Galvanised by low interest rates, you may well be considering venturing out of cash for the first time. Instead of going full pelt into an emerging market, smaller companies, technology fund (for example), a multi-asset fund – which brings everything together in one place – can be a good starting point.
‘Multi-asset’ is a little jargon-y, but in practice it means holding lots of different types of investment within one fund. So you might have a little bit of bonds, a few UK shares, a few emerging market shares, a splash of property and so on. It is, if you like, a ready-meal, rather than preparing all the ingredients yourself.
The best thing is that instead of you having to decide whether now is the right time to be invested in this or that company, or this or that country, someone does that for you. You outsource this decision-making.
There are different types of multi-asset fund, but many will come with a handy indication of the type of investors that should consider them. For example, they might be a ‘cautious’ investor. This would only have a small amount in the stock market, with the remainder in less volatile investments such as government bonds. More ‘adventurous’ or ‘aggressive’ options may have a higher weighting in the stock market. You can also get options that pay an income.
How do you know what type of investor you are? There are plenty of tools to help you determine the right sort of multi-asset fund. We particularly like this Fidelity fund, from Fidelity Personal Investing, which has nice sliders and straightforward language. AJ Bell also has a handy guide to Multi Asset Funds.
Lots of people offer multi-asset funds. A key choice is whether investors should buy a multi-asset fund that uses ‘active’ funds, or one that focuses exclusively on passive funds. For active funds, a fund manager will try to beat an index (such as the FTSE 100) by picking the best stocks as they see it. ‘Passive’ or ‘tracker’ funds simply aim to replicate the index. The latter tends to be cheaper, the former may give you a higher return over time.
The big names on the active side are the BMO Asset Management Navigator or Jupiter Merlin range of funds, both of which have solid long-term track records and well-respected managers. Good passive options include the Vanguard LifeStrategy range, which provides a simple way to invest and will cost you up to a reasonable 0.37% a year if you buy directly from Vanguard.
Once you are up and running with a multi-asset fund, you don’t need to do very much. You can just keep investing and leave it well alone.