The trait of many investors is to run with the herd and the race to use up year-end tax reliefs is a sign of that group mentality.
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Financial firms and investors often collude at the year-end to sweep up unused reliefs and allowances.
That’s fine, but any professional investor will know the start of the tax year is the time to dump money into funds and wrappers because often the deal are more enticing and any cash invested has an extra year to grow.
The strategy also works well for investors concerned about risk as they can drip their money into the markets without fearing a catastrophic loss if something goes wrong.
For British taxpayers, including expats who are not yet non-resident, this tax year has a slight twist as the ISA limit changes a third of the way through the year – on July 1.
ISA limit change
The key change on that date is the old ISA limit of £11,800, which is available from April 6, 2014, rockets up to £15,000.
Now is a good time to make plans of where to put money to take advantage of the big boom.
To help sort the wheat from the chaff, Rob Morgan, pension and investments analyst at Charles Stanley Direct has some tips from looking at recent winners and losers.
He feels British smaller company funds have dominated the top performers over the past year with the sector posting a 33.5% increase over the 12 months.
Europe is also showing some life in the bruised and battered economy, along with the other developed market of the US.
“Looking in the opposite direction, the east has not performed anywhere as near as well as the west,” he said. “Opportunities in Japan were limited and the wider Asia and Pacific Rim slipped back.
Poor performers
“But the worst fund performance was put in by the emerging markets, particularly in Latin America and Russia.”
He explained that investors perceived risks in some markets, especially the knock-on of quantitative easing in the US, a slowdown in growth, currency problems and political unrest.
“Some see these factors as a problem, while others may view them as opportunity as valuations have fallen and investors willing to weather some inevitable volatility could reap some good profits,” said Morgan.
Morgan’s worst picks for 2013 – gold mining funds as the price of the precious metal fell and made many current and planned mining projects financially unviable.
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