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MARKET COMMENT
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The latest figures for ISA sales, due to be published later this week by the Investment Management Association, are expected to show a large decline on last year. Anecdotal reports from various fund managers have sales running at up to 50% below those of 2002. Falling stock markets and a seemingly never-ending flow of scandals have caused most of the damage. Sales of ISAs have already fallen by 60% from 2000 to 2002, although it's fair to say sales were exceptionally high in 2000. A recent survey by the Association of Investment Trust Companies showed that 63% of investors don't intend to use up their ISA allowance this year. Concerns about the disappearance of the tax credit have added to the gloom surrounding ISAs. Many of the ISAs that are being sold are bond funds, which will still attract a 20% tax credit after April 2004. The 'hedge your bets' option of £3,000 in a mini cash ISA and £3,000 in a mini shares ISA is also apparently proving popular. But there is one investing maxim worth bearing in mind here, namely don't follow the crowd. The crowd always arrives late to the party and the excessive demand caused by their sheer numbers tends to push prices up well beyond their true value. So I'm steering well clear of bond funds at the moment! On the flip side the fact that virtually no one wants a share ISA at the moment suggests now is probably a good time take a nibble at the market. The need to save for our retirements hasn't gone away. In fact, most people need to invest more money these days, not less. For example, those employers that are sticking with final salary schemes are planning to put more money into them in the next few years and many are also looking to make employees increase the amount they put in as well. While we're not going to see a stock market boom like that witnessed in the 1980s and 1990s, the long-term returns of shares mean they should still be a large part of most people's retirement plans. Although the income tax benefits of ISAs will be reduced from 2004, the capital gains benefit of ISAs is still attractive for those who manage to invest each and every year. Find out more about ISAs in our ISA centre.