SUPPLEMENT | APRIL 2021 STOCKS AND SHARES ISAs Healthcare and technology could be the best medicine to revitalise your growth ISA The recommended dose for your ISA Seize the day Small and mighty School of thought Don’t dally, act now to profit The Aim market is going Learn about the opportunities from the financials rally from strength to strength in the edtech sector Pages 5 & 6 Pages 12 & 13 Pages 14 & 15 ad template.indd 1 18/03/2021 09:28 Contents Stocks and shares ISAs | April 2021 3 LEADER ‘ Regular investing has a smoothing effect’ Lawrence Gosling , editor-in-chief, What Investment In an ideal world we’d all be smooth ISA operators, contributing regularly and avoiding the mad dash to make investments ahead of a new tax year t is a quirk of human nature that many of us only do I something when we are It is a quirk of human facing a deadline. What else could explain the interest in ISAs and nature that many of us Junior ISAs in March and the fi rst only do something when week of April each year? we are facing a deadline Of course, we can make a contribution into an ISA on any day of a tax year starting from So if you don’t already, perhaps 4 Comfort fi rst 6 April, and there is a strong consider making monthly ISA Why the trend may not always be argument for investing earlier contributions, rather than a your friend when investing for an ISA rather than later. single lump sum at the start That is easy to say in retrospect, or end of a tax year. Regular 5 Seize the day however. If you had invested in investing has a smoothing eff ect, Nick Brind warns investors not to April of 2020 for the 2020/21 tax what investment groups like leave it too late to participate in the year you would have been buying to call ‘pound-cost averaging’, inevitable fi nancials sector rally into the market at a low. which is the way many fund There was a widespread sell-off managers buy and sell into 8 Buy now, pay later on 23 March 2020 as the full individual company shares. Will the chancellor’s recovery budget implications of Covid-19 began to Sadly, there are fewer and fewer be enough to galvanise the economy? become apparent to investors in regular savings schemes available western markets. But the reality direct from the large investment 9 The third way is very few people knew March trust groups – I think I’m right Why choose between value or would be the low point. in saying Aberdeen Standard growth when you can have the If, like me, you felt caution Investments stands out here for best of both worlds? was the watchword, it seemed its scheme that covers more than better to wait and see if markets 25 of the trusts it manages. 10 Riding the tech wave recovered before making your As ever, good luck with your ISA Find out which technology stocks new ISA contribution. investments – whether you make will be riding high in 2021 They broadly did recover them now or later. ■ through the rest of 2020, 12 Small and mighty so if you had been ‘brave’ you There’s no stopping the Aim market would have seen a good return, after some unexpected wins in 2020 at least during that relatively short time period. 14 School of thought Of course, the other side of this Education technology allows for a discussion is that the value of an broader, deeper learning experience ISA for the 2019/20 tax year could for all have been badly hit depending on when you made your investment. 16 Healthy return Experienced investors are used How investing in healthcare could to the highs and lows – or as fund get your ISA portfolio fi ghting fi t managers like to say ‘volatility’ – of the stock markets. It can be 14 Vital statistics quite hard to bear, however, if Independent performance statistics you are relying on your ISA for provided by Morningstar retirement income. 003 _WIsupp_0421.indd 3 18/03/2021 09:40 4 Overview Stocks and shares ISAs | April 2021 Many of us fail to use our I was reminded of the value of annual capital gains tax these trusts and the importance allowance, so if you expect of staying with them recently a certain asset class or sector when the Alliance Trust reported Comfort will do well over a short period its results for 2020. of time then invest directly, Four years ago, the sentiment turn a profit and use some about the trust was not great for of that allowance. reasons shareholders will well remember. But by holding onto Tried and trusted those shares while the company first Keep your ISA for long-term sorted itself out, shareholders investments you hope will have been rewarded with The latest trend may not accumulate over time. I know continuous dividend gains. for many readers this is how The trust reported its 42nd year always be the best fit when you use investment trusts, of rising dividends and there is investing for your ISA, particularly some of the older clearly plenty of reserves left in and bigger trusts that offer the tank, so to speak. My broader warns Lawrence Gosling exposure to a range of markets. point is that while it is good to look for something ‘new’ for your ISA investment, something old ometimes the discussion can also be worth sticking with. about where to invest an ISA Some of the areas we talk Sfor a new tax year feels a about in this supplement, little too focused on the latest such as healthcare and fashion for the season. technology, are themes that Just as most of us do not change companies like Alliance Trust our wardrobe because something invests in to achieve growth, is trendy according to a style so it’s always worth reading a magazine, we are looking for report and accounts to learn resilient investments that will more. We hope you find this do well over a period of time. supplement useful. n Think of them as that reliable, hard-wearing, comfortable pair Lawrence Gosling is editor-in-chief of shoes you’ll never get rid of. of What Investment Portfolio staples Over the following pages we look at a range of investment sectors and ideas we believe are resilient and hard-wearing enough for your ISA. Or to put it another way, they have the potential for solid long-term growth, with ‘long term’ being key. In my opinion every ISA investment should be long term to get the fullest benefits of the scheme. If you want to make short- term tactical investments – and I admit I do every now again – don’t do it in an ISA. While it is good to look for something ‘new’ for your ISA investment, something old can also be worth sticking with 004 _WIsupp_0421.indd 4 18/03/2021 10:05 Financials Stocks and shares ISAs | April 2021 5 Seize the day Nick Brind warns investors not Its earnings are sensitive outperformed almost to economic activity so the immediately. This was to leave it too late to participate improving forecasts have driven evidenced by the early 1990s the rally, and confi dence in the recession, the UK exiting in the fi nancials rally that earnings outlook for the sector the exchange rate mechanism, inevitably follows a downturn over the next couple of years has the dotcom bubble in 2000, the risen signifi cantly. Iraq war in 2003, the global The sector discounted a fi nancial crisis and the UK inancials remains one of the worse downturn than actually referendum in 2016. This time, it cheapest equity markets. happened, thanks to government is no diff erent. FFollowing the positive and central bank actions that news around the coronavirus have reduced the economic Positive projections vaccines in November last year, impact of lockdowns and changes Earnings for the sector are they jumped sharply in price. Nick Brind in spending patterns. forecast to be up 38.9% in The sector is also likely to be Co-manager, Polar Looking back over previous 2021 and 10% in 2022, led by one of the biggest benefi ciaries Capital Global recessions or market falls, the recovery in the earnings of Financials Trust as economies open up over the having discounted the bad bank shares, as new accounting course of this year and into 2022. news, fi nancials have always rules have forced banks to make 005-006 _WIsupp_0421.indd 5 18/03/2021 10:05 6 Financials Stocks and shares ISAs | April 2021 loan-loss provisions earlier in the from Asia’s better handling cycle than in previous downturns. of Covid-19, which will As a result, provisions were allow a faster recovery. They set when the outlook in The financials sector is likely to be one also continue to benefit from mid-2020 was more opaque, of the biggest beneficiaries as economies the low penetration of financial and therefore likely to be too open up over the course of this year services to GDP relative to conservative. For example, developed markets, under- under its base case forecast, pinning their long-term JP Morgan stated it has excess Against this background, share growth potential. provisions of $10bn (£7.2bn). prices of some growth companies Payments companies continue In fact, the surprise of this are hitting stratospheric to benefit from the shift from downturn was that last year, multiples.