Planning for your ISA? Go the whole ‘hog
From Roman times onwards, hedgehogs have held a special place in our culture. Back then, Pliny the Elder, a renowned philosopher of that day, wrote about hedgehogs carrying apples on their spines, to sustain them through the winter months. Folk tales also cast hedgehogs in an idealised light. But these romanticised images bely their resilience and self-preservation. When a predator approaches, the hedgehog presents its spines (more than 5000 of them!), making a formidable shield.
Somewhat similar to this clever creature, investors also think about self-preservation – in order to achieve one’s financial goals, and to ensure enough is put aside for the long-term. This ISA season, you might be considering something different to the most popular but often overcrowded themes of the stockmarket – so here’s a round-up of our contrarian investment approach.
Built for long-term investing
The Scottish has a history of long-term investing. It boasts over 130 years as an established investment vehicle and importantly, as an independent trust, it is not constricted by short-term performance considerations.
The Trust’s contrarian approach is built on conviction, a search for out of favour but quality investments and an awareness of investors’ behavioural traits. It is never just a case of rounding up the most unloved stocks. There have to be inherent strengths as well as potential catalysts for sentiment and share prices to recover.
A Dividend Hero
Over time, dividends make up a substantial portion of total returns. The Scottish has 36 consecutive years of increased regular dividends and currently one of the highest dividend yields in its peer group. The compounding effect of these dividends, when reinvested into the fund, is material and boosts returns over time. The Trust has been listed as a ‘Dividend Hero’ by the Association of Investment Companies. It should be remembered, however, that dividends are not guaranteed and income can fall as well as rise.
The Scottish’s ongoing charges figure (OCF) is low relative to its peer group, an important consideration given the drag that high fees can have on overall returns.
ISA: a tax-efficient way to invest
The current ISA proposition stands out as relatively attractive. The vehicle offers generous tax benefits – when you invest in an ISA you pay no further tax on any income earned or on any gains when you sell your investment. Up to £20,000 can be invested in an ISA for the current tax year which ends on 5 April. ISAs are an attractive vehicle for building a substantial fund to potentially finance school fees or a deposit for a flat. Though remember that the value of any tax benefits depends on your individual circumstances and tax rules may change in the future.
Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.
Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this article should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.