ISA ideas for every generation from Baby Boomers to Gen Alpha

There are many things you must wait for in life, from learning to drive at 17 to collecting your state pension, currently at 66, but an ISA is open to you whatever your age.

The tax wrapper as a savings and investing vehicle suits the needs of everyone from newborn to centenarian, it’s just the goals and risk profiles that differ. In this article, generational groups are used simply to help readers recognise something of their own experience. A generation can cover up to 18 years, so there’s a range of goals and experiences within any one group.

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Here are some fund, investment trust and exchange-traded fund (ETF) ideas for generational cohorts largely defined by an article* published by US think-tank the Pew Research Center (except for Gen Alpha).

Generation Alpha: born 2013 to 2025 (0-12 years)

Counting Prince George among the Gen Alpha cohort, this is a generation of true digital natives, with iPads and streaming platforms competing for attention as soon as they can operate a device.

Because of the long time horizon, Gen Alpha have years to ride out inevitable stock market peaks and troughs while focusing on growth. Choosing a fund that invests solely in shares, the riskiest asset class, is sensible given the period that this generation will be invested in the market.

If you are investing on their behalf by putting money into a Junior ISA and a “hands-off” approach appeals, a low-cost global tracker fund such as iShares Core MSCI World ETF USD Acc GBP (LSE:SWDA) could work. This gives you exposure to 23 developed markets worldwide.

The accumulation version of the ETF means dividends are reinvested rather than paid out, which helps the investment grow and benefit from compounding, which is when investment returns themselves generate returns.

If you want exposure to emerging markets as well, you could consider other global equity options such as Vanguard LifeStrategy 100% Equity, whose ongoing charges figure (OCF) is 0.22%, meaning for every £1,000 invested, it costs £2.20 a year, plus the platform charge. Alternatively, HSBC FTSE All-World Index has a lower OCF of 0.13%.

If you prefer to go down the active investing route, where you put your faith in a fund manager to outperform the market, other investments to consider include Baillie Gifford-managed Scottish Mortgage Ord (LSE:SMT) Investment Trust.

This is an adventurous growth option, and the trust’s focus on innovative companies means it invests in businesses that are listed on a stock exchange and those that aren’t. Its top 10 holdings at the time of writing include Amazon.com Inc (NASDAQ:AMZN), Elon Musk’s Space X, and e-commerce marketplace MercadoLibre Inc (NASDAQ:MELI). Over the long term, this trust has delivered impressive results, but it has underperformed its benchmark over the short term.

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It’s important to stress that in the universe of funds, there are many options that can work in a Junior ISA and some parents could opt to put everything in an emerging markets fund, for example, or invest across a handful of shares.

On the new interactive investor Community app, one investor argues that “it’s worth considering more than one investment [in a Junior ISA], but it depends how active you want to be. Some people just want a single ‘buy and forget’ tracker, while others want to trade the market and pick individual stocks.”

Parents who are worried that their child could blow their nest egg on something frivolous once the Junior ISA becomes accessible when they turn 18, sometimes circumvent the problem by investing for their child inside their own ISA. However, this only works if they haven’t used up their own individual £20,000 annual ISA allowance.

Others hope that by providing some financial education and discussing the investments held inside the ISA with their child, their offspring will make sensible choices when they come to access it.

Generation Z: born 1997 to 2012 (13 to 28 in 2025)

This generational cohort is comprised of young teenagers to late 20somethings, some of whom had their educations disrupted by Covid lockdowns. Climate change activist Greta Thunberg is considered Gen Z, which also has time on its side, so will want to pursue investment growth, with shares the most appropriate asset class again.

Although amounts invested by older members of this group could be relatively small after high rents, student loan payments, and perhaps running a car are accounted for, any spare cash regularly invested each month into a stocks and shares ISA can help build up a tidy nest egg. Priorities for older individuals in this generational cohort might include saving a deposit for their first home.

A monthly savings habit also means that investors benefit from pound-cost averaging. This is when your money buys more units of a fund when prices are low, and fewer units of a fund when prices are higher, which basically means averaging out prices.

Investment ideas for those with at least a five-year time frame include low-cost passive trackers such as Vanguard LifeStrategy 80% Equity. Other multi-asset options include BlackRock MyMap 6, which currently has 93% invested in shares, and is a cheaper alternative to the well-known Vanguard LifeStrategy range, costing 0.17% vs 0.22%. The difference is that MyMap multi-asset funds invest a small amount in alternatives (2%), as well as bonds (5%), providing further diversification.

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Active options to consider include Alliance Witan Ord (LSE:ALW) a global equity multi-manager investment trust which outsources stock picking to external fund managers, and Fundsmith Equity, a global equity fund run by ‘star’ fund manager Terry Smith. Although long-term returns are good, this fund has suffered in the short term, in part because Smith does not own artificial intelligence (AI) chipmaker NVIDIA Corp (NASDAQ:NVDA). Its stellar performance, alongside other ‘Magnificent Seven’ stocks, has turbocharged those funds that have them among their holdings.

Millennials: born 1981 to 1996 (29 to 44 in 2025)

This is the generation who grew up alongside Harry Potter (the first book was published by Bloomsbury in 1997) and are now potentially buying it for their own children. Well-known Millennials include the Duchess of Cambridge, and Facebook inventor Mark Zuckerberg, CEO of Meta Platforms.

The combination of raising a family combined with the demands of career progression means that people in this generation could well be time poor as a result, and “set and forget” investments may appeal. Growth is still the objective, however, with Millennials perhaps saving for private school fees, or seeking to move to a bigger property.

Passive core holding ideas include Vanguard FTSE All-World ETF USD Acc GBP (LSE:VWRP), whichcosts 0.22% a year, and is exposed to emerging market shares as well as developed market ones.

Alternatively, F&C Investment Trust Ord (LSE:FCIT), a highly diversified actively managed global equity option, costs 0.80% a year. Like the Vanguard ETF, this another one-stop shop investment.

Or Millennials might prefer to plump for a Managed ISA, where you outsource the decision-making to ii experts.

Craig Rickman, ii’s personal finance editor, says: “The process is simple. You answer a few questions about your attitude to risk and investing style and are matched to one of 10 investment portfolios. These portfolios invest in a mix of assets (although mostly shares and bonds with various weightings) and are monitored by experts to ensure the asset allocations continue to remain suitable.”

For Millennials who already have a core holding and are looking for satellite ideas, options include thematic funds in areas such as AI. There are passive options like L&G Artificial Intelligence ETF GBP (LSE:AIAG),costing 0.49% in annual fees, or, for a similar fee, theactively managed Sanlam Global Artificial Intelligence fund (0.46% OCF).

Investments in areas such as property and infrastructure can add further diversification. Funds in these areas appearing on the ii Super 60 list of investment ideas include TR Property Ord (LSE:TRY) and FTF ClearBridge Global Infrastructure Income.

Generation X: born 1965 to 1980 (45 to 60 in 2025)

Individuals who are part of the Gen X generation include Tesla and Space X chief Elon Musk, and Microsoft CEO Satya Nadella.

At this stage of life, older Gen Xers may be involved in “sandwich care”, meaning they look after both grandchildren and elderly parents, while younger Gen Xers may be supporting older children through university, and shovelling spare money into their pensions.

However, some people who are planning to enter income drawdown like to have built up money in an ISA, giving them the option to withdraw it tax-free to supplement pension income, for example, and possibly allowing them to avoid moving into a higher tax bracket once they start drawing income.

Others who are planning to retire before state pension age, currently 66, might be building up money in their ISA to cover costs until they can start accessing their private/state pension.

While older Gen Xers in this group don’t want to be taking huge risks with the capital they have accrued so far, growth is by no means off the table.

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A low-cost global tracker such as Vanguard FTSE Global All Cap Index might appeal. This fund, which can be owned for an annual fee of 0.23% a year, offers exposure to both developed and emerging markets.

Again, since this is likely to be a generational cohort juggling multiple commitments, and with limited free time, a Managed ISAportfolio could be a good fit here, with risk profiles to suit different investors’ goals.

Rickman says ready-made solutions “can be useful for those who have the knowledge and skills to manage their portfolio but lack the time or inclination to keep on top of things”.

Fund ideas here include Vanguard LifeStrategy 40% Equity. As its name suggests, this fund has a 40% allocation to shares and a 60% allocation to bonds, which means the portfolio has a substantial defensive ballast. Those with a longer time horizon and a suitable risk appetite may prefer more exposure to equities through the 60% Equity version of this fund.

For anyone currently concerned about “concentration risk” owing to their portfolio’s exposure to the Magnificent Seven tech stocks given the dominance of the mega-cap companies in the S&P 500, an equal-weight ETF might appeal. One example is Invesco S&P 500 Equal Weight ETF Acc GBP (LSE:SPEX), which holds each company in equal proportion.

Kyle Caldwell, ii’s funds and investment education editor, says that: “One of the main benefits is that an equal-weighted ETF avoids being overexposed to stocks that have become overvalued or, worse still, potentially part of a bubble.”

Baby Boomers: born 1946 to 1964 (61 to 79)

Nvidia CEO Jensen Huang, and Cathie Wood, CEO of US investment management firm Ark Invest, fall into the Boomer category.

Unlike them, however, many in this age group will be retired or on the eve of it, so a cautious approach focused on capital preservation or income generation are likely to be the order of the day.

There are several capital preservation investment trusts, including Personal Assets Ord (LSE:PNL), Capital Gearing Ord (LSE:CGT), Ruffer Investment Company Ord (LSE:RICA) and RIT Capital Partners Ord (LSE:RCP), although it’s important to stress that performances have diverged over five years.

Capital Gearing is one of ii’s Super 60 investment ideas. Over the long term, this mixed-asset trust boasts a successful record of preserving and growing investors’ capital. The OCF is 0.69%.

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City of London Ord (LSE:CTY) investment trust is often touted as a sensible and reliable income option for this age group, and with good reason. It is one of the Association of Investment Companies’ (AIC) “dividends heroes”, so named because it is among a small group of investment trusts that have consistently raised their dividends for a minimum of 20 or more consecutive years. City of London has 58 consecutive years of increases. Investors can own this trust for an annual fee of 0.37%.

Another ISA option to consider are money market funds. This type of low-risk investment soared in popularity as interest rates rose because the return is linked to the Bank of England base rate. One of the most-popular buys on the ii platform recently has been Royal London Short Term Money Market, which can be held inside an ISA. However, as interest rates start to edge down, so too will the yield on these funds. However, there’s debate over how many rate cuts will take place in 2025 given inflation concerns.

*https://www.pewresearch.org/short-reads/2019/01/17/where-millennials-end-and-generation-z-begins/