The ISA is twenty years old this year. I know, time flies, right?
Introduced on 6 April 1999 to replace Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs), ISAs were split into either 'Mini' or 'Maxi' variants and the maximum investment allowed was £7,000.
Back then there was no social media, you could not use your phone and the internet at the same time, and the millennium bug (the idea that computers would get confused when the year 2000 began and shut down) was the big story of the year.
Markets have been on a rollercoaster journey over the past two decades, courtesy of numerous events such as the collapse of the technology bubble in 2000 and the global financial crisis of 2007-08. However, they have also reached new highs, with many success stories for active fund managers. And you can now invest up to £20,000 into an ISA.
This fund of funds is managed by one of the most respected multi-manager teams in the industry. It has been designed to provide an immediate and growing income, with the potential for capital growth too. The fund must have a minimum of 45% in cash and bonds and up to 35% in equities.
A return of more than £20,000 on an initial £7,000 investment could buy you a new car. From a VW Golf to a Mazda MX-5 or even a brand new Mini Convertible (other brands are available), you could be in possession of a shiny new vehicle and no MOT or servicing worries for a while. Equally, with one in four people expected to owe up to £24,000 when they retire, you could pay off your debts.
On the Chelsea Selection, this fund invests predominantly large European companies. The managers have developed a distinctive process, which focuses on industry structure and a company's competitive position. They specifically look for firms that can defend their margins and industries with barriers to entry.
The average wedding will set a doting father back an eye-watering £30,000. So you could use the money to pay for your daughter's wedding and even help out with the honeymoon. Or you could let her elope and do something better with the money. Like buy an adult season ticket to watch Chelsea football club – for the next 30 years...
If you were willing to look further afield two decades ago, this fund, which is also on the Chelsea Selection, has given equity investors access to the higher growth Asian economies, including Australia and New Zealand, but excluding Japan. Its income-focused mandate means it has been less volatile than most other Asian funds and could has added diversification to an income portfolio.
OK, so this is a bit of a boring one, but it is an important one. A return of almost £37,000 equates to a 20% deposit on a first home. The number of young adults living with their parents having reached an all-time high, with more than a quarter of people aged 20 to 34 still living at home, according to the Office of National Statistics. So if you want to give your children a helping hand with their independence, this could be money well spent – as long as said child doesn't want to live in London or the South East, where a 20% deposit would be £50,000 - £80,000. They may have to have been saving themselves to make up the difference.
Smaller companies bring a number of advantages to investors through their ability to be more flexible, dynamic and innovative - particularly in the long-term. This is one of the more popular funds in the sector, having been managed by experienced duo Anthony Cross and Julian Fosh since 1998 and 2008 respectively. The managers look for firms with intellectual capital, such as strong distribution networks, recurring revenue streams and products with no obvious substitutes.
This is much more self indulgent - hence we really like the idea. It’s hard to get accurate figures on what a trip around the world would cost, however website earthtrekkers.com has given a rough estimate based on reading travel budgets of other bloggers, various travel planning resources and their own experience of circa of $40,000-$50,000 per person for a year (£30,382/£37,982).
Another Chelsea Selection favourite, this fund has had Giles Hargreave at the helm since 1998, with Eustace Santa Barbara co-managing since 2014. It is typically well diversified with almost 200 stocks to minimise risk. Relatively small positions are taken and the managers will add to them if their conviction grows. It has evolved over the years to include more medium sized holdings, but is still small-cap focused.
While the average UK house price was £226, 906 last year, it's still possible to purchase a cottage in a wine region of France for less than £180,000. So investing your full ISA allocation in 1999 into this fund could have bought you a handy second home - not too far away that you can't get there quickly, easily and cheaply, but far enough away to escape those adult children that perhaps still haven't flown the nest...
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius's views are his own and do not constitute financial advice.
*Source: FE Analytics, total returns in sterling, 6 April 1999 to 26 February 2019