The ISA Adviser

Investment ISAs are the big brothers of Cash ISAs allowing you to invest in a wide range of investments with certain tax advantages over making the same investments direct.

What can you invest in with an ISA?

Investment ISAs allow to invest in a vast range range of investment vehicles. Self-select ISAs being by far the most flexible allowing you to select the shares of any company listed on a recognised stock exchange. Investing in the shares of an individual company through an ISA however is something that I would very rarely recommend, although your ISA allowance is valuable it's far too small to invest in a single company. When you invest in a single company slight variations in their price can have a massive effect on the value of your investment. So it's only really an option if you have sufficient funds to invest in a very large range of companies in order to achieve some investment diversification.

Generally speaking therefore I recommend that clients in vest in either one or a range of pooled investment funds, often referred to as collective investments.

Collective Investment Funds and ISAs

Collective investment funds take up several legal forms that you don't really need to be aware of but they all operate on a similar model. You buy units or shares in the fund and then the manager of the fund uses your investment along with the investment of others to invest in a wide range of assets which can include, shares, property, bonds, gilts and many other asset types depending on the rules of the fund. Americans tend to refer to these sort of funds as "mutual funds" however we tend not to use the term in the UK as it has different connotations here.

By investing your ISA allowance in pooled investments you have the opportunity to reduce the risk and volatility to which you are exposed as an ISA investor. You are no longer subject to the rises and falls of an individual company that may go against market trends.

Pooled investment funds all have rules that the manager must follow, these are laid down when the fund is formed and tell the managers what they can and can't invest in, what they should be aiming to achieve for the investors. Many funds have very similar make ups and aims this has led to investment industry bodies developing "sectors" to classify funds so that they can be compared to one another by investors and financial advisers. The grouping of funds in to sectors also aids the construction and selection of funds for an ISA or any other investment portfolio as it allows an adviser or investor to build up a diversified portfolio.

There are two major industry bodies in the UK that classify funds the IMA and the ABI. Funds are generally divided sector and then classification.

ABI Fund Classifications

IMA Fund Classifications

Ready to Invest?

Guiding people such as yourself on constructing an ISA portfolio with an investment strategy that meets your needs now and in the future is something that I specialise in. So if you would like me to advise and guide you through the minefield of investment strategy, risk management and ongoing management on either a new ISA or an existing one then please get in touch either on 0191 4066453 or by emailing me.