Interactive Investor

Where ISA early birds have invested their cash

The first week of the new ISA allowance revealed some expected and unexpected investment choices, writes Sam Benstead.

17th April 2024 10:39

by Sam Benstead from interactive investor

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The first week of the new ISA allowance always sees a flurry of investment activity, as investors take advantage of the new £20,000 allowance.  

In fact, half of interactive investor’s customers contributing to their ISA in the first two days of the new tax year had already used their full £20,000 annual allowance. 

Taking a look at data from the first week of the new allowance, over the trading days of Monday 8 April to Friday 12 April, reveals some valuable insights about where some of the most wealthy investors are putting their cash in 2024. We take a look at the top investments.  

Where the most money flowed 

In terms of the investments taking the most cash in the first week, a couple of trends emerge.  

First, individual companies were popular. The most-bought investment for net cash flows was Legal & General, while Phoenix Group was in fourth place, Aviva in fifth place, Lloyds in sixth place and M&G in eighth place.  

All in the financials sector, these companies have high dividend yields, suggesting early bird ISA investors are looking to extract an income from their portfolio. 

In terms of funds, income was also a major theme. The fund collecting the most money over the week was Royal London Short Term Money Market, which yields just over 5% by investing in cash-like instruments of bonds that are maturing very soon. 

However, global shares were also very popular. HSBC FTSE All World Index, iShares Core MSCI World Ucits ETF, Vanguard FTSE All World Ucits ETF and JPMorgan Global Growth & Income all featured in the top 10. 

More and more, investors are choosing to go global, using a fund as a one-stop shop for equity markets. Global trackers have performed very well due to their high concentration in US shares, including top-performing technology giants such as Nvidia, Apple and Microsoft.  

These funds tend to have around two-thirds invested in the US – some may view this as an advantage as they expect US dominance to continue, or a risk, if they believe that American shares are overvalued. 

The most-bought investments 

While following the money tells one story, looking at the most-bought investments per number of buy trades tells another. It is a more accurate reflection of what most early bird ISA investors are doing.  

The most-bought investment trusts over the first five days of the new ISA season were: Brunner, Scottish Mortgage, JPMorgan Global Growth & Income, LondonMetric Property and Greencoat UK Wind

Scottish Mortgage and JPMorgan Global Growth & Income, which regularly feature on our monthly most-bought trusts’ lists, give investors access to global equities.  

Two of the other three names have more niche investment propositions. 

Greencoat UK Wind owns wind assets across the British Isles, generating an income that it returns to investors, which is linked to the Retail Prices Index inflation rate. It trades on a -15% discount and yields just above 7%, which may be tempting to bargain hunters.  

London Metric is a real estate investment trust (REIT) that owns logistic, healthcare and leisure property assets across the UK. It merged with LXi Reit this year and offers a 5% yield.  

Meanwhile, Brunner is a global equity trust, yielding 1.9% and trading near a -5% discount. Its top stocks are Microsoft, Visa and UnitedHealth Group.  

There were fewer surprises in the most-bought funds list. The top funds by number of buys were: Fundsmith Equity, Vanguard LifeStrategy 80% Equity, L&G Global Technology Index Trust, Royal London Short Term Money Market and Jupiter India

These investments are usually very popular, with Terry Smith’s giant Fundsmith Equity a regular at the top of our monthly most-bought funds’ lists. It buys “quality” shares that should be able to grow profits in most market conditions.  

Jupiter India and the L&G technology tracker have been standout performers this year to date, both returning 15%, while Fundsmith Equity trails with an 8% return and Vanguard’s 80% Equity fund is up 4.5%.  

The five most-bought exchange-traded funds (ETFs) were Vanguard S&P 500 Ucits ETF (distributing), Vanguard S&P 500 Ucits ETF (accumulating), iShares Core MSCI World, Vanguard FTSE All World Ucits ETF and iShares Physical Gold ETC.  

Tracking US and global markets (and gold), these ETFs are core options for investors, giving them access to the world’s largest companies for a low fee. The S&P 500 trackers from Vanguard cost just 0.07% a year, and given that the index of America’s largest shares has returned on average 10% a year for 30 years, it is no surprise that they are popular with ISA investors. 

Gold is on a strong run as well, with an ounce now costing more than $2,300 (£1,850), which is a new record. This tracker from BlackRock is backed by physical gold bars and is one of interactive investor’s Super 60 investment ideas.  

How do they compare with last year’s early bird buys?  

Compared with the first week of the new ISA season last year, investors this year were more focused on active funds. 

For example, while Fundsmith Equity was still the most-popular open-ended fund last year, the next four were all index funds from Vanguard: Vanguard LifeStrategy 80% Equity, Vanguard LifeStrategy 100% Equity, Vanguard US Equity Index and Vanguard FTSE Global All Cap Index.  

Meanwhile, the most-popular investment trusts last year were JP Morgan Global Growth & Income, GoreStreet Energy Storage, Brunner, Land Securities Group and Scottish Mortgage. With three trusts overlapping, it shows that investment trust preferences have not changed that much.  

For ETFs, top of the popularity charts last year were Vanguard S&P 500 Ucits ETF (distributing), iShares Physical Gold, iShares Core MSCI World Ucits ETF, Vanguard FTSE All World High Dividend Ucits ETF and Vanguard FTSE All-World UCITS ETF. 

The main difference here is the presence of the high dividend ETF. With a yield of just above 3%, it is a popular way for passive investment fans to own high-yielding shares from around the world. It is a member of the Super 60 list.  

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

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