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It is a good idea to constantly review and, if necessary, update your investment strategy. The problem for many is that finding new ways to use the money in an Individual Savings Account (ISA) takes time and effort.
However, it does not have to be a laborious task. And if done effectively, the rewards can be considerable.
With the New Year underway, many UK savers and investors are looking for new ways to boost their ISAs. Here are two that I think deserve serious consideration right now.
1. Focus on actions
I am one of many people who own both a cash ISA and a stocks and shares ISA. But the amount of money invested in the latter dwarfs what I have in the former.
Cash accounts are a great way to manage risk. But the better returns on offer mean that prioritizing a stocks and shares ISA may be a good idea for those with a higher risk threshold.
Recent interest rate cuts mean the best-paying and easy-to-access Cash ISA rate is now below 5%. In comparison, the long-term average performance of FTSE 100 and S&P 500 They are around 7% and 11% respectively.
Cash ISA yields could also continue to fall, as the Bank of England adjusts its monetary policy in response to falling inflation.
Let me show you the difference this could make in a person's long-term wealth. A monthly investment of £500 in a cash ISA yielding 4% would become £257,065 after 25 years.
Now let's split that investment 80/20, with £100 put into that cash ISA and £400 into a stocks and shares ISA. If that person could achieve a 9% average annual return on his stock investments, he would end up with £499,862 in both ISAs, excluding brokers' fees.
Past performance is no guarantee of future returns. But I'm optimistic that equity markets can continue their impressive long-term rise.
2. Broaden your horizons
Top UK and US stocks dominate the stocks and Shares portfolios of ISA investors. The tastes of Lloyd's, NVIDIA, Rolls-Royceand tesla all functions are important.
However, those looking to boost their investment returns may want to look further afield to emerging markets for other stocks and funds to buy.
He Franklin FTSE India ETF (LSE:FLXI) is a fund I am considering for my own portfolio. This exchange-traded fund (ETF) has holdings in 244 large- and mid-cap Indian stocks, a quality that helps investors spread risk.
Since the beginning of 2020, the fund has achieved an average annual return of 11.4%. That's below the 14% that an ETF focused on the S&P 500 would have contributed in roughly that time.
However, I think the returns here could be much higher going forward, driven by India's rapid economic growth, strong foreign investment, and ongoing government reforms.
The IMF believes Asia's second-largest economy will grow 6.5% this year alone. This is significantly higher than the 2.2% and 1.5% forecast for the US and UK.
A wide selection of actions, from HDFC Bank and Hindustan Unilever to Tata Motors – offers investors in this Franklin Templeton fund multiple ways to capitalize on the economic boom.
While currency volatility could impact future returns, I still think emerging market ETFs like this one have the potential to generate huge returns for investors.
