Financial markets have faced plenty of challenges in the first half of 2025, making fund and stock picking even more of a challenge.
Interest rates may have come down but there are still concerns about inflation staying high or even rising again amid continuing geopolitical conflicts in the Middle East and between Ukraine and Russia, as well as concerns about Trump tariffs.
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Most popular ISA funds
According to fund supermarket AJ Bell, investors have spent much of 2025 going global and favouring technology, while the trend towards lower-cost passive investments has continued.
This is, perhaps, unsurprising as many active managers have struggled to outperform the strong US market amid the rise of the Magnificent 7 pushing up the S&P 500.
But there are signs that investors are looking for cheaper alternatives due to concerns that the US is becoming an expensive market to invest in.
Similar to earlier this year, there isn’t a single actively managed portfolio of stocks and shares on the list of most popular ISA investments so far this year among AJ Bell investors.
Users have instead opted for low-cost tracker funds or exchange traded vehicles to keep costs down and spread their risk exposure.
Investors may be changing their strategies though as FTSE 100 tracker funds
have overtaken S&P 500 trackers as the most popular.
Dan Coatsworth, investment analyst for AJ Bell, said: “That echoes with signs across the market that certain investors are taking some money off the table with regards to US exposure and reallocating it to other parts of the world.
“The UK has been a natural place to explore because stocks are much cheaper than the US and the market is full of companies that might tick over regardless of what’s happening in the economy.”
It comes as research by AJ Bell recently found just 31% of actively managed funds have beaten a passive alternative over the past 10 years.
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Most popular funds among AJ Bell ISA customers so far in 2025 |
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HSBC FTSE All World Index |
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Fidelity Index World |
|
L&G Global Technology Index |
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Vanguard LifeStrategy 100% Equity |
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Vanguard LifeStrategy 80% Equity |
|
Vanguard FTSE All Cap Index |
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UBS S&P 500 Index |
|
Vanguard FTSE 100 Index |
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Fundsmith Equity Fund |
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Vanguard LifeStrategy 60% Equity |
Most popular ISA investment trusts
Income has been the dominant theme among the most popular investment trusts with AJ Bell DIY investors so far this year.
The platform highlights that the average dividend yield on the top 10 most popular trusts is 6.7%, nearly twice the 3.4% yield offered by the FTSE 100.
Coatsworth added: “Share price weakness in many parts of the investment trust space, particularly infrastructure and renewable energy, have resulted in very high yields, including 10% from The Renewables Infrastructure Group.
“Investors may view such trusts as bargains given many trade on large discounts to the value of their underlying portfolio. Large yields offer compensation for the shares being out of favour but there is still uncertainty in when or if those discounts will start to narrow.”
Coatsworth said the minimal representation of growth-style investment trusts in the most popular list is a surprise and suggests a sense of caution among investors.
He added: “Scottish Mortgage used to be the ISA investor’s investment trust of choice, offering a way of accessing tomorrow’s market leaders. Not only is it absent from this year’s most popular trusts among AJ Bell DIY investors, but it also ranks as the least popular based on net flows. That suggests many people don’t want to hold out for jam tomorrow, and would prefer something that generates jam today, even if the returns might be less.”
Coatsworth said investors are looking for trusts with a tried and tested method of achieving positive results, adding: “They’re happy to pay up for names that can demonstrate success wasn’t simply down to one lucky year.
“City of London Investment Trust is a popular holding with people in retirement thanks to its ability to run a portfolio that has beaten the market on many occasions in the past, while also offering a decent yield.”
|
Investment Trust |
Yield |
|
City of London Investment Trust |
4.7% |
|
TwentyFour Select Monthly Income |
8.5% |
|
JPMorgan Global Growth & Income |
3.9% |
|
Law Debenture |
3.5% |
|
3i Group |
1.5% |
|
The Renewables Infrastructure Group |
10.0% |
|
Greencoat UK Wind |
9.1% |
|
Henderson Far East Income |
11.3% |
|
Abrdn European Logistics Income |
6.1% |
|
Supermarket Income REIT |
8.8% |
Most popular ISA stocks
The list of most popular stocks in AJ Bell ISAs so far this year has been divided into three groups.
There are higher-risk investments linked to cryptocurrencies and AI such as MicroStrategy and Nvidia, generous dividend payers such as retirement savings group Phoenix and defensive stocks such as Taylor Wimpey and HSBC, which often come into favour during uncertain times.
It comes despite concerns about Nvidia’s earnings growth while Tesla remains popular despite controversies surrounding Elon Musk’s previous involvement with the US government.
Coatsworth added: “Nvidia might have been caught up in the global market sell-off in April, but plenty of investors still have faith in the AI story. Their patience has been rewarded after the shares hit a new record high during June.
“Tesla shares had a terrible first quarter after negative market response to poor electric vehicle sales and drama around Elon Musk’s involvement with the US government. Sentiment has started to improve in recent months and that might explain why Tesla features among the most popular stocks so far this year.”
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Most popular stocks and shares among AJ Bell ISA customers so far in 2025 |
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Nvidia |
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Legal & General |
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Rolls Royce |
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BP |
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Tesla |
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BAE Systems |
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HSBC |
|
GSK |
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Taylor Wimpey |
|
MicroStrategy |
