ISA season is upon us again
Adopt the 'supermarket' approach to this year's jamboree, advises Stuart Smith
Before stockmarkets around the world started to fall in 2000, fund management groups used to look forward to what became known as the 'ISA season'.
This was the period between February and the end of the tax year (April 5) when private investors would rush to invest in an individual savings
account, often leaving investment until the very last minute, with some groups reporting investments just before midnight on April 5!
The reason for this annual jamboree was that if an investor did not make use of the annual ISA allowance it could
not be carried forward and was therefore lost forever.
Human nature dictates that many of us will put off doing things until the last possible opportunity, particularly if it involves making a difficult decision,
such as choosing a fund or funds in which to invest.
For the last three years the ISA season has been very subdued, reflecting the fact that relatively few investors have been willing to commit further capital to investments that seemed to be in permanent decline.
Since the bottom of the stockmarket decline on March 12, 2003, however, investors have benefited from some substantial gains. The FTSE 100 Index is up from its low point of 3,277 to a current level (as at February 12, 2004) of 4,377 a rise of just over 33 per cent. Of course, the FTSE 100 Index still has some way to go to reach its previous peak of 6,930, attained on December 30, 1999, but the recovery since early last year suggests the three-year bear market is well and truly over.
If so, then the ISA season may well be a reality again this year, particularly as many investors have not yet used their 2003/4 ISA allowance, waiting for conclusive signs that the bear is dead!
Quite apart from the rise in the FTSE 100 Index, individual fund managers are now all speaking much more positively, which is always a good sign, as collectively they have the power to move markets. The move towards higher interest rates is also supportive, as it not only makes fixed-interest stocks relatively less attractive but it also indicates that the economy is in a robust state.
So what should doctors do about their ISA allowance this tax year? Some may already have placed £3,000 in a mini cash ISA if so, this still leaves scope for a further £3,000 to be invested in a mini stocks and shares ISA. Those who have not yet used any of their allowance can invest up to £7,000 in a maxi stocks and shares ISA.
There are a few doctors who like to choose their own stocks and shares and therefore invest in a 'self-select' ISA. But the vast majority have neither the time nor the inclination to conduct the research necessary to choose the right shares and prefer to delegate selection and management to the professionals the fund management groups.
The traditional approach was to pick a top-performing fund and then use the ISA offered by the fund management group running that fund. If repeated over a number of years, what often resulted was a collection of funds that were once 'flavour of the month' but have since fallen out of fashion witness the rush to invest in technology funds a few years ago.
This approach also tends to generate a huge volume of paperwork as each individual investment generates half-yearly valuations, managers' reports and supporting documentation.
Investing via a fund supermarket does away with some of these problems. In particular, you can invest in the funds of more than one fund management group within the same ISA, thus allowing you to cut down on the paperwork while also building a coherent and diversified portfolio to suit your own attitude towards risk.
There are a number of fund supermarkets to choose from but our preference is Cofunds Ltd, which now provides a choice of 690 funds from
50 of the leading fund management groups, including all of the familiar names such as Fidelity, Jupiter, New Star and Invesco Perpetual.
Crucially, Cofunds does not charge you an additional fee for setting up and maintaining your ISA it takes a small part of the usual annual management fee charged by the fund management group. Furthermore, switching between funds is easy and relatively inexpensive.
While you are free to construct your own portfolio from the many funds available, we have put together three readymade portfolios Cautious, Balanced and Aggressive which we believe make use of some of the best funds on the platform.
For details of the Cofunds ISA and the suggested Portfolios simply complete and return the coupon. Alternatively,
e-mail, telephone or fax the same details.
Pulse Independent I.F.A.
147 Connaught Avenue
Frinton on Sea
Essex CO13 9BR