Early bird ISA investors flock to global funds, India and the US

There’s been an increase in investors maxing out their ISA at the start of the new tax year. But where are they putting their cash and why does it make sense to be an early bird investor?

Candlestick chart and data of financial market.
(Image credit: tadamichi)

The number of investors who have already maxed out their annual ISA allowance has gone up, with Hargreaves Lansdown reporting a 31% in early bird investors on its platform within the first 10 days of the new tax year.

Early bird investors who use up their ISA allowance at the start of the year rather than leaving it to the tail end of the tax year, benefit from potentially stronger returns - plus returns are shielded from tax sooner.

According to Hargreaves Lansdown, if you invested £20,000 for the past 10 years on the first day of the tax year in the Legal & General International Index fund, your investments would have shot up to £360,500. But if you left it to the end of the tax year, you would have £322,500.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

While the benefits of catching the early bird worm are clear, which investments are worth a look? These are the stocks and funds investors have so far pumped their money into.

Top investments for early bird ISA investors

Diversification seems to be a high priority for investors with global funds, US and India topping the list so far. Tech and banking stocks are also popular.

Legal & General dominates the most popular ISA investments for early birds with three of its index trackers in the top 10 as they make cheap buys for investors.

“L&G lends itself well to an income portfolio, 8.9% forward yield with strong capital levels and good capital generation (which supports the dividend),” Matt Britzman, equity analyst at HL said.

Jupiter India comes in third position as investors buy into India’s growing economy. Experts have noted India’s stock market has performed strongly over the last two years and the fund has also crept up the top investment funds list in recent months. 

Terry Smith’s Fundsmith fund also continues to be popular despite recent underperformance woes.

Top 10 early bird ISA investments include:

Swipe to scroll horizontally
RankISA investments
1Legal & General US Index
2Legal & General Group plc
3Jupiter India
4Fundsmith Equity
5Fidelity Index World
6Legal & General International Index Trust
7Rathbone Global Opportunities
8Legal & General Global Technology Index Trust
9Aviva plc
10Lloyds Banking Group plc

Why should you invest early into an ISA? 

Even though HL considers those who invest in the first 10 days of the tax year as ‘early bird investors,’ you can still rake in the benefits from investing early into an ISA, rather than leaving it to the last minute. 

As mentioned, the second you put into a stocks and shares ISA, your investments are protected from the taxman. 

Plus, this tax year 2024/25 will mean a reduction in the dividend allowance and capital gains tax, making the tax free allowance more valuable. Dividend allowance has been cut in halve from £1,000 to £500, which means you can only earn up to £500 in dividends tax free. 

The capital gains tax allowance has also been reduced from £6,000 to £3,000 so investors will be looking for ways to lower their capital gains tax bill. It means more investors will be pulled into paying more tax on the profits earned on their investments when they sell their assets. But, investing via a stocks and shares ISA will protect your gains from the tax.  

Vaishali Varu
Staff Writer

Vaishali has a background in personal finance and a passion for helping people manage their finances. As a staff writer for MoneyWeek, Vaishali covers the latest news, trends and insights on property, savings and ISAs.

She also has bylines for the U.S. personal finance site Kiplinger.com and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury

Before joining MoneyWeek, Vaishali worked in marketing and copywriting for small businesses. Away from her desk, Vaishali likes to travel, socialise and cook homely favourites