The birth of the ISA: Who can you trust with your unit trust transfers?

Making good judgements about your potential investments is never easy. Let our panellists offer you some guidance. By Iain Morse

HOW DO you choose one unit trust against another, and when should you switch holdings? The Independent asked three independent financial advisers to recommend funds to sell and buy in three of the most popular unit trust sectors: UK Growth, UK Equity Income and UK Smaller Companies.

We don't look often or critically enough at our existing investments, but a little caution is needed if you decide to sell and then buy. This is not a cost-free exercise. If you are trying to add how much cash you will raise from encashing a unit trust, remember to base your calculation on the "offer" price, or the amount per unit you will be paid by the trust manager when redeeming your units. If you are buying into a fund you will pay the "bid" price, which will be higher than the offer price. This bid/offer spread is typically around 5 per cent. Treat this spread as the true cost of your investment.

Jason Hollands, BESt Investment, London

The real art of sound investment is to make the right judgement about future performance. There are plenty of good examples of former "star" funds that waned or became "dogs" following changes of personnel. Follow the manager, not the fund name. Lazard's UK Equity Income fund is an example of this and their one-time star performer. This has drifted since fund manager Tim Russell was poached by HSBC.

It is not yet a dog, but performance has suffered. Holders of the fund should consider a transfer to Colin Moreton's BWD UK Equity Income fund, a trust which has managed to beat the All Share Index in each one of the last five years. In the UK Growth sector, we recommend holders of M&G's British Opportunities consider a switch, as this sector has under-performed in the last five years. I would consider a move to Jeremy Lang's River & Mercantile First Growth Fund, which has beaten the All Share index annually for the last five years.

Finally, the smaller companies sector has shown some of the greatest disparities in performance over the last five years; partly owing to the way fund results can be improved by stock selection. Equitable Smaller Companies has under-performed in this sector; try a change to Frank Manduca's Gartmore UK Smaller Companies.

Don Clark, Torquil Clark, Wolverhampton

Among UK Equity Income funds I would come out of Lincoln's Income fund, which has failed to produce even average returns; it has been consistently third and often fourth quartile in its sector. Instead buy Jupiter's Income Trust, managed by William Littlewood, producing top quartile returns over one, three and five years. This fund is worth over pounds 1bn with strong core holdings, but also many small bets.

Among UK Growth funds, sell Sovereign's UK Growth. It has shown superb consistency, but over five years it has been fourth quartile. Investors have seen it grow by 26 per cent over five years, against a sector average of 56 per cent.

Buy Save & Prosper's Premier Equity Growth instead. The fund style is one of risk control. Performance has been consistently strong, better than the FTSE All Share over the last six years. A good balance of performance and risk management. UK Smaller Companies are always a difficult sector to judge. I would sell Martin Currie UK Smaller Companies, and buy Gartmore's UK Smaller Companies instead.

Anthony Yagdaroff, Allen Direct, London

In the UK Equity Income sector, I would transfer out of Baillie Gifford's Income fund which has done poorly, returning just 35.7 per cent against sector average returns over three years of 60.6 per cent. Consider Fidelity's Income Plus fund, run by Tim McCarron. This has returned 84.2 per cent over the same period, managed on a stock-picking basis, with emphasis on dividend growth and reduced volatility.

The UK Equity Growth sector has shown average returns of 60.6 per cent over the last three years, with market conditions not unfavourable to fund managers. Why, then, has Murray's Blue Chip fund managed a return of only 46.2 per cent? Transfer out to Britannia's Balanced Growth fund, which has grown 70.8 per cent over the same period.

I would sell Lloyds Bank Smaller Companies & Recovery fund; this has returned just 14.7 per cent over 3 years against a sector return of 45 per cent. Much the same is true of M&G's Smaller Companies fund, growing by just 6.8 per cent.