- Cash ISAs or not?
- Corporate bonds vs Cash ISAs
- Tax saving cash ISAs

Each April, many of us look at where we can invest our annual tax free ISA allowance.

We are not short of choice as to where the money can be invested, but the real difficulty is deciding what type of ISA investment is right for you. For someone in their 20s, taking a long term view a spicy Emerging markets unit trust fund might be just the job. There may be peaks and troughs along the way but over, say 20 years, the returns might be very palatable – especially if economist forecasts are right and the emerging world will be the real drivers of global growth in the next few decades.

Of course someone in their 70s looking to supplement their retirement income a high risk emerging market strategy is unlikely to be the order of the day.

Alice Jones is a typical example of an ISA investor who has tactically changed her ISA investments over the years. Alice is 60 years old and is a retired legal secretary from Bath. “When ISAs were first introduced (in 1999) myself and my husband Keith were keen to use up both of our ISA allowances. At the time we had two salaries coming into the house and our kids had left home so we had more disposable income than we had ever had! We didn’t require income from our ISA at the time but neither did we want to be too aggressive in going for capital growth.”

Alice adds: ‘Thankfully our relatively cautious approach meant we avoided the worst of the technology bubble that hurt many investors in 2000. We opted for solid UK equity funds, global growth funds and cautious managed funds which combined bonds with equities.”

As the years have progressed Alice and Keith have moved their ISA steadily out of higher risk equities and into lower risk bonds and cash. “We were advised to reduce our exposure to the stock market as the years progressed and it did mean that when the credit crunch hit most of our money was safely out of harms way. It is at times like this that you realise the importance of switching money around as you get older. Given our age and the fact that we are both retired now, we were not in a position to take a major loss and then wait years to make up these losses!”

Chris Maher is 31 and is a telecoms engineer from Northampton. He has been investing in ISAs for the past four years and he concedes that he has seen his portfolio fall heavily. However he is still keen to use his annual ISA allowance for this year.

“I can afford to invest for the longer term but that doesn’t mean it doesn’t hurt when you see the value of your ISA portfolio plummet! My dad is an accountant and he advised me not to just bail out and sell as all I would be doing would be crystallising a loss. What I have done though (via Fidelity funds network) is tweak my portfolio online. I had far too much in the way of UK funds so I have tried to get a better spread by going into global funds and even a couple of US funds as everyone seems to think the US will lead the economic recovery”

Maher adds:“I am drip feeding my money into my ISA rather than paying it in one big chunk which is a safer way to do things. I have also put a bit of money in a cash ISA for the first time. I just wasn’t sure I wanted to invest the whole amount this year (₤7,200 for 2009) straight into the stock market – sitting a bit in cash gives me the option to move into investment funds if I get a little bolder!”