Tax year end is fast approaching, along with the deadline to use up your annual ISA allowance. You may be looking to add some exchange-traded funds (ETFs) to your pot to make the most of any remaining allowance.
ETFs can be a simple way to max out your annual investments into your stocks and shares ISA, and are often popular funds with DIY investors – from beginners to the most experienced, thanks to their simplicity and transparency.
Hal Cook, senior investment analyst at Hargreaves Lansdown says one of the advantages of ETFs is that they can offer diversification to your stocks and shares ISA, which can help protect it against shocks like the rising oil prices that have set in since the outbreak of the conflict in Iran.
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“It’s the unknown risks that hit markets hardest and cause the most disruption,” said Cook. “Diversification of investments is the best way to protect against these events in future.”
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We’ve collated experts’ top ETF picks for the end of this tax year, that could be used to max out your ISA allowance before April. So if you’re still considering where to invest, read on for ETF inspiration for your stocks and shares ISA.
Expert picks: Six ETFs to consider for your stocks and shares ISA
A global stocks ETF: Vanguard FTSE All-World ETF
The Vanguard FTSE All-World ETF (LON:VWRL) is a low-cost index ETF tracking the FTSE All-World Index, thereby offering broad global exposure across both developed and emerging markets.
That makes it “a core building block to an investment portfolio, providing investments in stock markets all over the world”, according to Cook.
A UK stocks ETF: iShares Core FTSE 100 UCITS ETF
The iShares Core FTSE 100 UCITS ETF (LON:ISF) offers a “straightforward approach” to investing in UK stocks, says Rob Morgan, chief investment analyst at wealth manager Charles Stanley.
“It is'physically replicated', holding all the same stocks as the FTSE 100 index, and has a strong record of closely following it,” Morgan added.
A global bonds ETF: Vanguard Global Aggregate Bond ETF
If you want to add exposure to bonds to your portfolio, you could consider the Vanguard Global Aggregate Bond ETF (LON:VAGS). This ETF offers exposure to investment-grade government and corporate bonds globally.
It is a more defensive investment, and the income that bond offers can be particularly welcome for anyone who is in or approaching retirement.
A UK dividend ETF: iShares UK Dividend ETF
A more adventurous income-generating option is the iShares UK Dividend ETF (LON:IUKD).
This tracks the FTSE UK Dividend+ Index, which contains 50 high-yielding FTSE 350 stocks.
“We think this is a good option for investors looking for income – or who want to reinvest dividends to boost total returns,” said Cook. The ETF returned 37.4% in the 12 months to 28 February, and 106.4% in the five years to that date.
An emerging markets ETF: iShares CORE MSCI EM IMI UCITS ETF
The iShares Core MSCI EM IMI UCITS ETF (LON:EMIM) is a more targeted approach for investors that want to add emerging market exposure to their portfolio.
“Emerging markets could be set to return to an investment sweet spot, defined by superior earnings growth, a weaker US dollar, and attractive valuations,” said Morgan. “A passive investment like this one following the index is very much part of the artificial intelligence complex with the Taiwanese, Chinese and Korean tech sectors prominent, so expect short term volatility.”
However, Morgan picks this out as a low-cost option for anyone seeking exposure to the largest stocks in the emerging world.
An agriculture ETF: iShares Agribusiness ETF
Most of the ETFs for your stocks and shares ISA mentioned above are tracker funds offering fairly broad exposure to different regions or asset classes.
Angeline Ong, senior investments analyst at investment platform IG, highlights a thematic ETF that is especially pertinent given current global trends.
The iShares Agribusiness UCITS ETF (LON:SPAG) offers exposure to one of the often overlooked consequences of the current turmoil in the Middle East: rising food prices.
“Many people, understandably, look to investing in oil in times of conflict in the Middle East, but what they don’t realise is that they should also be looking at fertilisers,” said Ong. “Persian Gulf producers are among the largest exporters of nitrogen fertilisers and any sustained disruption to Hormuz materially tightens global urea supply.”
Ong added that while there is no pure-play ETF for fertilisers, some of the world’s largest urea suppliers – including CF Industries (NYSE:CF), Mosaic (NYSE:MOS), and Nutrien (NYSE:NTR) - feature heavily in SPAG’s portfolio.
