How would Neil Woodford invest this year's ISA allowance?
Neil Woodford's reputation has been hurt over the last couple of years. His performance has not been as strong as it has been and some investors may have doubted his ability as a fund manager.
However, over a long-term period, he remains a relatively strong performer. And even the very best investors experience disappointments, make mistakes and ultimately cannot have a fool-proof strategy for all market conditions.
As such, adopting parts of Woodford's investment style could be worthwhile when it comes to investing your ISA allowance. Here are some ideas which all investors may be able to implement.
While dividend stocks may not be the most exciting types of investment, they can deliver stunning returns longer term. Various studies have shown that it's the reinvestment of dividends which can be the biggest contributor to total returns in the long run. As such, with the FTSE 100 offering a wide range of shares that have above-inflation yields, there could be a significant buying opportunities.
Companies that are able to increase their dividends may also represent stocks that have strong financial futures. Company management is usually confident in the prospects for the business if they decide to increase the payout ratio, while a company that can afford a higher dividend may prove to be financially stronger than those unable to do so. With Woodford's career having focused on dividend stocks, following his lead in this respect could be a shrewd move.
With the FTSE 100 having fallen by over 10% in recent months, investor sentiment has clearly declined. Investors now seem to be increasingly unsure about the prospects for the world economy, with the potential for tariffs between major nations, as well as a tightening of monetary policy, having the capacity to slow GDP growth. And with Brexit now only a year away, it wouldn't be a major surprise if volatility remained high in the coming months.
As such, when investing this year's ISA allowance it may be prudent to seek stocks that have a relatively high chance of delivering consistent financial performance. This may not necessarily mean selling cyclical stocks, but could entail a greater focus on balance sheet strength, past performance during difficult economic periods, as well as geographic diversity. With Woodford having focused on companies in sectors such as tobacco and healthcare in his career, those same sectors could now be of greater interest to ISA investors.
While Woodford's reputation may not be quite as strong as it once was, he continues to have a successful long-term track record. His focus on defensive dividend stocks could produce relatively high total returns over a long period. And by following a similar style to his, investors may be able to generate relatively high and robust returns from their ISAs.
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