Why it’s time to think small as the Isa deadline looms
INVESTORS keen to use their £20,000 stocks and shares Isa allowance before next week’s annual deadline of midnight on April 5 are being urged to think small.
Darius McDermott, managing director as investment platform Fund Calibre.com, has analysed the best performing investment funds since Isas were launched 25 years ago in 1999, and found smaller companies beat allcomers.
While small, growing companies are more volatile in the short term, they can prove to be more rewarding over time.
In 1999, the stocks and shares Isa allowance was set at £7,000. Somebody who invested that sum in a global investment fund from day one would have seen their money grow 468 per cent, giving them £39,760.
McDermott said this is an impressive return. “That is in spite of plenty of bumps along the way, such as the dot.com bubble, global financial crash, pandemic and a variety of geopolitical crises.”
The single best performing fund of all is Artemis UK Smaller Companies, which grew an astonishing 1,826 per cent. “A lucky investor who had invested £7,000 in 1999 would now have £134,809,” McDermott said.
There would have a lot less if they had played safe with a cash Isa, he added. “With an average rate of 3 per cent, their £7,000 would be worth just £14,656.”
Liontrust UK Smaller Companies also did well, growing 1,271 per cent since 1999, turning £7,000 into £95,976.
Past performance is no guarantee of future returns, and people should only invest in shares for a minimum five years, alongside safer assets like cash and bonds.