With the ISA deadline on April 4th looming, many of you investing online may well be considering making a final lump sum investment into your stocks and shares ISA wrapper. With SIPP allowances able to be carried over for three years, time is not quite of the same essence but if the money happens to sitting there, why not also put it to work generating returns instead of being eroded by inflation ahead of interest rates?
Two days ago we covered some of the favourite funds of investment experts where cautious investors might put a lump sum ISA investment. The focus was conservative equity income, absolute return and high yield international bond funds. For those who might want to access their ISA or SIPP funds within the next 5 years, capital preservation is a wise approach, particularly against the backdrop of a recent bull market that has spanned several years. Volatility has shown signs of returning to financial markets and if a downturn kicks in you don’t want to run the risk of having to crystalise losses by selling investments before a recovery has time take effect.
However, if you are confident you are still at least several years away from wanting to dip into your ISA or SIPP pot a higher risk, higher return approach might be more suitable. That doesn’t have to mean pouring your life savings into a startup that is pitching itself as the next ‘TripAdvisor of X’ and hoping for the best. When it comes to the kind of investments most suitable for an ISA or SIPP. It simply means investments that trade off the potential for inflation beating returns with the risk of taking what should be temporary losses if markets enter a rough patch.
What are the expert’s ideas for ISA and SIPP investors ready to accept a degree of risk in the pursuit of achieving better long term returns? Chelsea Financial Services fund manager Darius McDermott thinks Investec’s UK Alpha is one good option. This diversified fund balances a 50% allocation to large cap FTSE 100 companies with the other 50% invested in small and medium sized LSE-listed companies.
In the context of Brexit uncertainty, many professional investors are also increasing their allocation to international markets at the expense of UK equities. The Share Centre’s investment research manager Sheridan Admans has a few suggestions to give an ISA or SIPP portfolio more international diversification. The first is the Threadneedle US Equity Income fund. US equity markets have done very well recently and many analysts believe their bull run might still have a year or so left in the tank. Japan is also a favourite international market at the moment and Admans also draws attention to the Legg Mason Japan equity fund. For longer term growth, he suggests exposure to emerging markets with his tip in that direction the Matthews Asia Pacific Tiger fund. It’s a regionally focused bet on the long term potential of the growing value of the Asian consumer.
The final ISA idea for those investing online comes from Philippa Gee of Shropshire-based Philippa Gee Wealth Management. Her tip-off as one to look at for those with a higher risk appetite is the Scottish Mortgage Investment Trust. With a high risk investment strategy that mixes an allocation to growth equities such as listed tech companies and companies still to go public this is one that would be put into an already diversified funds portfolio as a ‘high risk, high reward’ play.