What ISA funds would you recommend over a 5-year time horizon?

Q: I'm looking for a stocks and shares ISA for my stepson, who wants to invest £10k for up to 5 years. Happy to split it between a high-risk and low-risk fund. What would you recommend?

A: You don’t say how old your stepson is, and this may influence how you choose to invest: possibly you will select a different fund for a child, rather than a young adult who may need these funds for education or to help towards a house deposit. Depending on the age of your stepson, you may also want to discuss options with him (although you may not want him to know these funds are available at present!) 

Fidelity offers a full range of fund options, covering different asset classes. This includes equity funds covering different geographic regions and both active and passive options. Alongside this, it also offers bond funds and cash funds, which are typically considered lower-risk and less volatile options.

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There are also a range of mixed-asset funds, which invest in both equities and bonds within one fund wrapper, plus some specialist options — for example, property funds or ETFs that tracks the price of gold.

It can be quite overwhelming knowing what to pick, so Fidelity offers a number of tools on its platform to help investors like yourself choose the most appropriate option.

The Select 50 is a good starting point. Fidelity experts have hand-picked a list of 50 funds to consider for your portfolio. These picks are based on independent research.

• Select 50: our favourite funds - selected by experts

Within this, you will find both higher-risk equity funds and lower-risk bond and mixed-asset funds, so you have the option of splitting your money across a number of different funds.

If your stepson is a young adult (or still a child), you may want to focus on growth potential. Rather than simply a 50/50 split, you could invest a higher proportion — say, 60 or 70% — in equities, with the remainder in lower-risk assets. However, this will depend on how soon you think he is likely to need this money.

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If you are still finding it difficult to choose a fund (or funds), it is worth looking at Fidelity’s Navigator tool, which runs through some basic questions and will make recommendations based on your answers. Going through this process can also clarify what is important to you when picking an investment.

• Try our Navigator tool for yourself

There is also the option to invest in the Fidelity Select 50 Balanced Fund. This is a single fund, run by the portfolio manager Ayesha Akbar, which essentially invests in a selection of funds from the Fidelity 50 list. As its ‘Balanced’ name suggests, this invests in a range of both higher-risk and lower-risk funds from across the globe, with the aim of delivering capital growth over the longer term. This is still an investment, though, so this does not mean that it is without risk. As with any investment the value of your money can go up and down, particularly over short time periods.

• More on the Select 50 Balanced Fund 

When selecting an appropriate investment fund there are a couple of other points to bear in mind.  Most investment experts say that you should be looking at a minimum investment term of five years if you are investing in shares. You state you are looking to invest for ‘up to five years’ — so if you think your stepson will need these funds sooner, then you may want to keep a far larger portion of your money in less volatile assets, such as bonds and cash. But this will limit growth potential.

Finally, if you are concerned about market volatility in the short term, there is always the option to drip-feed this £10,000 investment into a fund over a period of months. This can help smooth out some of the ups and downs of the stock market.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Overseas investments will be affected by movements in currency exchange rates. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Select 50 is not a personal recommendation to buy funds. Equally, if a fund you own is not on the Select 50, we're not recommending you sell it. You must ensure that any fund you choose to invest in is suitable for your own personal circumstances. Please note that these guidance tools are not a personal recommendation in respect of a particular investment. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.