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Markets take a panning while investors look for glitter in gold
tax efficient savings

FEW want to buy shares when markets fall, which could be the strongest argument for a taxfree shares Individual Savings Account (ISA) investment before April 5 for the 2007/8 tax year.

Bold investors choosing a UK fund for their Mini Equity ISA (maximum �4,000), or a Maxi (�7,000) can expect rough weather for months. But this is an investment for five years, or at least three, and shares, long term, usually outperform cash in the bank or building society.

Various providers, such as Norwich Union's "green"

Ethical Fund, offer ISAs for �50 a month, while discount broker Hargreaves Lansdown takes deposits via debit card.

"At �4,000 or �5,000, this isn't a life or death decision," says Paul Penny at discount broker Financial Discounts Direct. "It's an add-on to other savings."

Based on shares, equity ISAs, go down as well as up. Tony Ahearne at moneyspider.com monitors 2,000 or so managed funds, and says last year confirmed "the survival of the fittest" theory.

He said: "If you happen to be in the Rathbone Special Situations Fund, very popular with Joe Average investor, you are looking at losses of 25 per cent over the last year.

"The best performer, Merrill Lynch UK Dynamic, held out pretty well, down only 0.56 per cent in 12 months."

The ISA tax wrapper means capital gains are tax-free, while tax on dividends is only ten per cent. Find a fund in the right sector - perhaps Latin America, China, India or Russia, rather than Britain this time - and capital gains over five years can be considerable. Some Indian funds, for example, have grown fourfold since 2000, before the recent wobble.


The other attraction of ISAs is that an original investment can be sold, and reinvested in another fund, while remaining all the time within the tax shelter.

Wherever possible, though, ISA investors should avoid the initial commission, sometimes five per cent and more, charged by some fund managers on direct investments. With a discount broker, most of the initial fee is refunded.

On the well-regarded Artemis High Income Fund, for example, the initial commission is 5.25 per cent. Financial Discounts Direct discounts five per cent of that, so investors pay only 0.25 per cent. Discount brokers can give guidance and fund factsheets, but not advice as defined by the Financial Services Act. The Financial Discounts Direct brochure is one of the easiest to follow, because it picks only 13 funds and explains what each hopes to do.

Discount brokers can also take your money this side of the April 5 deadline, and put it on deposit for up to six months while the investor finds a fund.

Tony Ahearne at moneyspider.com also thinks investors should look beyond UK shares.

He said: "Virtually every asset class is suffering from the aftershock of the sub-prime collapse and subsequent credit crunch, but several areas could surprise on the upside in months ahead, albeit none for the faint-hearted.

"Asset-rich Russia, through funds such as Neptune Russia and Greater Russia, are attractive options because they are largely insulated from economic problems in the West.

"Gold, which despite corrections, must surely soon reach �1,000 an ounce, also looks attractive as faith in the dollar and other asset classes continues to dwindle."

Gold fans swear by the superb Merrill Lynch Gold and General, a �1.4bn fund that has quadrupled since 2000.

Ahearne also thinks funds focussing on Africa might be worth a look; more than �50m has gone New Star Heart of Africa Fund since November, 35 per cent of that invested in Nigeria. The unit price is ten per cent up on the launch price.

Moneyspider monitors 2,000 unit trusts and open-ended investment companies (OEICs) from A (very high) to E (distinctly poor) based on four parameters: a comparison with the performance of other funds in the same sector, the entire funds universe, the FTSE 100 and cash returns.


Receive a cheque for £20 and make or save thousands of pounds


Moneyspider.com is available to everyone. Registration is free and quick and you will NEVER be asked for any money. When you register with Moneyspider.com, they don't move your funds or change your investments in any way; your investments remain as they are in the same funds with the same fund managers. What's more when you register your funds with Moneyspider.com you will be entitled a cheque for £20*. Simply click here for details. And enter Promotional code MA15.


Registering with Moneyspider.com could make a difference of many thousands of pounds to you over the next few years. By seeing how your funds are rated and how their performance compares with other funds you will be armed with the up to the minute information you need to make informed decisions. In particular, you will be able to check how well or badly your existing funds are performing before using your tax free ISA allowance for the 07-08 year, which you must do before 5 April to benefit.


So while ignorance is certainly not bliss where financial matters are concerned, knowledge is power. Having this knowledge could make, or save, you a small fortune.

* The cheque for £20 will become payable when Moneyspider receives confirmation of your funds from the Fund Managers, and will be dispatched the following month.
Moneyspider Limited is an appointed representative of Anthony, Bryant and Company (Investment Consultants) Limited which is authorised and regulated by the Financial Services Authority. Warning: past performance is not necessarily a guide to future performance.


"Many of our members now check their funds on a daily basis."
Click here to find out more

Moneyspider Limited.


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tax efficient savings



Free registration
Registration is free and quick and you will never be asked for any money.
When you register with Moneyspider, we don't move your funds or change your investments in any way. Your investments remain as they are in the same funds with the same fund managers.
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Moneyspider Limited is an appointed representative of Anthony, Bryant and Company (Investment Consultants) Limited which is authorised and regulated by the Financial Services Authority. Warning: past performance is not necessarily a guide to future performance.more >>>



 

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