A last minute guide to the best Isa deals

In Europe, another wave of panic gripped the eurozone as policymakers threatened to withhold funds from Greece unless Athens got on with the reforms it had promised. The UK election could also destabilise the markets and, depending on its outcome, the prospect of an EU referendum could carry that through into next year.

Investors seem especially nervous as the bull market, which marked its sixth anniversary last week, grows long in the tooth. A bull market is usually defined as a rising market that avoids a downturn of 20 per cent or more. On that basis, this is the fourth-longest bull market since the 1930s, though it has some way to go to match the 12-year run that ended with the dotcom crash in 2000.

Despite these fears, most financial planners think equities are the best home to grow your Isa money over the long term. They are emphasising the need to diversify assets to reduce risks.

Stephen Womack, a chartered financial planner at David Williams IFA, says: “The next few months are full of uncertainty for UK markets, given the election looming. So we’re very much looking at global funds, both for equities and bonds, and not making bets on single nations or currencies. You may not be surprised to see multi-asset funds prominent on the list, especially for first-time investors.”

Here are recommendations suitable for the gamut of investors from first-timers to the experienced, the cautious to the adventurous.

The cautious

For a first-time investor, Mr Womack suggests Invesco Perpetual Global Targeted Returns. A multi-asset fund, it aims to deliver growth throughout the economic cycle, targeting inflation plus 5 per cent with less than half the risk of a typical global equity fund.

If you already have a well-diversified portfolio, Standard Life Global Absolute Return Strategies (GARS) is his fund of choice. He says: “This fund aims to produce positive returns, no matter what markets throw at it. The managers run a diverse range of strategies, exposed to bond, equity and currency markets and trying to exploit longer-term growth and short-term tactical gains.”

Keri Carter, a certified financial planner at Broadway Financial Planning, picks the same fund for first-time and experienced investors, the 7IM Moderately Cautious fund. “With an objective to achieve a return primarily through income with some capital growth, this fund has a sound strategic asset allocation with about 35 per cent in equities,” she says. “For those looking to minimise costs, the same asset allocated fund is available using trackers rather than active managers, the 7IM AAP Moderately Cautious Fund.”

Medium risk

Margetts Select Strategy Fund is Mrs Carter’s pick at this risk level. The fund, managed by Toby Ricketts, holds about 80 per cent in global equities, with the balance in fixed interest and cash.

For a first-time medium-risk investor, Mr Womack plumps for Fidelity Moneybuilder Balanced, which also holds a mix of global shares and bonds, with about one-third in bonds at the moment. More experienced investors are directed towards Newton Multi Asset Growth, which is mainly a global equity fund but has the ability to also hold bonds, which can give investors some protection if stock markets turn.

Adventurous investors

The intriguingly named Old Mutual Cirilium Dynamic is a fund of funds. It offers exposure to equities, hedge funds, commercial property, commodities and private equity. It has a strong track record over the past five years, and has the ability to switch tactics if stock markets go into reverse.

Unicorn Mastertrust, run by Peter Walls, holds a wide variety of investment trusts. “It has the potential to be volatile, so look to invest in slices, rather than all in one go, looking for days when markets are suffering, “ he says.

Mrs Carter suggests investing, say, two-thirds of your allowance into a medium-risk fund such as Margetts Select Strategy, then complementing this with more equity-focused funds such as HSBC FTSE 250 Index or Margetts International Strategy.

Income investors

“Those seeking income need to tread with some care this Isa season as value is hard to find in the bond markets, while equity dividend growth is slowing in the UK and some major sectors, notably oil and gas but also supermarkets, face negative headwinds,” says Jason Hollands of Tilney Bestinvest. He recommends Standard Life UK Equity Income Unconstrained, which explores the whole market for opportunities and has almost no exposure to oil and gas companies. It currently yields 3.8 per cent.

The bare essentials

There are two types of Isa: cash, essentially a tax-free deposit account, and stocks and shares. Both allow you to shield your savings from income tax and capital gains tax. You can put up to £15,000 into an Isa this tax year, in any combination of cash and stocks and shares. You can also transfer money from a cash account into a stocks and shares Isa and back again.

The importance of timing

The first thing to consider is how long you intend to invest your money. “You’ve got to be willing to invest for at least five years,” says Stephen Womack of David Williams IFA. The stock market can be volatile, but investing for the longer term means you are less exposed to sharp fluctuations in share prices. You should not necessarily rush into usingyour whole allowance in one go. It is possible to drip the money into markets monthly. “This is normally advisable, as there is nothing worse for a new investor than seeing your funds drop as soon as they are invested as a result of market movement,” says Keri Carter of Broadway Financial Planning.

The bigger picture

Tempting as it can be to buy and forget your investments, advisers say you should regularly review them. If you are thinking of investing in a new Isa, this could be the ideal time to review them. Make sure that your fund selection is still suitable and that you are not paying unnecessarily high charges. Only invest in new funds if they fit into your existing portfolio.