Some sure bets for lazy Isa investors

Here is a selection of the top funds that it identified.

Unit Trusts

Liontrust Special Situations

In the high-roller years of 2009 and 2010, this fund produced returns of 41.2 per cent and 36.1 per cent, well ahead of most rivals and its benchmark, the FTSE all-share. But most impressively of all, it managed to produce a positive return of 7.5 per cent in 2011, when most rival funds made losses and the FTSE all-share fell by 3.4 per cent. Rob Gleeson, of Financial Express, says: “The managers of Liontrust Special Situations have taken a very bearish view of the market in recent years. They have focused on industries that have high barriers to entry and on companies that look to exploit their intellectual capital. This has proved an excellent strategy during difficult market conditions.”

MFM Slater Growth

The fund returned 41 per cent and 76.6 per cent in 2009 and 2010, and just about managed a positive result (plus 0.2 per cent) last year. Mark Slater, the fund manager, runs a concentrated portfolio of about 30 stocks, with a strong bias towards smaller companies. Mr Slater argues that smaller companies are less well researched than their larger rivals, and thus it is easier to find hidden gems that no one else has yet identified. One of his most successful purchases was Domino’s Pizza, which has risen in price more than tenfold since he bought it.

Unicorn Free Spirit

Unicorn’s fund is another one of the tiny handful that have posted positive returns in each of the past three years, with figures of 30.4 per cent, 22 per cent and 1.6 per cent. John McClure, the manager, has, like Mr Slater, profited from having a portfolio heavily skewed towards smaller companies. His top ten fund holdings do not feature any of the “usual suspects”, such as Vodafone and Royal Dutch Shell. Instead it contains dynamic but less well-known companies such as Andor Technology, the digital camera manufacturer, and Oxford Instruments, the high-tech manufacturing and research company.

Investment trusts

Murray International

This global growth and income trust has notched up returns for the past three years of 35.5 per cent, 26.5 per cent and 1.3 per cent respectively.

John Newlands, of Brewin Dolphin, the stockbroker, says that Bruce Stout, the manager, has made a number of shrewd decisions since he took over the helm at Murray International. “He vastly increased the percentage of overseas holdings in order to gain exposure to growth markets, he predicted there would be trouble in the UK banking sector and steered clear of it and he has paid great attention to picking stocks that can grow their dividends year after year.”

F&C Global Smaller Companies

In 2009 and 2010 this notched up returns of 35.8 per cent and 35.5 per cent, followed by 0.2 per cent in 2011.

Tom Tuite Dalton, of Oriel Securities, says: “This is another fund that has benefited from the recent strength of smaller company stocks. It is run by a team of managers, each covering a different part of the world, and they have a very simple approach, which consists of buying stocks that look good value. It has proved especially popular with adults investing in a Junior Isa for their children.”

Lindsell Train Investment Trust

The trust produced decent returns of 23.3 per cent and 30.9 per cent in 2009 and 2010, but it really shone last year, when it returned 7 per cent when most of its rivals were in negative territory.

Simon Elliott, of Winterflood Securities, says: “Mr [Nick] Train is a value-based investor who takes a long-term view. He identifies a small number of quality stocks, heavily focused on global brands and the media, and adopts a buy-and-hold strategy, each year making relatively few changes to his concentrated portfolio of about 30 holdings.”

A word of warning

Although funds that perform consistently well should be a good long-term bet, no investor should operate on a buy-and-forget basis. Even the laziest investors should monitor their portfolio regularly to ensure that it is doing what they want it to do.

How to get an Isa

Once you have decided to buy some funds in a stocks and shares Isa, your first task is to find a plan manager.

This can be a stockbroker or a bank, but usually a cheaper way of accessing funds is to select a fund platform as your plan manager.

Platforms that deal in both unit and investment trusts include Hargreaves Lansdown’s Vantage and Alliance Trust’s i.nvest.

Hargreaves rebates some commission, and Alliance Trust all commission on unit trusts to private investors. But you will need to check if the funds you want are on the platform you have chosen.

The maximum that you can invest this year in a stocks and shares Isa is £10,680.

Alternatively, you can put up to £5,340 a year into a cash Isa but the total you invest must not exceed £10,680.

If you are undecided on which funds to pick, many Isa managers allow you to put your money into a stocks and shares Isa then hold it as cash until you have made up your mind.

Watch out for charges. There are dealing costs when buying and selling, and your plan manager will normally make an annual charge for administering your fund. But don’t delay — you have 19 days left.

• Benchmark The yardstick against which a unit or investment trust’s performance is measured.

Usually this is a stock market index such as the FTSE 100 index of leading UK shares.

• Returns The total return achieved by a fund consists of two parts. The first is the income the fund generates. The second is the rise or fall in the fund’s price.

• Value-based investment A style of investing that looks at whether a company’s price is cheap when set against the earnings it generates.

Value investors look for stocks that are inexpensive today, as opposed to growth investors, who are more interested in finding companies that can grow their earnings more rapidly than most in the future.