Mark Dampier: Make the most of your tax-free portfolio
Saturday 19 March 2011
Although ISAs are open throughout the financial year, as with so many deadlines many investors leave it to the last moment. So I thought this week I might give a few thoughts to the so-called ISAseason, particularly at a time of further stock market volatility caused by such factors as continuing debt problems in Europe and the tragedy of the recent Japan earthquake.
I think I should start with the most obvious asset of all which many people neglect: cash. Many investors don't realise that rather than making a hasty investment decision, they can - if they so wish - put their entire ISA allowance in cash and make a choice about what to do with it later on. Rates on this type of ISA are extremely low but it is a way to ensure you don't lose your ISA allowance because you are nervous of markets. Simply put it in cash and invest it later is the message.
I think ISAs have become rejuvenated since the previous government raised the amount you could invest to £10,200. After 5 April it climbs a further £420 because the allowance is now linked to inflation. I do wonder how long this will continue. Either this government or the next is going to realise just how much tax is being lost through ISAs being taken out and do something about it. So my view is simple: grab it while you can; generally speaking taxes only go one way as politicians of all persuasions just want your money.
Turning to the investment side, I wouldn't necessarily look at your ISAs in isolation. Many of you may well be running personal pensions SIPPs, in which case your ISA should run alongside this. Bear this in mind when you are making your choice so that you don't end up overloading one area too much.
Which brings me nicely on to commodities and emerging markets, an area that I have liked for quite some time but am a little more wary about, at least in the short term.
Commodities in particular have had the most tremendous run over the last few years, and also have a high correlation with emerging markets. So while not suggesting that investors shouldn't have any exposure here, be careful that you don't have your portfolio tilted all in one direction. Note too that the poor performance of UK equity income funds over the last few years had much to do with the fact that they don't buy commodities, mainly because they offer little or no yield.
So if you want to be a true contrarian, look towards the UK income sector for your ISAs. This would include popular favourites such as Neil Woodford's Invesco Perpetual Higher Income fund, where he has a high proportion of his money in the extremely unpopular pharmaceutical sector. I note his passion on this subject reminiscent in 2000 when he said tobacco stocks were being overlooked. Since that date they are up over 500 per cent.
But given all the problems in the world you may wish to look for fund managers which you can buy and hold for the long term. Perhaps one of the best all-weather funds is Artemis Strategic Assets, managed by one of the best fund managers I know, William Littlewood. The fund has the ability to invest just about everywhere, with an additional ammunition of being able to go short when it might be required. It is certainly part of my own portfolio.
My own view is to generally back experienced fund managers rather than spending too much time on asset allocation. In both Europe and the UK we have some highly experienced fund managers. In Europe I would look at Richard Pease, who manages the Henderson European Special Situations fund, and Alex Darwell, who runs the Jupiter European Growth fund.
In the UK, which is often written off by UK investors possibly because we are too close to the economy, I highlight Harry Nimmo at Standard Life UK Smaller Companies, and Richard Buxton at Schroder UK Alpha Plus: both are worthy of any portfolio place.
The UK market is not on a demanding rating, and while I believe the economic recovery will be anaemic at best, I do think there is plenty of value still to be had in many companies. Any decent dips should be seen as buying opportunities and, quite possibly, we are seeing one right now.
Finally if you have left your ISA to the last moment, remember that after 5 April you are entitled to another allowance, and if you can afford to, why wait for another year? Start your 2011-12 ISA after 5 April and make use of the higher allowance. If you have done all your PEPs, ISAs and TESSAs over the years you will now have accumulated £184,800. The accumulation effect of being able to add to your tax-free portfolio every year really can make a big difference in the long run.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: I checked in with Air France in time and still missed the plane
Minister's pension promise to firefighters challenged
Bank-beating exchange rates on your international payments
- 1 Planes go hybrid-electric in important step to greener flight
- 3 Antonio Martin shooting: Mayor says there should be 'no comparison' to Ferguson
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens