55 per cent.
Looking forward to my Isa contributions in the new tax year, I will buy into the cheapest major market in the world – the UK. My shopping list will include JOHCM UK Equity Income, Schroder Recovery, and Artemis UK Smaller Companies.
These three funds have respective five-year returns of 18, 19 and 31 per cent. Total annual charges are 0.83, 0.9 and 0.86 per cent respectively.
A final word. This is your money you are investing, so look after it. Don’t buy-and-forget.
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