This year's Isa season is turning out to be as popular with investors as the shooting season is with...
This year's Isa season is turning out to be as popular with investors as the shooting season is with wildlife.
Sales figures are down across the board after two years of negative returns from world markets and the most popular areas of investment are bonds and income funds. Even here, the enthusiasm is containable, despite what would be seen as attractive sales messages in other, easier, market environments.
Bonds are outperforming and investors almost invariably jump on a half decent three year track record, remember tech funds in early 2000?
When it comes to income funds, the message is less defensive and has a more upbeat look for the future. Groups can offer investors a vehicle which will provide them similar income streams to a current account but with the potential for a growth kicker.
Oversold shares in the market have led to high dividend yields, a rarity during tech's glory days. If a company is fundamentally sound but happens to be out of favour in the market any rebounding share price growth can be added to already healthy dividends to produce a 7% total return for the year without too much difficulty, a familiar target figure now being quoted as the annual return from equities investors can expect going forward.
In such an environment many are beginning to think if the Isa season is this bad, what follows will be even worse.
Those who do could be falling into the same trap as those who only look at fund performance up to an arbitrary date picked by the product provider in its investment advertising.
The opportunity to use this tax year's Isa allowance ends on 5 April but it is misleading to see 5 April as anything other than a totally random date when it comes to judging the retail market's hunger for mutual fund investing later in the year.
Anecdotal evidence suggests there is plenty of money out there in investors' pockets, the result of the boom years of the 1990s, they are just not willing to spend it as yet.
When they do it could very well be a case of investors making use of their 2002/03 Isa allowance early rather than waiting to March or April 2003 before taking a punt on the market. If anything, those who do not use this year's allowances in full but regain their appetite post 6 April will be in greater need of tax efficient investment advice than ever before: making use of a spouse's Isa allowance, topping up pension contributions, even putting money into VCTs or EIS's. The market might be purgatory now but that doesn't mean it is going to be hell on earth because not everyone used their Isa 2001/2 allowance by 5 April.
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