Investors have an ISA allowance of £11,520 to use or lose before April 5. Up to £5,760 of that allowance can be saved in a cash ISA and the remainder allocated to funds, stocks or bonds.
The Share Centre’s head of investment research, Andy Parsons recommends first determining your risk appetite before choosing a fund for your ISA.
For those looking for income Parsons tips the Morningstar analyst Silver Rated fund Artemis High Income. For growth, Parsons favours Schroder Recovery, which is Bronze Rated.
“As its name suggests, this fund invests in companies where the profits or share price have suffered a setback but the prospects for future recovery are encouraging,” he says.
According to the discount broker Willis Owen in the past month income has proved a popular approach among ISA investors, with Artemis taking the most-sold crown.
Alongside income funds, the Gold Rated Jupiter Merlin Balanced Portfolio has proved popular. Morningstar analyst Karine Nowak credits the strength of the management team for the high rating.
“John Chatfeild-Roberts, Peter Lawery, and Algy Smith-Maxwell have been at the helm since the fund was launched in 2002,” she said. “The managers’ combined skills and experience in asset allocation and fund selection make for a market-leading fund-of-funds team.”
For a contrarian bet suitable for investors who are not risk averse, Adrian Lowcock of Hargreaves Lansdown tips Old Mutual UK Alpha – which has a punchy allocation to undervalued mining stocks.
Manager Richard Buxton previously held a Gold Rating when he ran Schroder UK Alpha Plus, and his Old Mutual fund has been awarded a Silver Rating.
Drip Feed in Future
Leaving your ISA investment to the last minute means that you miss out on growth for 11 months of the year. Andy James, head of retirement planning, Towry says that a couple would have saved £331,760 if both had maximised their full ISA allowances in each year for the past 20 years.
“While many will rightly be seeking to use this ISA season in order to ensure they have used their full allowance this tax year, in reality getting the best possible returns means maximising your cash and stocks & shares ISAs as soon as possible in the new tax year,” he said. “That means that from Sunday April 6 onwards, you should seek to put as much money into your ISA as you can right at the start of the 2014/15 tax year, maximising both your allowance and investment returns.”
If you can’t afford to make a lump sum deposit in the new tax year, consider drip feeding a monthly amount into your ISA.
Research from Fidelity shows that for savers who make a fixed payment into their ISA every month, increasing these contributions by as little as £5 per month could add up to a significant boost of £727 over ten years.
Mark Till, head of Personal Investing at Fidelity said there’s a misconception that savers need to have large amounts of spare money to make the most of their ISA allowance each year, but in fact, it can be wiser to split your contributions over time.
Can’t Decide Where to Invest?
If you really can’t decide where you wish to invest this year’s ISA allowance you can also choose to hold your allocation in cash by using a ‘cash park’ on an investment platform website.
These facilities allow investors to hold that year’s allowance within the ISA wrapper in cash, protecting its tax-free status and buying the individual more time to choose what to invest in.
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