ISAS: ou can't go wrong with stocks and shares
Fund managers believe that investors can buy into maxi ISAs with some confidence, writes Tony Lyons
Sunday 25 April 1999
"Economies are under more control now than they used to be," says Roger Cornick, of fund manager Perpetual. Edward Bonham-Carter, of Jupiter, agrees: "Global economic growth is broadly picking up from low levels, except maybe in the US where some slowdown is possible. Taking a benign view of inflation, while we expect markets to continue to be volatile, the medium-term outlook is good."
These views from two of the largest fund managers should hearten anyone thinking of taking out an ISA. If you go down the maxi ISA route (see page 7 for more on maxi and mini ISA schemes) you can invest up to pounds 7,000 this year and pounds 5,000 per year subsequently. You can choose to put it all into equities as long as you don't make any use of the cash ISA being offered.
"If it's tax-free equity investment that you want," says Stephen Lansdown, of Hargreaves Lansdown, "then you should opt for a maxi ISA. Treat it just like a PEP, except that now there's no difference between a general and a single-company plan. If you go down the mini ISA road, you may find this confusing, even a recipe for disaster if you are not too efficient when it comes to keeping track of your investments."
Treat equity ISAs as being just like PEPs, except that you now have much wider choice as to where you can invest (see page 9). "If you want to put stocks and shares in your ISA, just as you did with a self-select PEP, then you can do so," says Justin Urquhart-Stewart, of Barclays Stockbrokers.
Most of us are likely to continue using fund managers rather than investing directly in the stock market when we take out ISAs. If you were paying regular monthly payments into a PEP, then you can continue with the same group's ISA - just sign and return the forms to your plan manager.
"Just as with PEPs, investors should take the long-term view," says Roddy Kohn, of Kohn Cougar. "If at all nervous, don't invest a lump sum. Rather, dribble it into the market on a monthly basis. This way, you can sleep easier and avoid the swings and roundabouts."
So where should you be investing? Customers are still piling into corporate bonds. The mainstream funds investing in top grade bonds from blue chip companies are yielding around 6 per cent. They continue to offer the most tax-efficient way of generating a decent level of income. Unlike equities, where the managers can only reclaim half the tax now paid on company dividends, all the income from corporate bonds is tax free, as is any growth.
ISAs carrying a CAT mark will have low charges, and these tend to be tracker funds that mirror the stock market. Many active fund managers have boycotted the CAT scheme. Be careful about buying a more expensive product as past performance is no guarantee that a fund will do well in future. If you want to buy an actively managed fund and pay less you should use a discount broker.
Contacts: Financial Discounts Direct, 01420 549090; Fidelity, 0800 414171; M&G, 01245 390390; HSBC, 0800 181890; Jupiter, 0500 050098; BWD Rensburg, 0113 245 4488; CGU, 0845 6055559; Gartmore, 0800 289336; Legal & General, 01222 448412; Newton, 0800 614330; Perpetual, 01491 416123; Dresdner RCM, 0171-623 8000; Flemings, 0171-638 5858; River & Mercantile, 0171-412 1700; Templeton, 0131 469 4000; Save & Prosper, 0800 829100; Aberdeen Prolific, 0345 886666; Baillie Gifford, 0800 9172112; Framlington, 0345 775511; Norwich Union, 01603 204312; Schroders, 0800 526535.
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