DIY Investor Magazine
/
March 2017
10
DIVERSIFICATION AS AN ISA SOLUTION
The wisdom of diversification is simple: the yield from
some investments may be disappointing, but others will
outperform expectations.
Investing in a diversified portfolio should mean that
taken as a whole, with out-performers and under-
performers offsetting each other, returns should be in
line with expectations. But of course diversification does
not necessarily guarantee investment returns and does
not eliminate the risk of loss.
Diversification soared in popularity among the pre-
millennials from the early 1990s, with private investors
opening share dealing accounts, or investing in unit
trusts, investment trusts or exchange-traded funds, all at
a reasonable cost. The Individual Savings Account (ISA)
is another innovation of the late 1990s that millennials
would be wise to consider.
Up to £15,240 in the tax year 2016/2017, rising to
£20,000 per year in 2017/2018, can be invested through
Individual Savings Accounts (ISAs). Investments held
within an ISA are free of income tax on dividends and
IMPORTANT INFORMATION
This document has been produced for information purposes only and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any
investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted
upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of
J.P.Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated,
J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed
as to accuracy. They may be subject to change without reference or notification to you. Both past performance and yield may not be a reliable guide to current and future performance
and you should be aware that the value of securities and any income arising from them may fluctuate in accordance with market conditions. There is no guarantee that any forecast made
will come to pass.
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interest earned, and free of capital gains tax breaks that
improve overall investment returns. Of course, there are
unavoidable taxes such as stamp duty, which is payable
at 0.5% on share and fund purchases.
Different types of asset can be put into ISAs: many
choose to wrap their ISAs around investments in unit
trusts and investment trusts, giving them a stake in large
diversified funds which invest in assets that are selected
to provide regular income, or capital gains, or a mixture
of both, to suit the preferences of their investors. Income
funds, for example, provide investors with regular
income from the dividends and interest earned by
assets in the fund, plus the gain from any increase in
their market value.
Millennials may not enjoy all the advantages available
to previous generations for wealth creation, but they
would be wise to consider investing their savings, and
potentially managing the risk through diversification.
Investments can provide regular income and capital
gains over time, and have the potential to provide their
owners with stability and reassurance through life.
