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Three Tiscalli users - with different levels of financial experience - want to know what to do about their Isas. They want to be sensible and start their Isa at the beginning of the new tax year rather than join the mad Isa dash in March.
Independent financial adviser June Cross of Professional Partnerships has offered them some general guidance about their possible investments for the coming tax year.
The Novice Investor
Mr A has no shares or investments other than some shares from the company he works for. He wants to dip his toe in the stockmarket, but having seen the value of his company shares fall does not want anything too risky.
He wants to invest on a monthly basis rather than a lump sum. As he is a higher rate taxpayer he also wants to shelter some of his savings if possible.
The advice
For an inexperienced investor who wishes to save some cash, I suggest the following:
My overall advice would be the same for a lump sum or for monthly savings. If there is a lump sum to invest I suggest opening a Mini Cash ISA with anything up to ¯¿½3,000. Best interest rates are currently about 4.20% pa - 4.60% pa depending upon the notice period, penalties etc.
I suggest the Alliance and Leicester Mini Cash ISA, which is an instant access account carrying the CAT Standard (for Charges Access and Terms) currently paying interest of 4.20% per annum. This account can be operated by post. If a lump sum is not available and the investor has less than ¯¿½50.00 per month to save I would suggest that he opts only for the cash ISA.
If he has more disposable income to spare then I would recommend in addition as a first equity based ISA a UK Tracker Fund which tracks the FTSE All Share Index. He should look at the annual management charges (AMC) on these funds and go for a fund with an AMC 1ower than 1% per annum.
Legal and General, Dresdner RCM and Gartmore all have funds which fit into this category. He should remember that these funds will not out perform the index, they are low cost but not low risk!
The Beginner Investor
Ms P has begun to dabble over the last few years - starting off with a PEP in the Fidelity Wealthbuilder fund and the original investment of ¯¿½6,000 is now worth ¯¿½7,869.62. The next investment was her first Isa and was put into Newton Income and is now worth around ¯¿½2,700. The last investment was into two Invesco Perpetual funds - split equally into the European Growth fund and the UK Growth and Income fund. This is being paid at ¯¿½50 a month. The European Growth fund has not done at all well. There was an original investment ¯¿½250 with ¯¿½50 a month paid in to each of the two funds so total investment to date in each fund is about ¯¿½1,000. The European Growth fund was worth ¯¿½682.70 at end of December and the UK Income and Growth fund which has not fared quite so badly is now worth around ¯¿½900. This is reflective of how the stock market has been over the last year and effectively proves the point that the value of shares can go down as well as up.
However Ms P has not been deterred as she is now a long-term investor. She wants to carry on paying in monthly as she can't afford a big lump sum, but wants to make sure she has a sensible risk balance - geographically, with large and small companies and with fund managers.
The advice
The more experienced investor currently investing with Invesco Perpetual could benefit from investing via one of the fund supermarkets currently available. The Invesco Perpetual Income and Growth Fund has continued to perform well and I see no reason for switching away from this fund. The European Fund has been rather disappointing and has recently lost its fund manager.
By using a fund supermarket the investor would have the facility of continuing to invest in the Invesco Perpetual Income and Growth fund while choosing a different European Fund such as the Gartmore European Selected Opportunities Fund. The Fund manager Roger Guy has been running this fund successfully for eight years; the fund is invested partly in large companies and partly in 'selected opportunities' aiming to increase the overall investment return. They could, if they feel positive about Europe and some fund managers are predicting more growth there than in the UK for next year, weight their contributions towards the Gartmore fund.
The Experienced Investor
Mr W has been investing over a fair few years and has built up a reasonable size portfolio. He has expressed his investments as percentages of his total portfolio to help judge the investment spread.
His portfolio comprises:
• Alliance Trust 23.0,
• Bradford & Bingley 1.0,
• Dresdner RCM 2nd endowment 9.0,
• HBOS 2.0,
• Henderson Euro ZDP 3.0,
• HendersonElectric, 1.0,
• Scottish Mortgage Trust 18.0,
• SvmOfexFd 1.0,
• Fidelity European 3.0,
• Fidelity South East Asia 3.0,
• Fidelity Special Situations 12.0,
• Gartmore European Select Opportunities 7.0,
• Henderson Global Technology Class A 2.0,
• Jupiter Far Eastern 6.0,
• Legal & General UK Index Acc 5.0,
• Newton Continental European Inc 1.0,
• Newton Income Inc 7.0
He wants to make sure that the geographical/sector spread is right or whether there is an area he should be putting more money into. He would quite like a new fund - rather than paying more into one of these (but not necessarily new in the sense of just launched). This will be a lump sum investment of up to £7,000 and he would be happy to spread this across a couple of funds if this would be sensible.
The advice
For an investor who obviously enjoys playing the game and has a split of funds in the Global, UK, European and Far Eastern sectors there is an obvious omission with no North American exposure.
This may have been because he thought the US markets overvalued in the past couple of years. I suggest that now would be a good time to start and would recommend the use of a fund supermarket here also.
I would suggest an overall exposure of 10 per cent of the total portfolio into North America and suggest the Credit Suisse Transatlantic Fund. This is a growth fund investing mainly in the US, Canada and Mexico. The fund has a four-star Micropal rating for investment performance and volatility compared with other funds in the same sector over a three year period. Five stars is the maximum award.
He could consider some further investment in Europe with the New Star European Fund. This company was set up by John Duffield of Jupiter and is managed by Richard Pease also of Jupiter who managed the Jupiter European fund for 10 years. Much of the fund is invested in small to medium sized companies balanced by a third of the fund investing in blue chips.
A cautionary note
Anyone considering investing in shares or investments like unit or investment trusts should be investing for the long term - at least three to five years.
It goes without saying - and the evidence has been very clear in the last year - that the value of shares can go down as well as up.
Generally, Tiscali would advise anyone thinking of investing to take independent financial advice. You can find your nearest adviser by just typing in your postcode to our useful Find an Adviser service. Professional Partnerships can be contacted on 020 7353 9393.
