As the end of the tax year approaches, experts say it could be worth reviewing the investments in your individual savings account (ISA), to make the most of your annual allowance.
This tax year ends on 5 April, meaning the maximum annual allowance of £20,000 that you can put into an ISA will reset the day after.
That means investors still have a little time left to use any of remaining allowance by topping up this tax-free savings pot.
Hal Cook, senior investment analyst at Hargreaves Lansdown (HL.L), said: "This is a great time to review your ISA investments. You might still have some of your ISA allowance left. If so, then perhaps you could consider using it to make your ISA more diversified."
He explained that funds can be good way to diversify your investments but that it's important to make sure they are truly different.
"The problem is that determining exactly how diversified your portfolio is not always as easy as you might think," he said. "For example, an investor could buy a global fund, a US fund and a technology fund where there could be more overlap in these funds than it seems."
The MSCI World index (^990100-USD-STRD) currently has a 74% exposure to the US, while this goes up to 90% for the MSCI World Information Technology index. In addition, the MSCI World and MSCI USA (^984000-USD-STRD) indices have 25% and 31% exposure to the technology sector respectively.
All three of these indices also have the same top three investments — Apple (AAPL), Nvidia (NVDA) and Microsoft (MSFT).
Funds can be good way to diversify your investments but that it's important to make sure they are truly different. ·wera Rodsawang via Getty Images
"So, although you are buying three seemingly quite distinct funds, in reality there is a big overlap in the underlying holdings," Cook said.
"The important thing for all investors is to understand exactly what they own, whether they have a concentrated portfolio or not, and if they do, that they are happy with the risks that poses," he said.
Myron Jobson, senior personal finance analyst at Interactive Investor, noted that this season had been marked by volatility, fuelled partly by US president Donald Trump's trade war.
"But investors should not be swayed by short-term turbulence," he said. "Investing is a long-term endeavour, and history shows that those who remain patient and stay the course tend to be rewarded. Time in the market is what truly counts."
With that in mind, analysts suggest the following funds could help with diversification, depending on what investors are looking to add to their ISA portfolio.
One option that Hargreaves Lansdown's (HL.L) Cook said could be of interest to investors is the BNY Multi-Asset Balanced (0P0000X8S2.L) fund, which focuses on companies with solid long-term prospects from around the world, using bonds and cash to offer some diversification.
The fund, which has returned 6% over one-year and nearly 24% over three years, aims to achieve a balance between capital growth and income over the long term.
While top holdings include a couple of the major tech companies — Microsoft (MSFT) and Alphabet (GOOGL, GOOG) — there are also key positions FTSE 100 (^FTSE) firms, including business information giant Relx (REL.L) and oil major Shell (SHEL.L).
"Most of the fund (typically 70-80%) is invested in shares, and [fund manager Simon] Nichols favours established companies with competitive advantages that often pay a dividend," said Cook. "Nichols likes companies that pay a dividend because of the discipline that this puts on company management teams."
Another fund on Cook's list is Baillie Gifford Monthly Income (0P0001HCBD.L), which aims to provide an income return that increases by more than the consumer prices index (CPI) — a key measure of inflation — over time.
The fund has generated a return of 3.4% over one year, which is slightly ahead of January's UK CPI reading of 3%. Over a long-term horizon, the fund has produced a much stronger return of 33% over five years.
The top position in the fund, as of the end of February, was a UK Treasury bill, which is a government bond with a short time until it matures.
Apple (AAPL) and Microsoft (MSFT) feature in the top 10 holdings but there are a number of more traditional businesses also in that list, including healthcare property business Assura (AGR.L) and industrial fastener distributor Fastenal (FAST).
"The managers invest in three broad categories of investments: shares, real assets and bonds," said Cook. "The real assets section of the fund is made up of companies listed on the stock market, which means most of the fund is usually invested in shares."
"The focus on income means that returns are often different to peers who have a greater focus on growing capital," he added. "This makes it a great option to diversify a portfolio of investments over the long-term."
Cook said that the Schroder Managed Balanced (0P0000JWBZ.L) fund is a highly diversified option, as it uses a "funds of funds" approach to investing. This refers to when managers mainly invest in other funds, rather than individual shares or bonds, which means the total number of securities in the portfolio is large and in this case, stood at around 3,500 as of the end of January.
"Even though the fund is highly diversified, it has a focus on shares, which makes it higher risk than some peers," Cook said.
"Because the fund is so diversified, decisions around what regions and asset classes to invest in tend to have a bigger impact on performance than the individual choices around what companies to invest in," he added. "The managers have a lot of experience in running this fund and thinking about asset allocation though, so we think they are a great option for long-term investors."
The fund has returned nearly 5% over one-year, but over five years generated a return of 41%.
For those looking to get exposure to bonds in their ISA portfolio, Alex Watts, senior investment analyst at Interactive Investor, puts forward the Invesco Sterling Bond (0P0001DKA2.L) fund as an option.
"As geopolitical tension, a far-from-resolved inflationary picture and concerns regarding government spending across developed economies continue or even worsen in 2025, government and corporate bond yields remain heightened," he said.
Government bonds sold off globally last week, which was sparked by an announcement from the incoming German government of plans to revamp debt rules to boost defence and infrastructure investment in Europe's largest economy. This prompted the yields — effectively the interest rate return on these investments — to rise.
The Invesco Sterling Bond fund invests in corporate bonds, which is debt issued by a company.
"The managers look both at the fundamentals underlying an issuing company, as well as taking top-down view to guide positioning," said Watts. "The fund invests heavily in bonds issued within the financials-sector, with around 40% of the portfolio held in bonds issued by banks and insurers, then followed by utilities and telecoms."
"The fund’s yield of around 4.8% is attractive and [fund manager Michael] Matthew’s approach has been well proven, with total returns over the long-run being impressive versus both peer group and the fund’s benchmark."
Goldman Sachs India Equity Portfolio (0P0000PW0V.L)
For exposure to emerging markets, Tom Bigley, fund analyst at Interactive Investor, highlighted the Goldman Sachs India Equity Portfolio fund.
"Over the past decade the Indian economy and stock market has seen substantial growth and is now one of the most highly valued markets in the world, despite a pullback in recent months," he said.
While the Goldman Sachs fund is down 1% over one-year, it has returned nearly 118% over five years.
"The fund invests in sound businesses of all sizes, preferring companies with strong competitive advantages and low or decreasing competition," said Bigley. "Company meetings are a crucial part of the process and the fund management team’s ability to meet companies on the ground in India differentiates it from many competitors."
Top holdings include Indian multinational bank ICICI Bank Ltd (ICICIBANK.NS) and IT firm Infosys Infosys (INFY.NS).
Bigley pointed out that not only has the fund outperformed the MSCI India IMI index in four of the past five years, it has also beaten this index and peers over five and 10 years.
Janus Henderson Global Sustainable Equity (0P0001HG2J.L)
For investors looking for a sustainable fund pick, Bigley pointed to the Janus Henderson Global Sustainable Equity (0P0001HG2J.L) fund.
"Sustainability is central to the process," he said. "For a company to be considered eligible at least 50% of their revenues is required to be aligned with the team’s 10 positive impact themes, which are mapped to the UN Sustainable Development Goals. This results in a subset of companies with long-term compounding characteristics and support from structural growth drivers."
While the top two holdings are Microsoft (MSFT) and Nvidia (NVDA), other key positions include healthcare services company McKesson (MCK) and energy management firm Schneider Electric (SU.PA).
"With its disciplined investment process and sustainability focus, this fund could be a compelling choice for an investor seeking to expand the core global equity exposure in their portfolio." said Bigley.
The fund has produced a return of 3.5% over one year but has returned 94% over five years.
Overall, when building an investment portfolio Interactive Investor's Jobson emphasised that diversification is key when building an investment portfolio. "This means owning a range of different investments — across asset classes, styles, and regions — to help reduce risk," he said.
