Investment ideas for ISAs

The Share Centre gives ideas for investors looking to make an early investment into their ISA this tax year

Investment ideas for ISAs

The Share Centre has tipped Rolls Royce, Unilever and Vodafone as suitable equities for those looking to make an investment in their ISA at the start of this tax year – while Fundsmith Equity, Woodford Equity Income and JP Morgan Global Macro Opportunities are recommended funds for ‘earlybird’ investors.

Stock recommendations

Helal Miah, investment analyst at The Share Centre, said: “There are advantages to investing your money into an ISA early in the tax year – one of them being the tax benefit. The sooner you invest, the longer period of time your money has to grow in a tax free environment. The more it grows, the more it avoids potential for capital gains tax.

“If you are looking to make an early equity investment in your stocks and shares ISA, you could look at companies that we expect to perform well this tax year.

“Vodafone announced its sixth consecutive quarter of growth in February and will be aiming to see that success story continue through the year as the use of data continues to increase. Given the level of consolidation in the sector, and the rise of ‘quad play’ providers (offering phone, broadband, mobile and TV), Vodafone will need to up its activity in these areas to compete.

“However, investors should note that the company has announced plans to launch a television and broadband service next year. If it can combine this with a major acquisition it could potentially drive earnings further forward.

“Unilever manufactures a wide range of well-known household products and we believe it is a safe and steady option in the current volatile market.

“For some time Unilever has been trying to grow its sales in the vibrant emerging markets where it believes the expanding middle classes will provide strong demand for its global brands for many years. That desire has been frustrated of late by a slowdown in growth in these regions, but we believe these are shorter term cyclical issues and the longer term structural changes are still supportive.

“This is a company with a diverse portfolio of global brands and a healthy dividend, which is expected to rise well ahead of inflation over the next couple of years.

“Rolls Royce could be the recovery story of 2016/17. Its new chief executive, Warren East, has an ambitious plan to restructure the business, cut costs and simplify operations. Despite announcing in February that it is cutting its dividend by 50% to bolster its finances, the company managed to avoid a profit warning while committing to a progressive dividend policy going forward.

“We maintain our ‘buy’ recommendation on the stock, although investors should be prepared to ride out the volatility it is likely to face as market conditions in aerospace look more uncertain. This may now be a stock for the contrarian investor seeking a balanced return and willing to accept a medium level of risk.”

Fund recommendations

Sheridan Admans, investment research manager at The Share Centre, said: “Good decision making is essential to helping your ISA to grow, and for investors who wish to seek professional input while remaining hands-on, we would advise them to look at single-strategy funds.

“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 and technological innovation, and which have existing advantages that are difficult to replicate. It is suitable for investors who take a long-term view when investing, and are comfortable investing in a concentrated globally exposed portfolio while 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 prefer a little less volatility and are looking to manage at least a positive return from their investments over the next 12 months, the JP Morgan Global Macro Opportunities fund may be suitable.

“The fund can take positions in equities, currencies and fixed income securities while making use of futures and options. The fund manager will employ the use of these investment types with the aim of providing a positive return in any market conditions over a 12 month rolling period, albeit not guaranteed. The fund aims to produce returns with less volatility than that associated with long-only global funds.”

Please remember that we do not give recommendations and all the caveats relating to investing apply. If you are unsure please seek financial advice

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