Investment ideas for ISAs

With so many ISA options, Fidelity Worldwide Investment's Investment Solutions Group has some suggestions for ISAs:

James Bateman, Head of Manager Selection for Fidelity's Investment Solutions Group: "No one can predict exactly what will happen in the future so when considering ISA investments savers should avoid putting all their eggs in one basket. A common mistake is to invest in asset classes that performed well in the previous year, or choose the most popular funds.

"For example, while global stocks provided a healthy return of 16.8% in 2010, in 2011 returns were negative and bonds would have been a much better bet. By investing in a mix of assets, investors can achieve a much more consistent return. Fidelity's research shows that a diversified portfolio of bonds, global stocks, commodities, property and cash would have achieved a healthy return of 5.8% per annum on average over a 10 year period. By adopting this strategy savers have a better chance of avoiding disaster in years when certain asset classes underperform. Actively allocating between these different asset classes gives an investor the potential to achieve a higher return than this 10 year average.

"An easy way to diversify is to invest in a multi asset fund where the fund manager allocates your money between different assets and tweaks this allocation relative to how the markets are behaving. These can invest either in passive index trackers, or in the case of Multi-Manager funds, active managers, with the fund manager selecting the asset classes, investment styles and underlying funds that they expect to perform well. In either case, it is their job to monitor the markets so that you don't have to."

Ayesha Akbar, Portfolio Manager, Fidelity MultiManager Growth: "Although emerging markets were one of the worst performing asset classes in 2011, I still consider them to be a good long-term investment for ISAs. Savers may be concerned about the impact of low global growth on emerging markets and be feeling nervous about investing in these areas. However, with valuations looking fairly attractive, those looking for growth and with a long enough time horizon to withstand short-term volatility would do well to consider the region.

"More specifically, the BRIC countries were the worst performers of all the emerging markets in 2011, but this year they are looking the most attractive of all. China also remains a good long term play and, although there are short-term worries, the underlying story remains strong and I anticipate that it will avoid a hard landing. Inflation concerns in emerging markets have eased, which means that there is greater chance of monetary stimulus which will be good news for companies.

"One fund that will access this theme well is JP Morgan Emerging Markets Fund. JP Morgan has a long established investment process in global emerging markets and a track record that is superior to many. The process focuses on long term themes and is backed up with large on the ground resources with portfolio management being carried out from London."