TOP STOCK MARKET FUNDS
HILE MOST BRITONS investing in a stocks and share Isa will want to have a large chunk of their portfolio in UK stocks, for the sake of balance they may also want to have some exposure to, say, the US and emerging markets. When comparing funds, you also have to be careful to avoid simply choosing the one that is currently at the top of the past performance tables, because this is no guarantee of future success.
Right now, the most popular fund among private investors in the UK is Terry Smith’s global fund Fundsmith Equity, and understandably so, given that is has returned a whopping 170 per cent over the past five years, helped by having large exposure to the buoyant US market.
The next most popular fund, according to Interactive Investor, is Woodford Equity Income, from star fund manager Neil Woodford.
Woodford became a legend for turning £10,000 into £114,000 in just 20 years when at Invesco-Perpetual. He has underperformed over the last year but has the pedigree to bounce back.
Lindsell Train Global Equity, run by experienced managers Michael Lindsell and Nick Train, is another top five fund having grown 150 per cent over the past five years, from a concentrated portfolio of international stocks.
Artemis Global Income is another investor favourite, having risen 130 per cent over five years.
Rebecca O’Keeffe, head of investment at Interactive Investor, says: “Investors continue to focus on funds investing in large UK companies and international stocks, as they embrace the prospect that the US economy and global growth are in good shape.”
These funds are all clearly doing something right, but remember there is no guarantee they will always be successful. Investors looking for global exposure might also consider a popular investment trust such as Scottish Mortgage Trust, another star performer growing 170 per cent over five years, or investment trusts Witan and Foreign & Colonial, each of which grew around 120 per cent in the past year. Again, these funds give you exposure to a large spread of companies in a single fund.
Growing numbers of investors now plump for exchange traded funds (ETFs), low-cost trackers that you can trade easily like stocks.
Vanguard S&P 500, which tracks the top US companies, is the most popular in the UK, followed by iShares FTSE 100, Vanguard FTSE All-World, Vanguard FTSE Emerging Markets and iShares FTSE 250.
If you spread your Isa pot across these five you would have a pretty well-balanced long-term portfolio, at minimal cost.
Oliver Smith, portfolio manager at online trading platform IG, says: “With more than 1,200 Isa-eligible ETFs you have plenty of choice but it can be hard to know where to start.”
He tips iShares Core MSCI World for those wanting access to global developed markets, or Vanguard FTSE All-World High Dividend Yield for those who want to generate income from their Isa.
SPDR Barclays 0-5 Year Corporate Bond, which invests in companyissued bonds, is another ETF option for income seekers, Smith says.