For a truly long-term investor investments may have to go down before they can go up

For a truly long-term investor, investments may have to go down before they can go up. In other words, your Isa need not be a winner from day one to be a good choice.The next point is that certain kinds of investment wheeled out under the Isa banner are to be avoided at all costs. Personally, I would not put a penny into any kind of guaranteed or protected fund. When you strip them down, these products are mostly innovations designed to find a new way of transferring your money into somebody else’s pocket. The guarantees they offer are almost invariably illusory, if not too expensive to justify.What you are in fact buying is very different to what appears on the label. A fifth survival point is that for most people with the benefit of 10 or more years of Pep and Isa investing behind them, the most important decision is not where you put your marginal £7,000 this year, but what you do about the £100,000 or more that you have already invested from years gone by.

Even if you do find the one sector which is going to rise 100 per cent in the next 12 months, simple maths will tell you that doubling your marginal £7,000 is poor reward if your £100,000 endowment meanwhile loses even 10 per cent of its value.What I am suggesting is that it just does not make sense to manage your portfolio as a series of independent once-a-year decisions. Even if you do manage to pick the investment style or sector that is destined to outperform all others over the next 12-month period, it is not the end of the process.Suppose you pick a growth fund in year one, a value fund in year two, another growth fund in year three and so on, and suppose that (improbably) each year you manage to pick the style that does best over, say, the next five years. The fact is that even blessed with this success, you will end up with a portfolio that is effectively an expensive index fund, as the two styles will have largely cancelled each other out over time.My conclusion is that the way to approach your annual Isa decision is to get away from an approach that says “this is what I must buy this year” and instead focus on saying “this is what I have overall; how can I improve the overall risk-return balance?” If you are willing to make specific bets, there is a good case for choosing a self-select Isa and investing in it shares or funds that may seem highly risky in isolation but which round out your overall financial position. That is certainly what I have found most helpful.Over the past two years I have filled my 1999-2000 self-select Isa with just two items: shares in Marks & Spencer and a Japanese investment trust. In isolation, even though they are starting to perform quite well, these look like barmy risks Both have certainly been contrarian bets. Overall, however, they aren’t as out-of-place or risky as they seem.

This year I am thinking of putting some of my Isa allowance into gold and bonds for the same reason. This decision probably won’t be right for you, but there is at least more logic to it, I kid myself, than buying yet another overmanaged and oversold managed fund just because it comes gift-wrapped by the Government.davisbiz aol . A few weeks ago, I became so frustrated with the lacklustre performance of the various shares I had bought in “quality” companies that I decided that I had to buy a dog. Not a greyhound, although even that notoriously easy way to wave goodbye to your hard-earned cash might have been a better bet.

MoneynetA few weeks ago, I became so frustrated with the lacklustre performance of the various shares I had bought in “quality” companies that I decided that I had to buy a dog. This is a hotel group that almost went bust a few years ago and is one of the smaller, weaker players in the hard-pressed leisure sector. Predictably at that time the shares were close to a year’s low, so I bought a few at about 7p each.Now, a mere five weeks later, I am in receipt of a tender offer from Hichens, Harrison & Co plc on behalf of Trefick to buy my shares for 14p each So I’ve doubled my money, or I would if I took up the offer. This of course gets me to thinking that Queens Moat may not be the hound of a company that I first thought it to be, and, if nothing else, it is still trading at a very substantial discount to its net asset value – about 50 per cent, which is large even for this line of business.It’s a bit complicated, but there’s a chap called Jack Petchey, a property entrepreneur who once owned Watford Football Club, who wants to buy up to 25.6 per cent of QMH, with the aim, say the analysts, of flushing out a bidder QMH is urging shareholders to reject the offer I think I’ll sit tight for now. After all, who’d have thought I could have so much fun with a greyhound?Meanwhile, the shares that I had been so disappointed with have started to come good. I have picked a few decent “recovery” plays since 11 September – British Airways, Rolls-Royce and easyJet, to name but three, and more recently I have been lucky with Logica, bought on bad results for a sub-£4 price, and Reuters, which I bought last week at a little above 500p again on some bad corporate news Both are up about 10 per cent. Reuters, though, may have been a slightly premature move, as the worst for the financial sector may not yet be over.