INVESTMENT CLINIC

I’VE read that Neil Woodford is launching a new fund. I already invest in his Equity Income fund. Should I put some money in the new one, too? W. K., Leeds.

The announcement that star fund manager Neil Woodford is set to launch the third fund at his investment house has caused a lot of excitement among savers.

But it’s very difficult to decide whether or not to invest in something that doesn’t yet exist.

The Woodford Income Focus fund is expected to launch on March 20. We don’t yet know which companies the fund will invest in or how successful it will be.

What we do know is that Mr Woodford’s new fund will aim to deliver a higher rate of income than his equity Income fund, which yields around 3.25 pc.

The new fund will aim to pay out 5 p per unit. At launch, units will be worth 100 p each, so that equates to an attractive yield of 5 pc.

But this percentage yield will change depending on the value of the units, which in turn will rise or fall based on the investments Mr Woodford picks.

We also know that the new fund will not be constrained to UK companies, though it is likely to be UK focused at the outset.

And it will invest in fewer stocks than Mr Woodford’s existing fund — around 50 compared with 70 in the equity Income portfolio.

Woodford says there will be limited overlap in the two funds’ investments. But few experts would advise holding two funds run by the same manager.

The exception is where they have an entirely different focus, such as one being a bond fund and the other investing in Chinese equities.

The main difference between the two Woodford options seems to be that the equity Income fund aims to grow your money and provide an income too.

The new Income Focus fund will aim to deliver a greater income, but that will be at the expense of some of the growth.

So, which is more suitable for you depends on your needs.

Some experts have said it will suit retirees who want the higher, steady income it offers.

If you’re a younger investor looking to grow your money over the long term, then it may be worth sticking with the existing fund.

If you have an investment question, get in touch at: Investment Clinic, Money Mail, Northcliffe House, Derry Street, London W8 5TT.