Three core funds for your ISA portfolio this year

If you currently find yourself rushing to get your ISA allowance allocated before the looming tax deadline and quietly wondering to yourself why you didn’t get started on this sooner – don’t worry, we’ve all been there. Let’s be honest, who actually gets straight to work the minute they sit down at their desk? 

Procrastination is incredibly common. In fact, studies show that 95% of people procrastinate to some degree*. While leaving things until the last minute can be inefficient, it doesn’t need to be stressful. To help alleviate some of that last-minute, procrastination-fuelled stress, we’ve rounded up three core funds for your portfolio.

Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and the ISA and tax rules can change. Chelsea does not offer advice and so you must manage your ISA yourself.

A fund to buy and hold

These are uncertain times, and it’s understandable if you feel tempted to sit on the sidelines, waiting for clearer conditions — whether that’s a settled tariff regime or more stability in global events. But staying in cash for too long can be a costly mistake. History shows that markets often rebound sharply after periods of volatility, and missing just a few key days can significantly impact long-term returns.

In fact, research from JPMorgan reveals that over the past 20 years, seven of the stock market’s 10 best days occurred within just 15 days of one of its worst*. “If an investor missed those 10 best days because they were attempting to dodge the down days that surrounded them, their average annualised return amounted to +5.7%. But what if that same investor stayed invested throughout the entire period, taking the bad days with the good? Their annualised return was +9.9%.”

The T. Rowe Price Global Focused Growth Equity fund is a solid core global equity fund. Manager David Eiswert uses the wide resources of analysts available to him to build a portfolio of best ideas with considerable potential for delivering long-term returns across all market conditions. He has redelivered positive returns for investors in eight of the past 10 years** and a total return of 262% over the past 10 years***.

A fund for income

One of the key selling points of an ISA is the ability to generate a tax-free income stream. By directing your ISA capital towards an income-generating investment, you’ll have a little bit extra to deal with those higher water, energy or council tax bills coming down the line in April.

The M&G Global Dividend fund has an excellent long-term track of delivering dividend growth for investors. Launched in 2008 with an objective of providing a rising income stream, it has duly delivered by increasing the distribution every year, through thick and thin, with a compound annual growth rate of 7%****.

Furthermore, last year the fund reached a significant milestone, with the accumulated income since the fund’s launch now exceeding the initial share price. In other words, an investor in the fund’s income-paying share class (I Inc) on day one will have received their money back in income alone — with capital appreciation on top. The capital value has tripled during the same timeframe****.

A fund for the future

The UK stock market drew precious little interest from fund buyers in 2024. Calastone data released in early January confirmed that UK-focused equities suffered the worst net outflows of any major market in 2024, shedding $13.3bn^. However, UK small-caps have a number of clear factors on their side. First, they are very cheap. Second, the UK economy is not as bad as sentiment would suggest, and third, history suggests that small-caps are usually the strongest beneficiaries of a recovery. These factors are well-known and understood; the problem is that they are yet to have an impact on smaller companies’ share prices.

It is worth noting that there are different shades of small-cap investment. One such fund in the smallest area of the market is the Liontrust UK Micro Cap fund, run by Liontrust’s proven ‘Economic Advantage’ team. Micro-caps to be under-researched and arguably the most hard-hit by negative sentiment, however, it may benefit most from the recovery. We particularly like the strong discipline on this fund with a focus on capital-light businesses that can scale quickly. Performance of this fund has been outstanding since it launched in 2016. The team has delivered a positive return for investors in six of the past eight years^^ and a total return of 105.8%, nearly double the IA UK Smaller Companies sector over the same period^^^.

*Source: JPMorgan Private Bank, 24 April 2024
**Source: FE Analytics, discrete calendar performance from 2015 to 2024
***Source: FE Analytics, total returns in pounds sterling, 25 March 2015 to 25 March 2025
****Source: M&G, 1 October 2024
^Source: Calastone, global fund flows report 2025
^^Source: FE Analytics, discrete calendar performance from 2017 to 2024
^^^Source: FE Analytics, total returns in pounds sterling, 9 March 2016 to 25 March 2025

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. The views expressed are those of the author and fund managers and do not constitute financial advice.