Ask Sindie: 'My ISAs have fallen on barren ground'

Your money problems solved

Q: Every year since 1999, I have put £500 into a different stock market individual savings account (ISA).

And, almost without fail, I seem to have picked poorly.

I have collected a rag-tag mix of funds, not one of which has really done anything good.

The six I have include the Investec European fund (up by around a third over the past three years), Scottish Widows Global Growth (up some 15 per cent in the past 12 months) and Jupiter's UK Special Situations (down by nearly 30 per cent over five years).

Totting it all up, my investments seem to be worth the less-than-grand sum of £3,700.

I admit I didn't bother with an independent financial adviser (IFA), choosing funds according to publicity and my own rather rudimentary research on the web.

I feel now that I'm not making the most of my choices, with too little spread too thin.

What do you think of channelling all the money instead into one high-profile or "star" manager with a proven track record?

It would be a change of tack but, if it means I get a better return, surely it's worth it?

LY, Nottingham

A: Your mixed bag of investments hasn't proved inspiring but think twice before handing all your cash to one manager.

First, though, some praise for taking the time to give your investments a onceover; too many of us simply open an equity ISA and then forget about it for years.

To be sure, growth in your Investec and Scottish Widows funds isn't great, as revealed by performance figures from the credit agency Standard & Poor's. Investec is actually up by 38 per cent, but that's not good enough compared to the 58.7 per cent average achieved by rival funds in the European sector.

Likewise Scottish Widows. In the past 12 months the fund has actually risen by some 17.9 per cent, but again, this pales against the 26.3 per cent average for its own sector.

The Jupiter fund has, like many others, struggled due to the slide in stock markets that the five-year period includes. But its own slump is particularly pronounced: the average performance of rivals in the same investment sector is a fall of 2.16 per cent, according to S&P.

As you said, your pick of funds partly reflects the success of advertising. But it may well have been that an IFA would have chosen a similar spread - with the same results.

Getting the best returns possible is, of course, every investor's dream. Yet giving all your money to one individual with a reputation for outshining his or her peers carries a significant risk, says Tim Cockerill of IFA Rowan & Co.

"No manager can get it right all the time. Everybody will have fallow periods."

The cult of personality has been around for some time in the investment world, with the sobriquet of "star" being accorded to those managers who have a habit of picking the right shares to make a healthy return on your money.

But no one person can always beat the market, so "it's really all about [finding] managers who have done well consistently instead," says Mr Cockerill, adding that: "Experience of managing people's money during good and bad times helps give perspective. As a rule, a few grey hairs on the manager's head is no bad thing."

However, investors face another problem when devoting themselves to one manager - that the "star" might leave the firm. There's then a risk that the replacement will be a pale shadow of his or her predecessor and do little with your money.

Of course, you could choose to follow the star. But in this case there will be a charge for switching your cash to another firm. This could be as little as 1 per cent if you go through a discount broker (or 0.5 per cent if you do the transfer via an online fund supermarket). If you go direct to the new com-pany, however, it could cost up to 5.25 per cent - wiping out a big chunk of your investment.

Putting all your fund money in one pot also leaves you exposed in the event of a bad decision, warns Mr Cockerill - no matter how good the manager.

Achieving the right level of risk with your ISAs is something else to bear in mind. Consider any other assets you might have - property, say, or cash savings - and ask if this provides some balance if you hold shares in volatile markets.

Although you've avoided advice so far, it could be worth seeing an IFA to make sure your cash is properly spread across investments.

But, for now, let's assume you have other savings in reserve. Given that £3,700 is a relatively small sum to have invested, Mr Cockerill suggests a star manager could be a good bet - "as long as you keep your money in UK markets where there's a good spread of companies and no currency worries".

In this case, he says, one name worth considering is Nigel Thomas, who runs the Framlington Select Opportunities fund. Another is Tim Russell, in charge of Cazenove's UK Income and Growth fund.

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