Early Bird ISAs: What’s The Rush?
June 22nd, 2008
With the majority of the tax year still ahead, we look at investing in your ISA straight away.
Why the hurry? Well there are actually a number of reasons, such as the opportunity cost. It would be fair to say that the market has experienced a high degree of volatility of late, but this also brings an opportunity to invest, providing you get the right fund.
Don’t forget that markets tend to rise at the end of tax years, so by getting in at that time you miss out on vital outperformance. It also makes sense to use the time allowed to choose the right fund for you, rather than rushing into the wrong fund when time is limited.
But where to invest? With the world at your fingertips you may be looking for some different ideas, so here are two options worth considering.
Schroder UK Income Defensive
Cautious Income Investors? Look no further!
We are delighted to bring you this newly launched fund from the same stable as the well regarded Income Maximiser fund.
Income investors will be pleased to note that it targets a yield of 5-6%, with a defensive strategy which creates a level of protection against market falls.
The fund uses a three-step investment strategy:
- The fund manager seeks out high quality companies paying high dividends and creates a portfolio.
- They cap the potential quarterly growth of the fund and in return receive a fee, part of which is used to increase investors income.
- With the remaining fee, the fund manager buys a level of protection on the equity indices to protect investors against large falls in the market.
Taking three different market conditions the fund might perform as follows:
In declining markets - The fund would be expected to outperform a traditional UK equity income fund because of the two layers of protection the fund offers.
In flat markets – The fund is likely to outperform a more traditional UK equity income fund as stocks are less likely to grow above the capped levels.
In rising markets – If rises are dramatic, the fund is likely to underperform a traditional UK equity income fund because of the effect of the capped capital growth.
So, this is clearly an ideal fund for clients who are looking to secure a good source of income in uncertain market conditions.
Fidelity Multi-Asset Strategic
A fund for all seasons and reasons?
The days of a fund investing in just one asset class are well and truly over so when Fidelity launched this fund in January 2007 they aimed to provide a one-stop solution to having “all eggs in one basket”.
The background to this is that historically the returns from equities, bonds, property and commodities do not all move the same way at the same time. The aim is to offer a high level of diversification across asset classes, equity regions and sectors, which it gains by investing in a number of Fidelity’s own funds.
This fund could be suitable for investors who:
- require an instant portfolio with multi-level diversification
- want an investment with the potential to add value in all market conditions
- seek a core holding which can be held alongside more specialist investments, like India or emerging market funds.
So, the fund sets out to be relatively defensive, but can be more aggressive when the time is right. This allows investors to benefit from holding their investment for the long-term, throughout a variety of different market conditions so that they don’t have to resort to buying and selling in response to market movements.
What you get is a fund with diversification; it currently has exposure to over 2,000 shares from 23 funds. It comes with an experienced manager and is backed by a research driven group. With this level of pedigree and high levels of diversification, the prospects are encouraging.
Author: Philippa Gee
June 22nd, 2008
Category: Investments.
