February 2008

ISA Question & Answer

Question:

In the last couple of years I invested my ISA allowance in Property Funds as this was the sector being promoted at the time. Recently I have been disappointed with their performance. What alternative area should I be looking to invest in for this years funding?

Answer:

Rather than looking to invest in the current "hot tip" area we think it is more advantageous over the long run to have a well structured asset allocation strategy that encompasses a wide range of asset classes.

Where property was recommended in the recent years it could be argued they were an easier sell due to their out performance for a number of years. Unfortunately the correction in the property sector would have seriously hit the confidence of the late investor to the sector when the market dipped dramatically at the end of the 2007.

Rather than looking at a specific "hot tip sector" I suggest a portfolio asset allocation strategy which would see a rebalancing of the various sectors on a regular basis. This would see the investor benefit from an asset reallocation that may not be into the current "hot tip" area. It is likely that the current favourite sector may have already seen the majority of it's gains and new money will not benefit to the same degree. Rather we would look to benefit from investment into the sectors that may not have performed so well in recent years but are anticipated to see improvement going forward.

This is why we feel having a structured asset allocation strategy and reviewing it regularly is the most appropriate way forward for any investor no matter how sophisticated and experienced they maybe.