ISA winners for 2007

ISA season is upon us and it's time to decide where to put the £7,000 you can invest without incurring tax on the profits. New rules on ISAs are due to come into effect sometime this year but the fact that individuals can either invest £7,000 in equities or £4,000 in equities and £3,000 in cash remains unchanged. So what are the likely ISA winners for 2007?

Cash

Cash ISAs are a good option if you don't fancy risking your cash on the stock market and might need your savings at short notice. Most banks and building societies offer cash ISAs but the terms and conditions differ between products and institutions. For example, Saffron Building Society has a cash ISA paying 6.05% AER but you need to invest at least £3,000 and give 30 days' notice to make a withdrawal. If you want a no-notice account try National Savings & Investments which pays 5.8% and requires a minimum investment of £1,000 or Kent Reliance Building Society which pays 5.71% and only requires a minimum deposit of £1.

Equities

Experts say that when choosing which ISA to invest into for 2007, you shouldn't be thinking about which one is likely to do better over the course of the year as you would be very lucky to get it spot on. Instead, it's more important to choose the fund that meets your investment objectives and therefore compliments your investment portfolio. For any money likely to be needed within five years, a cash ISA is going to be more appropriate while investing into equities calls for a long-term view.

A toe in the water

For the cautious investor, Anna Bowes of AWD Chase De Vere financial adviser suggests the Investec Cautious Managed fund. This fund aims to provide a combination of income and long term capital growth by investing into equities and fixed interest securities. According to Financial Express Analytics, the performance of the fund has been consistently good for many years - allthough it's been a tough time for fixed interest for the past couple of years. Nevertheless, over the past five years the fund has returned 45.36% compared to the sector average of 29.77%.

02 February 2007 © Moneyextra.com

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