Best ETFs to have in an ISA

After a rally in financial markets since the start of November, investors may be feeling a little more optimistic about their ISA choices for the year ahead. Interest rates appear to have peaked and may even fall by the end of the year. Inflation seems to be under control, and there are signs that any economic weakness will be mild and short-lived.

However, Peter Sleep, Senior Investment Manager at 7IM, cautions that ISA investors shouldn’t be reckless, even if the environment feels better. He says: “I feel quite strongly that money going into ISAs should be into relatively safe mainstream ETFs and not into chancy thematic ETFs which can go in and out of favour.”

That means no AI, innovative technology or clean energy-themed ETFs – not because these aren’t interesting areas, but simply because most mainstream ETFs will already have exposure to these trends and investors probably don’t need any more. There is always the temptation to chase big returns, but the volatility is likely to be uncomfortable for all but the most experienced investors.

Sleep says: “My picks for this year’s ISA season are pretty straightforward and all are easy to buy and sell should the need arise.”