Nervous over Isa funds? Pick a ready-made deal!

MANY investors will no doubt be feeling nervous about choosing a home for this year’s £ 20,000 Isa allowance.

But with savings rates decimated, experts insist the stock market still offers the greatest prospect of growing your wealth long term.

For those who are keen to invest some or all of this year’s Isa allowance but are unsure where to start, many leading fund supermarkets offer ready-made Isa portfolios. Justin Modray of advice firm Candid Money says: ‘The main benefit of so- called model portfolios during volatile times is that they are likely to have a sensible spread of investments, including non- stock market assets such as bonds and property. The temptation when choosing investments yourself is to pick whatever has done well in the past. Model portfolios tend to be more disciplined.’

Here, Money Mail runs the rule over what’s on offer where.

At AJ Bell YouInvest, there are four portfolios to match different risk appetites: cautious, balanced, adventurous; and one for investors wanting income. Each is made up of six or seven funds, but you can also add other funds from the list if you wish.

This deal has one of the lowest platform fees at 0.25 pc of your savings a year. There are also fund charges to pay ranging from an average of 0.61 pc with a cautious portfolio to 0.88 pc with the adventurous option.

The firm has not made changes to its investments as a result of the coronavirus crisis.

Hargreaves Lansdown’s Portfolio + service has six portfolios. They have varying risk levels and you choose an income or growth strategy.

The platform charge is more expensive at 0.45 pc and you’ll pay between 1.29 pc and 1.43 pc for the funds.

Hargreaves has also made no changes due to the virus.

Any adjustments are made twice a year, with the next due in August. The firm adds this so-called ‘rebalancing’ of portfolios usually means ‘ selling a little of what has done well, and reinvesting elsewhere’.

BestInvest has seven portfolios. Each is designed for a different type of investor — whether you are saving to grow your wealth, invest ethically or for a regular income. They cost from 1.38 pc to 1.48 pc, plus platform fees at 0.4 pc a year.

Fidelity offers ready- made portfolios through its Pathfinder service. If you are investing for growth, you will be asked to choose your appetite for risk on a scale out of five and how you would like your money managed. You can choose from five portfolios run by fund managers, known as active funds, and five passive portfolios which are automated to copy a stock market index. If investing for income, you have three options.

The platform charge is typically 0.35 pc, while fund charges range from 0.25 pc to 1.25 pc.

Vanguard’s LifeStrategy range offers five different options, which all put your money into passive funds.

Each of the options holds a different proportion of shares ranging from 20 pc to 100 pc with the remainder in bonds — plus a small bit in cash.

Vanguard’s platform fee is 0.15 pc and fund charges are 0.22 pc. They are rebalanced daily. If you wish to invest in a readymade package, the first step is to decide your attitude to risk. Those investing for longer can afford more risk because there is time to recover losses. Those in retirement or approaching this milestone may not want to take as much risk, so a portfolio with a greater proportion of fixed-income assets such as bonds might be in order. Tom Poulter of investment research group Square Mile says: ‘Ready-made Isas are usually easy to set up and investments into them can be made quickly and easily, which is one of many reasons they appeal.

‘It’s important, however, to make sure fees are competitive.

‘Another key benefit of model portfolios is the experts should be keeping a close eye on your funds.

‘But off-the-shelf Isas are not tailored to your individual needs.’

Mr Modray of Candid Money adds: ‘Fund pickers get it wrong, too.

‘Ensure you are comfortable with your chosen risk as there are no standard definitions of what a “balanced” or “cautious” risk means, so interpretations may vary.’