Which funds should I pick and which ones out of the thousands in the articles and the ads are any good?
Here is a rough-and-ready approach, which will have purists teeth-sucking, but I think is quite helpful.
So I do look at the preferred fund lists of the major investment platforms. It is my view that the fund selectors in the DIY platforms do a good job, with integrity and to the best of their ability. Doesn’t mean they’ll get it right. But they spend more time talking to fund managers than I do so I’m interested in what they think.
On the basis that 7 of the major platforms are unlikely to all be wallies or corrupt, I look at aggregate preferred picks of the professional fund selectors.
I want enough to spread my investments around globally, and I don’t want to buy 10 UK equity funds all trying to do the same thing. So think about having enough globally and avoid having a ‘home bias’. Also have a look at the top 10 holdings of your funds by region or type. Are they all the same – if so – what’s the point? By way of example, if you look at the top three holdings of Lindsell Train UK Equity, these are Relx, Diageo and Unilever. The top two sectors are financial services and drinks. Bit like my life then! By contrast another top pick of selectors, Majedie UK Equity’s top three holdings are BP, Royal Dutch Shell and Tesco, and their top two sectors are Oil and Gas and Food and Drugs. Less like my life! ;0)
But you get the point. Similar asset class – UK listed companies – but with a different flavour. So diversify by region and fund type, but also check you’re not just buying the same old vanilla ice cream multiple times, basically the same but with different logos on the carton.
If you think about these three points, you can quite quickly get to a totally manageable list of decent funds to think about in your portfolio. As a final sense-check, you can see what the ratings agencies make of these funds – Morningstar and Citywire, for example. Trustnet is also another helpful site.
There you have it. The short-cut practical route to sense-checking your funds.
I hope the shortlist we’ve prepared here is helpful. We looked at the preferred fund lists across AJ Bell Youinvest, Barclays Smart Investor, Bestinvest, Charles Stanley Direct, Fidelity, Hargreaves Lansdown and Interactive Investor. We have automatically included any fund which is on at least three platforms’ buy lists - some as you'll see get the nod 4 or even 5 times.
Across the City, some will be tutting at my ignorance, my lack of fundamental research and my failure to build macro spreadsheets to dissect Europe’s 90,000 funds and share classes in academic detail. I politely remind them that it’s Friday, I have 2 children to collect, a puppy to train, a boiler to fix, a garden to tame, wine to be drunk and some friends to see. Not necessarily in that order!
Have a good weekend everyone.
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