Putting money into investment funds within an ISA is generally a smart strategy. Over the long term, funds usually generate attractive returns. And if they’re held in an ISA, these returns are tax-free.
Of course, the challenge is selecting the right products – there are thousands to choose from. With that in mind, here are five top-performing funds to consider for an ISA today.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Global shares
For a core holding, it’s hard to look past Fundsmith Equity, in my view. Managed by Terry Smith (aka Britain’s Warren Buffett), this is a global equity fund with a focus on high-quality businesses.
It’s the focus on quality that appeals to me here. This approach to investing has worked very well over the long term.
Of course, past performance is not an indicator of future returns. However, with names such as Microsoft, PepsiCo, and L’Oreal in the portfolio, I’m confident the fund can continue to deliver for investors.
UK stocks
In terms of UK-focused products, one that I see as a solid core holding is Royal London Sustainable Leaders.
This fund is very different from a UK market (FTSE 100) tracker fund. For starters, it has an ethical focus. This means that certain areas of the market, such as tobacco companies, are avoided.
Secondly, there’s a focus on quality, with names such as Sage and Experian in the top 10 holdings.
It’s worth pointing out that this fund has the flexibility to invest 20% of its capital outside the London Stock Exchange. So it’s not always fully-focused on the UK. I see this as a good thing however, as it opens up more opportunities.
Growth
In the growth space, I like Blue Whale Growth. This is a high-conviction global fund run by Stephen Yiu.
Yiu tends to be good at identifying, and capitalising on, powerful growth themes. This year for example, the fund has done really well, thanks to its exposure to businesses set to benefit from the artificial intelligence (AI) boom.
The downside here is that the fund can be volatile. Last year, for instance, it lost 27.6% of its value. So it’s important to ensure that it’s ‘right-sized’ within an ISA.
Income
On the income side, one of my top picks is Morgan Stanley Global Brands Equity Income. This is focused on businesses with powerful brands.
Investing in companies with big brands is a solid strategy, to my mind. Brands can provide strong competitive advantages. Not only do they keep consumers coming back for more, but they also give companies pricing power (important when inflation is high).
This fund sports an attractive dividend yield of around 3.7%. It also has a solid overall performance track record. Again though, this doesn’t guarantee success going forward.
Technology
Finally, for tech exposure I like Fidelity Global Technology. I see this product as a good way to play the technology revolution we’re in the midst of.
Not only does it provide exposure to big players such as Apple and Microsoft but it also gives investors access to less well-known companies such as Salesforce and Taiwan Semiconductor.
This fund has done very well in recent years on the back of the tech boom. And I expect it to keep delivering in the long run. Like tech stocks though, it can be volatile. So it’s important to right-size the position.
| Fund | 1-year return | 5-year return |
| Fundsmith Equity | 8.6% | 63.7% |
| Royal London Sustainable Leaders | 6.1% | 45.1% |
| Blue Whale Growth | 10.8% | 56.6% |
| Morgan Stanley Global Brands Equity Income | 2.5% | 56.7% |
| Fidelity Global Technology | 11.7% | 136.8% |
