Building An ISA Portfolio Doesn’t Need To Be Complicated

ISA investing may seem daunting at first but it’s simple once you understand the basics.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If you’re a first-time investor, trying to decide which funds, equities or bonds to buy for your ISA can be a daunting prospect. Indeed, there are thousands of bonds, stocks and funds out there to choose from, and it would take months or even years to evaluate each one separately.

So where should you start?

Well, first of all, you’ve got to ask yourself what do you want to achieve. What are your investment goals, are you investing for capital growth or income? If you’re looking for a steady income and capital protection, then a bond fund may be right you. If you’re looking for both income and capital growth, then a UK Equity income fund is probably the best choice. And finally, if you’re looking for capital growth, it’s hard to go wrong with a low-cost index tracker.

When you’ve decided what your investment goals are, the next step is to find a fund worth buying. Here, there are two things to bear in mind. 

Firstly, most active fund managers fail to beat the index they’re tracking despite their high costs so more often than not it’s best to choose a passive index tracking fund over an active fund. And secondly, a high management charge can severely impact returns over time. When you’re looking for a fund to buy, it’s essential you consider the total expense ratio or TER. The lower the TER the better.

Here are five of the best income and growth funds with best cost structures around to help you with your investment process.

Five of the best

The CF Miton UK Multi Cap Income fund gives investors the chance to benefit from both income and capital growth over the long term.  Right now, the fund yields 3.8% and charges 1.5% per annum in management fees. Since launch in October 2011, the CF Miton UK Multi Cap Income fund has produced a cumulative return of around 110%. 

The JOHCM UK Equity Income fund is a pure income fund and currently yields 4.3%. Annual management fees amount to 1.25% and the fund’s top holdings are all FTSE 100 stalwarts. Over the past five years, the JOHCM fund has produced a cumulative return of 51.7%. 

The Marlborough Multi Cap Income fund is another fund that targets both income and growth. The Marlborough fund isn’t limited to blue-chip shares and as a result, the fund has been able to achieve an impressive level of capital growth over the past five years. The Marlborough Multi Cap fund has produced a cumulative return of 85% for investors since 2011. The fund currently supports a yield of 4.6% and the annual management charge is 1.5%. 

Rathbone Income Inc aims to achieve above average and maintainable income, without neglecting capital security and growth. Rathbone’s top holdings include both UK and US shares. The fund currently supports a yield of 3.6% and charges 1.5% per annum in management fees. 

Lastly, the Royal London UK Equity Income fund currently supports a yield of 4.3% and the annual management charge is 1.25%. Royal London’s top holdings are dividend stalwarts Royal Dutch Shell, GlaxoSmithKline, AstraZeneca and British American Tobacco. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

£20,000 in savings? Here’s how I’d aim to turn that into passive income of £903 a month

Our writer shares one approach to passive income investing, spotlighting a quality FTSE 100 stock he recently added to his…

Read more »

Investing Articles

Great dividend stocks! Here’s the forecast for Associated British Food shares to 2027

Associated British Foods' shares have dropped in value this year. Does this present a dip-buying opportunity for dividend investors to…

Read more »

Investing Articles

Should I sell my FTSE All-Share index fund and buy a S&P 500 tracker instead?

Harvey Jones is wondering whether now is a good time to invest more money in the S&P 500, after a…

Read more »

Investing Articles

Should I buy dirt-cheap BT shares after the recent pullback?

BT shares were on the up but now they're sliding again after the board trimmed full-year guidance. Now Harvey Jones…

Read more »

Investing Articles

Up 28%, can the easyJet share price keep rising?

The easyJet share price has gained altitude over one year but plunged over five. Is now an attractive time for…

Read more »

British Isles on nautical map
Investing Articles

Should I buy more BAE Systems shares at 1,350p?

BAE Systems shares have had a fantastic run since early 2022, yet still don't appear overvalued. Is it now time…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

7% yield and a cheap valuation! Is this one of the best shares to buy this month?

Christopher Ruane has been looking for cheap shares to buy. This one has a 7% dividend yield, so is it…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Should I buy National Grid shares for the big dividend before it’s too late?

This year's price weakness has left National Grid shares on what looks like a tempting valuation. I hope it doesn't…

Read more »