With the market crash likely to continue occupying Fools’ thoughts, it’s easy to forget the looming ISA deadline. Fail to use this year’s £20,000 allowance by 5 April, it’ll be lost forever.
While many of us won’t have anything like that amount to save in these uncertain times, using as much of it as possible is still recommended. After all, the ISA wrapper ensures you won’t pay tax on any profits you (eventually) make. The same goes for dividends, once companies start paying them again.
Naturally, what you decide to put in your ISA will depend on your financial goals, risk tolerance and time horizon. For most of us, however, the core of this account will usually be a selection of funds. Here are three I’ve been buying lately.
The first holding I’ve topped up has been the Vanguard Life Strategy 80% Equity Fund. As it says, this invests 80% of your cash in the stock market. The remainder is invested in fixed income assets. While not making you as much money over the long term, this tends to be less volatile.
The beauty of this and other funds in the Life Strategy stable (20%, 40%, 60% and 100% variants are also available) is that they offer a remarkably cheap of getting exposure to thousands of stocks all around the world. Right now, the ongoing charge is just 0.22%.
As well as allowing you to keep more of your profits, the level of diversification achieved by these funds also means you’re protected in a way that those invested in only a few individual companies aren’t. Plenty of the latter could end up going bust as a result of the crisis.
Another holding I’ve added to recently has been FTSE 100-listed Scottish Mortgage Investment Trust (LSE: SMT).
Rather than take a passive approach like Vanguard, this trust attempts to pick companies that will outperform the market over the long term. For this reason, its portfolio is very different from the benchmark it uses to measure performance.
That’s not to say the stocks it holds are all unfamiliar. Online giants Amazon and Alibaba both feature. So too does mega-popular streaming service Netflix. The largest holding, at least at the end of February, was electric vehicle manufacturer Tesla.
As well as performing exceptionally well for investors over the last decade, it’s worth highlighting that Scottish Mortgage’s management fees are very low relative to most active funds. It charges just 0.37%.
A third fund I’ve added to has been the CFP SDL UK Buffettology Fund, managed by Keith Ashworth-Lord. As its name suggests, this looks for the sort of stocks that would appeal to Warren Buffett and his strategy of ‘Business Perspective Investing’.
In practice, this means seeking companies with strong market positions and sustainable returns and avoiding those with weak balance sheets. Like Scottish Mortgage, this is high-conviction stuff with just 35 holdings. Only the best ideas make the cut.
Like pretty much everything else, the fund has been hit hard by the pandemic. Notwithstanding this, it’s performance up until recently has been superb (ranked top of 205 similar funds since launching nine years ago).
Although nothing can be guaranteed going forward, that’s the track record I want to see if I’m paying someone else to manage things on my behalf.