ISA investors want less risk

With the EU Referendum less than three months away, ISA investors are holding their breath – and their investments – until the uncertainty subsides.

ISA investors want less risk

As a result, a quarter (25%) of ISA investors are now looking for less risk in their portfolios, with almost half of these pointing to the EU Referendum as their reason according to new research from The Share Centre.

The study asked over 1,500 investors how their attitude to risk had changed in the past 12 months. Of those seeking a safer route for their investments, 42% said the UK markets feel too volatile, while over a quarter blame the instability around the Chinese economy as the reason they were taking a more cautious approach.

While not slowing down on their overall investments, some are using the chance to control their exposure to risk: well over half (58%) are choosing to invest in ‘medium-risk’ stocks for their ISA, which balances return with security.

The Share Centre said one way of doing this is to invest in an equity fund which takes a balanced approach to risk. The Share Centre tips Fundsmith Equity, Woodford Equity Income and Old Mutual Global Equity Absolute Return as funds that may be suitable for medium-risk investors.

Sheridan Admans, investment research manager, said: “Fundsmith Equity is a true global offering, managed by one of the industry’s most respected leading managers, Terry Smith. The fund has a preference for defensive companies that are resilient to change, technological innovation and who have existing advantages that are difficult to replicate. It is suitable for investors that take a long-term view when investing and are comfortable investing in a concentrated globally exposed portfolio and comfortable taking a medium level of risk.

“Investors have been keen to benefit from the expertise of Neil Woodford, one of the industry’s most highly respected fund managers, ever since he established the Woodford Equity Income fund in 2014. The fund offers a portfolio which comprises not only a core nucleus of blue chip companies, but a number of exciting young vibrant businesses just starting out. For investors seeking a core UK-dominated equity income investment then this fund may well be suitable.

“For those investors who want to remain invested in global markets but reduce their exposure to volatility further, absolute equity return funds may be worth a closer look. One that springs to mind is the Old Mutual Global Equity Absolute Return fund, which aims for capital appreciation while closely controlling risk.”

Richard Stone, chief executive of The Share Centre, added: “With political uncertainty weighing down on markets, including the EU referendum, personal investors are hedging their funds towards safer options until the mist clears.

“Whether investors will eventually end up voting for an ‘in’ or ‘out – and our latest research actually shows 63% of personal investors would vote to leave, despite concerns over the impact on the stock market – it can be all too easy to turn away from investing altogether when headwinds seem a little strong.

“However, the ‘little and often’ approach is truly an achievable and sensible method in volatile markets, and it’s important to recognise the benefits of drip-feeding rather than investing a lump sum. You can’t ignore the fact that the stock market has returned over 600% since 1990, compared to just 68% by cash. Yes, cash savings can seem like a safe haven in times of uncertainty, but history suggests that looking beyond the piggy bank should offer a far greater return over the long-term.”

Please remember that all the usual caveats apply when investing your money and we do not make investment recommendations – if you are unsure about investing then please make an appointment with an independent adviser

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