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There’s less than a month to go until the next Individual Savings Account (ISA) deadline. If you’re like me, you may be building a list of shares, trusts and funds to buy before this tax year’s £20,000 annual allowance expires.
Investors don’t actually need to buy any assets to utilise their allowance. Just parking money into a Stocks and Shares ISA is enough to enjoy their tax benefits. But if the right opportunity arises, it can make sense to strike while the iron’s hot.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
I have money in my own ISA I’m soon looking to invest. More specifically, I have my eyes on increasing my stake in this high-returning exchange-traded fund (ETF).
A booming market
ETFs allow investors to spread risk without necessarily sacrificing large returns. In fact, these financial instruments provide a simple way to diversify without the costs of buying a multitude of different shares.
Given these advantages, it’s no surprise that the ETF market has exploded in the last decade, and is tipped for further growth in 2025. Investment bank State Street says that a record $1.9trn flowed into global ETFs last year, pushing total assets to $14.7trn.
For 2025, it’s predicting total assets in European funds to rise another 25%, to above $2.8trn. And it thinks the proportion of retail investors owning them will jump to between 30-35%, up from 20-25% today.
Huge returns
UK investors are spoilt for choice, with more than 1,700 ETFs currently listed in London. One I think is worth serious consideration today is the iShares S&P 500 Information Technology Sector ETF (LSE:IUIT).
As you may expect, this fund provides substantial exposure to the grouping of high-growth of ‘Magnificent Seven’ tech stocks. More specifically, 57.4% of its capital is tied up in Apple, Microsoft and Nvidia shares.
This spread has underpinned the whopping gains it’s delivered to shareholders. Since its inception in November 2015, it’s risen an impressive 540.2% in value.
An intelligent approach
When it comes to investing in technology, I think taking a diversified approach like this is worth serious consideration. And news of Skype’s demise over the weekend reminded me why. What was once the video conference market’s dominant player, Skype had more than 300m customers. Today, its user base is around 10% of that number, and so Microsoft plans to wind down the service in May.
The fast-moving nature of tech development means today’s sector king can end up the industry’s big loser. By owning a large basket of shares — in total, the above iShares ETF has holdings in 69 different tech businesses — investors can substantially reduce this danger.
There are still risks, of course. Cyclical ETFs like this can underperform during economic downturns. Its constituents also face mounting competition from Chinese businesses. But on balance, I’m confident it can continue delivering stunning long-term returns.
