Most popular investments for last minute ISAs

•    Last minute ISA investors go global
•    Some trust investors are looking to pick up a bargain in China
•    Investors have until 5th April to take out this year’s ISA allowance
•    But they don’t have to make an investment just yet, they can just ‘park and glide’

Laith Khalaf, head of investment analysis at AJ Bell, comments:

“As we hurtle towards the end of the tax year, last minute ISA investors have been demonstrating their devotion to a global investment strategy. Of the ten most popular funds with AJ Bell Youinvest ISA customers in March, eight were funds with a broad global remit. 

“Only one of the top ten invests predominantly in UK equities, which highlights the gulf in sentiment between funds which invest domestically, and those which spread their wings internationally. That’s despite the FTSE All Share outperforming the MSCI World Index by around 1.5% so far this calendar year. The recent resurgence of cyclical stocks has given us a peek at a possible future where the UK stock market stages a long overdue comeback against its international peers, but DIY investors aren’t buying it just yet.

“There is clearly some interest in the far east amongst investment trusts afficionados, with both Henderson Far East Income and JP Morgan China Growth and Income making it into the ten most popular trusts in March. The Chinese stock market has had a turbulent year, after Beijing’s crackdown on what it perceives to be disorderly capitalism, followed by fears over a COVID resurgence, and potential geopolitical consequences of the Ukraine crisis. The broad regional spread of Henderson Far East Income means it has dodged the carnage in Chinese stocks, but the JP Morgan China Growth & Income trust is down over a third in the last year, so some adventurous investors appear to be bargain hunting in the far east region.

“Some last minute ISA investors have also chosen to invest thematically. Nowadays it’s no surprise to see two ESG funds in the list of most popular purchases, even though the Ukraine crisis appears to have put energy security ahead of energy transition for the time being. Investors have also chosen to invest in commodity equities via the Blackrock World Mining fund, which is most likely a strategy to hedge against inflation by buying into some of its sources. 

“There are only a few days left until the tax year closes, and we know from experience that lots of DIY investors will be opening their accounts right up to the final buzzer. If investors are pressed for time, they shouldn’t rush into an investment decision though. The ISA rules allow for you to make a contribution in this tax year, to maximise your annual allowance, and then simply hold it in cash until you are ready to make an investment decision.

“Indeed some investors may naturally prefer a ‘park and glide’ approach, rather than investing their full ISA contribution as one lump sum. By parking money in the ISA as cash, and then drip feeding it into investments gradually, investors can smooth out the ups and downs of the stock market, and mitigate the risk of a market fall just after you have committed a large sum of money.”

Most popular funds and trusts:

The following table shows the most popular funds and trusts bought by DIY investors in the AJ Bell Youinvest ISA between 1st and 28th March 2022.

Source: Most bought AJ Bell Youinvest ISA investments 01/03/22 - 28/03/22