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I was wondering how to best use the information you thoughtfully provide on the most popular fund buys in the previous month?

28 January 2022

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Question by James

Hi Holly,


I was wondering how to best use the information you thoughtfully provide from those platforms that list the most popular fund buys in the previous month. Is it a case of this being very useful ‘wisdom of the crowds’ information, or is it unfortunately, more the ‘hopes of the lost sheep’? Do you think the popular recommended best buy lists of funds, produced by various organisations are responsible for the most popular fund buys? Has there been any academic research into comparisons of how these ‘popular’ and ‘recommended’ funds do over short, medium or long time periods, which might confirm that there really is such a thing as wisdom of the crowds or knowledgeable providers?


Answered by Holly Mackay

Hi,

Picking funds is a bit of a nightmare for retail investors. There are about 90,000 registered funds for sale in Europe! Trying to pick decent funds can feel daunting for most of us and so we do need help to whittle them down.

Best Buy lists got a pasting in the press when the once popular Woodford Equity Income fund – which had been on many providers Best Buy lists – imploded. It’s most notable casualty was Hargreaves Lansdown who stuck with the fund long after some other platforms had cut and run.

However I find them useful. I know the companies and I know the people involved and I am comfortable that firms do look at this with detailed rigour AND with no commercial bias. Platforms do not make money from having providers on these lists. They no longer get any kick-backs as they did in the past.

Of course people make mistakes and the most sophisticated algorithms still rely on the oil us poor old flawed humans put in the engine. But on the balance of probability, I think if 3 platforms have a fund on their list, I find comfort in that.

We’re all just managing risk. I have some great funds in my portfolio which I was first alerted to by platforms. Hargreaves told me about Lindsell Train ages ago – and that has done super well for me. Lots of platform rate JPM Emerging Markets – that’s done well over the years. Stewart Investors Asia Pacific Leaders Sustainability. These are just some examples of funds I’ve held for ages which I was alerted to by these lists.

If you stick to the basic premise of thinking about timeframes, risk then asset allocation. And get a decent mix of funds. IN different regions and sectors. Which have a consensus backing from the platforms and / or research houses such as Morningstar or Trustnet. Then I think that’s a pretty sensible way to go about things.

And assume you may get 1 or 2 duff things out of 10? That’s not bad. If you don’t feel comfortable after all of this then I would just buy a passive multi-asset fund and stop bothering trying to beat things and pick the best! You’ll never be the best. But you certainly wont be the worst either!

Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.