Over the next few weeks, as the 2009-2010 tax year draws to a close and investors scramble to top up their ISA investments, we'll be taking a look at what Morningstar fund analysts are doing with their own ISAs. For more information on what an ISA is and how to take advantage of tax-efficient investing, watch this video, or you can read the previous analyst's ISA story here. Our ISA page also has plenty of case studies and additional articles on investing in ISA-eligible vehicles and managing an ISA portfolio.
Jackie Beard, Director of Fund Research for Morningstar UK:
It’s the time of year when many of us in the industry panic and remind ourselves to practice what we preach. With the wealth of information at our fingertips at Morningstar we really have no excuse not to be proactive in our ISAs. But sometimes the decision to do nothing is as valuable as the decision to do something—and it’s still a decision that requires thought.
In 2005, I set up a direct debit for my ISA, safe in the knowledge I wouldn’t stay as much on top of my investments as I’d like with small children in the house. Periodically, I check my fund choice, along with my other investments. When I chose my fund in 2005, I opted for someone I have followed for a number of years and whom I hold in high regard: Nigel Thomas at AXA Framlington UK Select Opportunities, which has just received an Elite rating from Morningstar. I have to confess I don’t use the full annual allowance but I have increased my monthly contributions in the last year.
This fund has served me very well and I see no reason to change it right now. Run by Thomas since inception, it fits well within my overall investment portfolio and adds some variety alongside my UK large-cap, UK mid-cap and UK small-cap funds. I know there will be overlap of stocks but I like the flexibility Thomas has shown over the years at moving throughout the cap scale and, when it comes to macro calls, his many years in the industry help considerably as he has seen a number of market cycles.
As we rode through the volatility of the last couple of years, I took comfort from the fact that my investment was being managed by someone with over 25 years in the industry. He didn’t panic and flee the market in September 2008; he has always been wary of financials as he finds them very hard to value accurately and in October 2008 he had just 8% of the fund in the sector. This helped limit the damage that year: though he ended 2008 down over 29%, this was over 5 percentage points less than his Morningstar UK Mid-Cap Equity peers.
This is reiterated by my final thought when setting up this regular investment. By buying units each month, I’ll be less exposed to violent swings in the market as I pound-cost-average my way in. This lends to a smoother return pattern overall and is a strategy that has worked well. Overall, my investment has held up relatively well over the long term and it’s pleasing to see I’m showing a healthy profit, despite the market woes. I do make sure I revisit my fund choice in conjunction with my overall portfolio on a regular basis but my long-term view on this fund is intact. I’m happy in the knowledge I need do nothing this year.
Jackie Beard is writing as a private investor about her own ISA portfolio. The views expressed in this article are those of the individual, and not of Morningstar, and should not in any way be construed as financial advice.
