How Efficient Is Your ISA Portfolio?
As the end of the personal tax year fast approaches, so to does the deadline for investors to make the most of their ISA allowance.
Despite the tax free benefits of investing in ISA’s, the fact is, that the vast majority of investors miss out on potential growth by investing inefficiently in funds that consistently underperform. This is also true in the rising number of convenient pre made ISA portfolio's offered by an increasing number of fund supermarket and advice firms.
Within this article we detail the most efficient process for building a TOP performing ISA portfolio within an asset allocation model suitable to your investment goals.
Many Investors Are Missing Out On Growth
With the rate of inflation greater than the interest earned from most cash ISA's more and investors are allocating their ISA allowance to invest in 'higher risk' unit trust funds.
By investing in a stocks & shares ISA’s you have the potential to generate significantly greater returns, but with over 2,300 ISA eligible funds to choose from, making an informed fund choice is essential to the success of your ISA portfolio growth.
Our research team analyse hundreds of ISA portfolios each month and have identified that the significant majority contain funds that have underperformed. By investing in funds that have proven to consistently deliver top performance within their sector, investors have greater potential to generate better returns within a portfolio that suits their attitude to risk.
Are You Getting The Most From Your ISA Portfolio?
There are over 2,300 ISA eligible funds that are managed by over 100 different fund management firms available to UK investors. Each fund sits within a particular investment sector based on their asset type, region or industry sector.
Within each sector there are funds that continually deliver better performance than their peers, with the vast majority of funds in each sector either underperforming or lacking consistency. By selecting funds that have consistently outperformed at least 75% of same sector funds over 1, 3 & 5 years, we believe investors have greater potential for maximising growth.
While no one can accurately predict the future, we believe such funds are managed by fund managers that have demonstrated their expertise within their relevant sector. They offer greater potential than funds that have a history of poor or inconsistent performance.
The table below represents the growth achieved by our 8 model ISA portfolios over the most recent 1, 3 & 5 years.
The Most Efficient Process For Maximising ISA Growth
1. Asset Allocation
The asset allocation model of any portfolio or ISA is the single most important aspect of investing and is critical to ensuring your portfolio does not assume more or less risk than you are comfortable with. Investing in funds across varying asset classes allows you to diversify, minimising the impact on your portfolio should one sector take a dip.
Once your asset allocation model is defined, it is important to regularly review your portfolio and rebalance if required. Rebalancing is the process of realigning the weightings of assets in your portfolio when one sector grows more than another, shifting the percentage you have invested within particular sectors.
2. Fund Selection
If your ISA portfolio is managed by a financial adviser, the most important question you need to ask them is “Are the funds you recommend consistently top performing within their sector and if so, can you prove it?”. There are financial advisers who demonstrate great expertise and knowledge when it comes to fund selection. However, fund performance is not a regulated aspect of financial planning, financial advisers are not required to research funds. As a result, a large proportion demonstrate a poor level of knowledge on fund performance or the actual quality of funds they recommend.
By ensuring your ISA portfolio contains only consistently top performing funds, within an asset allocation model suitable to your risk profile, you have added the 2 main ingredients to building a successful ISA portfolio.
Whether you prefer to manage your own ISA portfolio or have someone do it for you, the Yodelar data service is an essential knowledge base suitable to all investors. As a subscriber, investors have access to all factual fund performance and ranking reports, including the top performing ISA funds report, which details all ISA funds that have consistently maintained top quartile sector performance over the recent 1, 3 & 5 years. These factual and independent reports enable investors to clearly identify which funds are TOP or POOR performing, and help investors to make more informed investment decisions.
Review Your Existing ISA Portfolio & Investing Process
Our model ISA portfolios represent a realistic benchmark of what can be achieved by investing in consistently top performing ISA funds within a suitable asset allocation model.
By following the processes detailed above investors have the ability to efficiently maximise their ISA allowance and generate significantly greater returns from their portfolio without assuming unnecessary risk.
If you have an existing ISA portfolio or you have been recommended a portfolio of funds to invest in we recommend that you benefit from our independent portfolio service.
As an investor, our 5 star rated portfolio review service will provide you with complete clarity on the quality of your portfolio. It will identify if you are invested in top, mediocre or poor performing funds.
