Here’s how I’m investing in my ISA for 2026

Two things will govern how I invest my ISA this year: my plans to cash in ISA money to put towards a house purchase in the near future; and my wariness about the relatively high valuation of some of the world’s biggest companies.

It’s one of the most-repeated rules in investing that you should only risk your money if you’re willing to do it for the long term - three to five years is the commonly suggested minimum time horizon. That poses a challenge when you are already invested and you don’t know for certain when you’ll want to put the money to use. When do you take money off the table?

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I know I’ll need to use some of my ISA money to help a house purchase in the future - probably in a year or two - so it’s sensible for me to be reducing my risk ahead of that moment so as to avoid any sudden falls in value. I’ve been doing that over the past year, moving assets out of funds invested in the stock and bond markets and into a cash equivalent. I’ve selected the Fidelity Cash Fund for the job. My plan is to reach a point soon where half my ISA sits in cash.

When I started that process a year ago it felt like a smart move - not just to reduce my risk but in terms of returns as well. Markets were already high and the returns on cash looked healthy versus inflation. As time has gone on it has felt a bit more painful to be on the sidelines - markets have continued to climb after a tariff-related wobble last year and interest rates on cash have been tracking lower. Nonetheless, I’m settled on this being the right approach given my near-term plans. Sometimes you have to park your FOMO and do the prudent thing.

• Read: How far will interest rates fall?

The question then is what to do with the other half of my ISA pot that remains exposed to the ups and downs of markets.

Like many investors, I can see how valuations of the world’s biggest companies, which have driven returns in my portfolio for several years now, are now looking increasingly stretched. These are, of course, the giant US tech companies. My usual approach of simply tracking global stock markets has meant that I have been quite heavily exposed to these companies. I certainly don’t know that they are about to fall in value, but I do see the sense in diversifying away from them a bit.

To do that I’m targeting areas of the market that are normally neglected when you invest according to global market capitalisation weighted index funds.

Firstly, I’m going to seek the comfort of dividends, which tend to come from large companies in well-established industries. These have been slightly left behind in the rush for the fast-growing earnings of tech, where any spare cash is ploughed back into capital expenditure, and increasingly look like good value.

I’ve picked the Fidelity Global Dividend Fund, which has a strong weighting to the defensive dividend giants in Europe and the UK, in particular. Pharmaceutical, utilities and consumer staples companies dominate its portfolio, helping it to produce a notably steady ride for its investors.

I’m also introducing a gold exposure to my portfolio via the iShares Physical Gold ETC. I’d have loved to have held this sooner, given the stellar run that gold has enjoyed, but I still see sense in the metal now as a hedge against extreme volatility and shocks.

Emerging markets have struggled in the long period of US tech dominance but have regained much of their appeal recently, as the dollar has weakened and money has flowed away from the US over the past year. Global index funds tend to offer only minimal exposure to them but I would like more. I’m choosing a low-cost option, with the Vanguard FTSE Emerging Markets UCITS ETF.

• Read: Which global index is best for you?

Smaller companies also appeal to me. As with emerging markets, they have been somewhat neglected as investors have been able to plug into US tech to get all the rapid-growth they need. I’m hoping investors will once again seek out traditional sources of long-term growth and fall back in love with smaller companies. I’ve chosen the Vanguard Global Small Cap Index Fund.

Finally, because I still want a solid core of international stock market exposure, I am holding a global tracker - the Vanguard FTSE Global All-Cap Index Fund. This tracks an index that is more diverse than those tracked by other global index funds, with higher exposures to smaller companies and emerging markets, as revealed in our analysis of global index funds.

• Open a Fidelity Stocks and Shares ISA
• More on Fidelity Cash Fund
• More on Fidelity Global Dividend Fund
• More on iShares Physical Gold ETC
• More on Vanguard FTSE Emerging Markets UCITS ETF
• More on Vanguard Global Small Cap Index Fund
• More on Vanguard FTSE Global All-Cap Index Fund

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Before investing, please read the relevant key information document which contains important information about each fund. An investment in a money market such as the Fidelity Cash Fund is different from an investment in deposits, as the principal invested in a money market fund is capable of fluctuation. Fidelity’s money market funds do not rely on external support for guaranteeing the liquidity of the money market funds or stabilising the NAV per unit or share. An investment in a money market fund is not guaranteed. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. 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.