Building An ISA Portfolio Doesn't Need To Be Complicated

If you're a first-time investor, trying to decide which funds, equities or bonds to buy for your ISA can be a daunting prospect. Indeed, there are thousands of bonds, stocks and funds out there to choose from, and it would take months or even years to evaluate each one separately.

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So where should you start?

Well, first of all, you've got to ask yourself what do you want to achieve. What are your investment goals, are you investing for capital growth or income? If you're looking for a steady income and capital protection, then a bond fund may be right you. If you're looking for both income and capital growth, then a UK Equity income fund is probably the best choice. And finally, if you're looking for capital growth, it's hard to go wrong with a low-cost index tracker.

When you've decided what your investment goals are, the next step is to find a fund worth buying. Here, there are two things to bear in mind.

Firstly, most active fund managers fail to beat the index they're tracking despite their high costs so more often than not it's best to choose a passive index tracking fund over an active fund. And secondly, a high management charge can severely impact returns over time. When you're looking for a fund to buy, it's essential you consider the total expense ratio or TER. The lower the TER the better.

Here are five of the best income and growth funds with best cost structures around to help you with your investment process.

Five of the best

The CF Miton UK Multi Cap Income fund gives investors the chance to benefit from both income and capital growth over the long term. Right now, the fund yields 3.8% and charges 1.5% per annum in management fees. Since launch in October 2011, the CF Miton UK Multi Cap Income fund has produced a cumulative return of around 110%.

The JOHCM UK Equity Income fund is a pure income fund and currently yields 4.3%. Annual management fees amount to 1.25% and the fund's top holdings are all FTSE 100 stalwarts. Over the past five years, the JOHCM fund has produced a cumulative return of 51.7%.

The Marlborough Multi Cap Income fund is another fund that targets both income and growth. The Marlborough fund isn't limited to blue-chip shares and as a result, the fund has been able to achieve an impressive level of capital growth over the past five years. The Marlborough Multi Cap fund has produced a cumulative return of 85% for investors since 2011. The fund currently supports a yield of 4.6% and the annual management charge is 1.5%.

Rathbone Income Inc aims to achieve above average and maintainable income, without neglecting capital security and growth. Rathbone's top holdings include both UK and US shares. The fund currently supports a yield of 3.6% and charges 1.5% per annum in management fees.

Lastly, the Royal London UK Equity Income fund currently supports a yield of 4.3% and the annual management charge is 1.25%. Royal London's top holdings are dividend stalwarts Royal Dutch Shell, GlaxoSmithKline, AstraZeneca and British American Tobacco.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.