Measure Twice, Cut Once – SELECTING AN INVESTMENT COMPANY FOR YOUR NISA

SELECTING AN INVESTMENT COMPANY FOR YOUR NISA

James Carthew

Marten and Co

Investment Companies Have Much to Offer the DIY Investor and as Ever Careful Planning and Research Will be Rewarded in the Long Term

With the ability to save £15,240 a year, in any combination of cash and stocks and shares that you desire and the freedom to invest in AIM stocks, the usefulness of NISAs as a savings vehicle is much enhanced over, say, a 2012 vintage ISA.

But how best to take advantage of the situation?

Banks slashed deposit rates in anticipation of a wall of cash heading their way from cash NISAs, to the extent that there is a question mark about whether such products offer investors real returns and, while markets are a little off their highs, many do not look particularly cheap.

Fortunately, with the change in the rules about including AIM stocks in ISAs/NISAs, savers now have access to an enormous variety of investment companies, many of which set out to deliver returns that are uncorrelated with equity markets and many of which aim to generate decent income and some capital growth.

‘With the ability to save £15,240 a year, in any combination of cash and stocks and shares that you desire and the freedom to invest in AIM stocks, the usefulness of NISAs as a savings vehicle is much enhanced over, say, a 2012 vintage ISA.’

As ever, your choice of fund is going to depend on your individual circumstances. At one extreme, Global funds, because their portfolios are diversified by geography and, often, also by asset class, offer a good “one-stop shop” for an investor looking for a core holding for their portfolio.

Look carefully at what they hold however, while some aim to capture the best investment opportunities available across the globe, others still have a strong bias to a single country (often the UK).

Looking at the Global sub sector today, nine funds have delivered net asset value returns of more than 10% per annum over the last ten years.

At the other, we have seen dramatic growth in recent years of specialist funds, often in response to the demand for income.

Bear in mind that the FCA believes not every fund is deemed suitable for retail investors. Among those that are, the infrastructure sectors have proved particularly popular with investors as the offer yields of circa 5% and some RPI linkage in the income generated by their portfolios.

‘Investment companies have much to offer the DIY investor and as ever careful planning and research will be rewarded in the long term.’

Open-ended funds are just not suited to investing in assets that need to be held for the very long term (20-30 years for most infrastructure projects).

The debt fund sector, which was not really a feature of the investment company sector a few years ago, is now £6bn.

Many of the funds in the property sector ran into trouble a few years ago (mainly because they borrowed too much) but the sector has largely rehabilitated itself and is expanding again.

Then there is a raft of very specialist funds that, if you are going to dive in, should probably be only a small part of your portfolio but could offer interesting ways of making it more diversified.

Investment companies have much to offer the DIY investor and as ever careful planning and research will be rewarded in the long term.

Our website, www.QuotedData.com, apart from offering daily news on sector, organises the entire London listed investment company market into 42 different sub-sectors, lets you compare the companies in those sectors and gives you detailed information on each company– it’s not a bad place to start if you are thinking about choosing an investment company.

JAMES CARTHEW

HEAD OF RESEARCH &

DIRECTOR, MARTEN & CO