The entire Individual Savings Account (ISA) allowance of £11,520 can be invested into a Stocks & Shares ISA during the 2013/14 tax year. Investors can choose from a vast and ever-increasing array of options, ranging across global equity to bond markets.
If you are an investor who knows what they want then Platforms offer the most flexible approach, allowing you to self-select your own shares or funds. Platforms cover a range of asset classes and markets, so you can create your own portfolio or use your ISA allowance to target one specific investment.
However, choosing your own shares can be risky and unless it forms part of a wider share portfolio, this approach can concentrate your investment around the fortunes of just a few companies. Many investors therefore choose to put their ISA allowance into something more diversified, such as collective schemes or a range of investment funds, which reduces risk by accessing a wide selection of shares.
There are many funds from which to choose – some prioritise income, while others focus on capital growth. Over the long term, funds with relatively high equity content have tended to offer better returns than equivalent investments in cash, bonds or commercial property. However, the value of equities can go down as well as up and they can be volatile. Funds are grouped into categories to give you an indication of their aims – for example, the ‘Mixed Investment 20-60% shares’ category will have no more than 60% in shares, while more aggressive funds can be found in, for example, the UK All Companies, UK Smaller Companies or Global Emerging Markets sectors.
If you want your ISA to generate an income stream, you might wish to consider funds that deliver regular dividend or rental income, or interest payments. The three principal income-generating asset classes are equity income, commercial property and bonds, and there are a number of funds that combine these asset classes together, thereby generating income from a diversified portfolio.
Ultimately, your ISA choices should not only reflect your aims and goals, but also sit comfortably within your wider portfolio. If you want to make sure you have covered all the options available, you should seek professional advice. Please also remember past performance is not a reliable indicator of future results.
Platinum continue to help our clients create balanced portfolios of investments suited to their individual attitudes to risk. If you would like to know more please get in touch…