Research shows a record number of savers are piling into last-minute Individual Savings Accounts (ISAs) but advisers are warning seasonal investing could damage returns.
J.P. Morgan data reveals that since 2002, April has been consistently the month in which most money has been invested into Isas, with March being the second most popular month.
However, where there used to be a gradual and smooth pick-up in activity from the start of the calendar year to the end of the tax year, the past three years have seen declining net sales in March yet increasing sales in April.
Investors who buy last-minute Isas rather than putting their funds to work regularly throughout the year, could be missing out on potentially better returns, or leaving themselves exposed to possible market falls.
Keith Evins, head of UK funds marketing at JP Morgan Asset Management, said: “The big spike in April sales could reflect ‘early birds’ investing their new year’s Isa allowance as well as those who have left it to the last minute. Because of the ‘use it or lose it’ nature of the Isa allowance, there will always be an element of seasonality in buying behaviour."
He added: "Even if you have a lump sum you might be better off investing your money in stages. For the many people who do not have a lump sum, regular investing - even if it is £50 a month - is an affordable way of building a meaningful savings pot for the future."
Ben Yearsley, head of investment research at Charles Stanley, agreed panic-buying is a terrible idea. "Why do you need to invest by a deadline when you can just hold the money as cash instead?" he said. Self-select Isas on offer from stockbrokers such as have a cash facility via which you can drip-feed Isa monies into the stock markets after you have subscribed the full amount. The downside is that you won't get a good rate on your cash while you are holding it in this facility so the value of your funds will be eroded by inflation.
Mr Yearsley recommends taking the time to research sectors that have stood still or fallen in recent months, and invest in those. He revealed to Investors Chronicle he used his own personal Isa allowance to buy into the BlackRock Gold & General fund (ISIN: GB0005852396) as well as shares in Eurasian Natural Resources (ENRC).
If you are interested in finding out more about Isas, read:
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