ISA ideas for investors in a quandary

It’s the last week of the tax year and, for those who have yet to use this year’s ISA allowance, it’s a case of ‘use it or lose it’.

But understandably, many investors are worried about stock markets and whether the global healthcare crisis will get worse before it gets better.

So, for those investors in a quandary, but not wanting to miss out, here are five options to consider:

1. ‘Invest’ in Cash

We think it would be a mistake to miss out on this year’s ISA allowance, just because stock markets are making negative headlines.

So why not put it into Cash temporarily? That way, you secure the tax benefits but can then sit back, self-isolate, and wait for better times to come……

Just don’t wait too long to switch into an investment, as you may miss the bounce.

2. Choose bonds

Just because its more popular name is a 'Stocks & Shares ISA', an investment ISA is anything but. Remember: your ISA can be invested in different assets, so you don't have to go guns blazing into equities if you are worried: you can invest in bonds instead.

These have, on average, fallen a lot less than equity markets over the past few weeks and can add valuable diversification to a portfolio.

For example, the two best performing bond funds from the Chelsea Selection, Jupiter Strategic Bond and TwentyFour Corporate Bond are down 5.3%* and 6.1%* respectively from the February highs to date.

3. Defend with Absolute Return

Having been widely dismissed in the press over the past couple of years, as the bull market raged, a number of Targeted Absolute Return funds have come into their own in recent weeks.

Janus Henderson UK Absolute Return and BlackRock UK Absolute Return – both funds on the Chelsea Selection that can make money from falling share prices as well as rising share prices – have fallen just 2.6%* and 4.2%* respectively.

Like bonds, they can add valuable diversification and protection to a wider investment portfolio. Unlike bonds, they have the potential to capture some of the rise in equity markets too when they recover.

4. VT Chelsea Managed funds

For those that prefer not to have to think about asset allocation, the VT Chelsea Managed fund range could be an option.

With options for cautious, balanced, aggressive and income investors, there is something for everyone – and you know that the Chelsea research team, as advisors to the funds, is working hard on your behalf to make the most of opportunities whilst doing their best to protect should markets fall further.

5. Equities

Finally, for the brave investor, it is worth remembering that equities are some 20-30% cheaper this week than they were in February.

If you were willing to invest then, why not now? You are getting the same investments for a lot less money. Funds to consider could be Marlborough Multi Cap Growth fund (formerly Marlborough UK Multi Cap Growth) or Schroder Asian Income. As the first into this crisis, arguably, Asia could be the first out…

And if you are worried about being too early – that stock markets will indeed fall further before they finally recover, this chart from Goldman Sachs Asset Management might reassure - timing the market bottom may be difficult, but history tells us that the penalty of being early is short-lived: investing 5% before the market bottom has, on average, added just 3 days to an investors recovery period.


*Source: FE Analytics, total returns in sterling, 20 February 2020 to 30 March 2020.

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and do not constitute financial advice.

Published on 31/03/2020