Spice up your ISA

Take an Aggressive Stance

Concentrate your investments on emerging markets and the more daring end of the UK equities market. These racy portfolios focus on fast-growing world economies such as Asia and Eastern Europe, or a concentration of companies in which fund managers have an especially high conviction.

For the ultra-confident amongst you, a Self-Select ISA allows complete investing freedom, working as a wrapper to place any eligible investments into. Products like the Self Select ISA come with myriad health warnings and caveats though and certainly shouldn’t be taken lightly. Taking advice from an accredited fund manager is almost always the best option.

If the prospect of investing your entire ISA quotient in risky overseas markets seems a little unpalatable, then why not invest in UK registered companies who are set to out perform the market over a limited period of time?

Back to the top

UK all the way

Products such as Focus Funds will concentrate your investments on twenty or so hot UK companies who are tipped to skyrocket on the stock market. Investing in such a narrow pool can generate tremendous returns if all goes according to plan, but if one of these companies issues a profit warning then, like a house of cards, the whole portfolio can collapse. Investors who are wary of this scenario should spread investments to reduce the risk.

Special Situation funds on the other hand hone in on companies who have struggled in recent times but are predicted to enjoy a renaissance of fortune. Again, this is risky, and the level-headed alternative is to invest in an established, blue chip FTSE behemoth.

Back to the top

Look East

Russia is the cheapest emerging market around and, in its current state, represents a unique buying opportunity. The Russian market occupies a position in the shadows behind Asia’s spotlight. While everyone concentrates on China, the Russian market goes untapped.

Back to the top

Sleeping Satellites

You don’t necessarily have to be a high risk investor to buy into Russian, Asian or even African markets. Low and moderate risk investors can include shares from these markets in their portfolio along with a spread of steadier investments. Aggressive funds are most effective when they play a satellite role around a core investment portfolio, even for high risk investors. Chasing high performance returns can lead to major gains but also catastrophic losses, so a diversified portfolio is a must if you want to regularly sleep at night.

Back to the top

Everything’s Gone Green

Taking an individual approach to your ISA doesn’t necessarily mean investing your allowance in high risk overseas lotteries. Investing in an ethical ISA can be as pioneering as buying shares in a Brazilian banking conglomerate, for the following reasons:

Ethical ISAs are designed to make a positive contribution to society and the environment, although the range of ethical stances that can be measured between individuals makes for a broad church. Of the 43 ethical ISAs currently available, each has its own unique ethical investment code, allowing you to find an ethical ISA tailored to your viewpoint.
An ethical ISA fund manager will avoid companies who fail to meet the ethical standards of the fund, and investments will only be made in firms committed to responsible business practices.
In cases where companies are walking a tightrope between ethical and unethical practices, fund managers use their power as shareholders to actively encourage these companies’ execs to take on more responsible business standards.

The suspicion remains, however, that ethical investing can involve sacrificing returns for principle. For the UK ‘All Companies’ sector, ethical funds have marginally outperformed their peers over one year, but significantly underperformed over three and five-year periods. Returns from ethical ISAs tend to be cyclical.

Back to the top

In Summary

Daring portfolios work when aggressive funds satellite around steady core investments.
The Russian market is a largely untapped area where profitable investments are ripe for the picking.
Ethical ISAs represent a truly pioneering investment model that outperforms peers over a 12 month period.
If miss-managed, self-select ISAs can be akin to throwing thousands of pounds out of a 19th storey window. Using an accredited fund manager is always the safest option.
Investing in UK ‘shooting star’ companies is a useful alternative to taking risks in foreign markets. ISAs are for the long term, so don’t invest in companies that are likely to burn out immediately.
Returns from ethical ISAs tend to be cyclical, so make sure you join the cycle at a point where the peaks and troughs to come will benefit you most.

Back to the top

Our Recommendation

There are a number of avenues open to the intrepid investor: Russia, Asia, UK ‘shooting stars’, ethical ISAs and complete investment control with a self-select ISA. It’s important that you aim for an ISA that carries and acceptable level of risk for you. If you’re prepared to throw caution to the wind, then go all in with a self-select ISA or a narrow portfolio of UK sleeping giants.

We recommend, however, that you think along the lines of ‘how much can I afford to lose?’ and tread carefully. A portfolio of aggressive investments built upon a foundation of strong core funds is believed, industry wide, to be the most gainful approach.

Back to the top