Faced with the vast number of options on investing platforms, it’s easy for investors to become frozen by too much choice. Last week Bestinvest revealed its widely respected list of ‘Dog funds’ – those that have consistently underperformed the market – so that savers could get an idea of what to avoid. This week it’s the turn of the pedigree investments.
There are over 300 investment professionals at Tilney, Smith & Williamson – the parent company behind investing platform Bestinvest – encompassing forensic expertise across the universe of global investments. The Best Funds list replicates the core panel of funds, investment trusts and ETFs that they use within managed portfolios, where these are also available to DIY investors.
The latest ‘Best Funds’ list is out now and includes 25 listed investment trusts and 11 exchange-traded funds, which sets it apart from some other platform ‘best buy’ lists that tend to feature only open-ended funds. The top ideas from our sector specialists, who are the brains behind a team that manages over £55 billion of assets for clients, also include 10 passive index funds.
Together with the ETFs that means there are 21 low-cost index-tracking options for fee-conscious investors. For those who want to make sure their investments do not clash with their values, there are 17 investments across all the different types of fund with environmental, social impact and governance strategies.
Meanwhile those who are prepared to pay a bit more for funds that are actively managed still want to make sure they are getting value for money. Just 98 actively managed funds and investment companies have made the Best Funds List, which is a tiny proportion of the roughly 4,000 open-ended funds and more than 300 investment companies that are available in the UK. This is because the bar is set very high by our ‘10 commandments’ – or the qualities that the investment team look for in actively managed funds.
The criteria include managers who are not constrained by hugging benchmarks, have a clearly defined approach, who personally invest in their own funds and who are willing to limit the size of their funds if this starts to hamper the way it is managed. The list includes funds managed by large, well-known fund management groups, but also selections from small, boutique management groups who aren’t household names.
Jason Hollands, Managing Director at Bestinvest, commented: “Choosing funds yourself is one of the joys of do-it-yourself investing, but also one of the challenges. With thousands of funds of all different shapes and sizes on offer in the UK, it is easy for savers – and particularly those starting off on their investment journey – to become overwhelmed by the range of options.
“Last week we listed 86 of the funds that investors might want to avoid because they are the worst underperformers. This week on a more positive note we reveal the ones that our investment team prefer based on a whole range of criteria, some of which the retail investor might easily fail to consider.
“Many investors put too much emphasis on a few basic metrics like recent past performance, which is a like driving a car solely looking in the rear-view mirror and not the road ahead. The Best Funds list is distilled from extensive research, including meeting the fund managers, digging beneath the bonnet to understand their investment approaches and giving consideration to factors like fund size and liquidity.
“There’s still some choosing for investors to do, with 119 vehicles on the list across many different sectors, but in the absence of tailored investment advice, it makes an excellent starting point.
“As the list evolves throughout the year, with funds removed or new ones added, these are updated on the Bestinvest website, so that clients are kept up-to-date. Choosing a fund is not just a case of doing some homework before buying them, once invested it is vital to constantly monitor your portfolio. A change in circumstances, such as the departure of a fund manager or a significant increase in the size of a fund, many require you to reassess whether it is right to stay invested or move to another fund instead.”
For those who don’t want to have to choose their own funds, Bestinvest has just launched a new range of low-cost Smart ready-made portfolios to complement its existing range of Expert funds of funds. The Smart portfolios, designed to suit five different risk profiles, spread investors cash across a diversified selection of passive funds. With low ongoing costs of 0.34 – 0.37% and a reduced Bestinvest platform fee of just 0.2%, they are one of the cheapest investments of their kind on the market and very competitive even versus ‘robo-advisers’.
Bestinvest’s ‘Best Funds’ list can be downloaded for free at: https://www.bestinvest.co.uk/guides/the-best-funds-list