Scottish Daily Mail

Stickto the rules of investing

- By Holly Black MONEY MAIL

THE all-singing, alldancing new super Isa is j ust days from launch. From July 1 i nvestors can put up to £15,000 a year in tax-free savings and investment­s.

This is a considerab­le boost to the current £11,880 limit and, critically, it is the first time investors can switch out of equity Isas into the cash equivalent­s.

For those investors keen to sell down some of their shares Isas into cash, the best one-year cash Isa rate currently available is 1.65pc from Tesco Bank.

Put in the full allowance and you’d receive interest of just £247.50 over a year. This means savers hoping for a better bounty will have to keep some exposure to stock market risk. But few people apart from the stock market sophistica­tes should consider using their whole allowance for investing.

There are a few golden rules for investing: spread your risk, dripfeed your money in and review your investment­s on a regular basis – twice a year at least.

Try to put your money across more than one fund. By investing in steps, you can build a balanced portfolio and minimise disruption to your investment­s.

A typically cautious investor seeking to protect their capital but keen to earn income should start with equity income funds and possibly add a dash of risk from an emerging markets fund.

Darius McDermott, managing director at Chelsea Financial Services fund broker, recommends the Threadneed­le UK Equity Alpha Income fund. It invests in big UK companies such as oil giant BP and insurers Aviva and Legal & General – businesses very adept at pumping out profits during all kinds of economic weather.

These firms are steady growers and good dividend payers. The fund’s annual dividend is currently 4.2pc. If you had invested £1,000 five years ago it would now be worth more than double – £2,223 – figures from Trustnet show.

The Invesco Perpetual Monthly Income Plus is another of McDermott’s fund tips, yielding 4.1pc.

The fund is spread across company shares and investment grade and high yield bonds.

An alternativ­e income fund is the slightly higher risk Henderson UK Property fund. This fund, investing in a mix of office blocks, warehouses and retail units generating income from commercial tenants, has a yield of 3.8pc.

The added risk comes from the fact property is a relatively illiquid asset which can be difficult to exit during economic turbulence.

For those happy to inject a degree of danger, the Lazard Emerging Markets fund could fit the bill says Ben Yearsley, head of investment research at online broker Charles Stanley Direct. Over the past five years, it would have turned your £1,000 into £1,676.

If you’re looking to grow your capital rather than seeking income, consider including a global equity fund to your portfolio. Artemis Income’s recent performanc­e has been a little shaky but it would have almost doubled your money over the past five years. This fund is invested mostly in UK shares,





80 with some European and US companies thrown in too.

Another top fund for growth investors is Standard Life GARS. It has been a fair performer and has grown by 46pc over the past five years.

Whether you are an income investor or growth investor, you could broaden your risk with an indexlinke­d gilt fund.

These invest in bonds issued by the Government which pay an interest rate linked to inflation.

Although bond funds have traditiona­lly been seen as a safe choice, there are question marks hanging over these at the moment. Fears of a bond sell off have plagued the market since late 2012. The Government’s policy of printing money to boost the economy, known as Quantitati­ve Easing, saw the Bank of England flood the economy with cash by buying bonds. This sent their value soaring.

Now that QE has come to an end, and the economy is back on the front foot, interest rates look set to rise soon.

When this happens, bond values will fall – and the interest paid out will seem less attractive.

However you decide to split your money, it is vital to review your investment­s regularly. Small blips are fine, but if there is a big shift in sentiment, you need to be aware.

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