The millennial wealth gap
I was in a meeting this week when the subject of ‘millennials’ came up. And, shortly into the...
Investment portfolios tend to have a ‘core’. There are no hard and fast rules about what this ‘core’ should be, but generally it is made up of a fund or funds that form the largest and most stable part of our savings.
Depending on our personal risk appetites, a core fund may be one that is well diversified and exhibits lower volatility than the stock market – perhaps a multi-asset fund. Alternatively it could be a fund that supplies us with a steady income stream. It could equally be a UK equity fund that invests in household names we recognise and are more comfortable owning, or a global equity fund that may still own companies we know, but is spread more geographically around the world.
Whatever we choose, the one common denominator tends to be that it is an investment we are comfortable investing the majority of our savings in throughout the market cycle.
Here are five core funds you could consider for your investment ISA this year:
For those starting out or wanting a professional to decide on asset allocation for them, Jupiter’s suite of Merlin funds is an option. This particular multi-manager fund can have between 40-85% in equities, with the remainder in fixed income, commodities and property. The team analyses the macroeconomic environment, trying to identify key turning points (such as a change in direction of the interest rate cycle) in an accurate and timely manner. They then identify the fund managers most likely to outperform in that environment and are not afraid to make big changes as and when the investment environment shifts.
Those wanting diversification and a regular income could consider this fund. It was designed specifically to provide a natural high and sustainable income (currently 4.58%*) in the form of a dividend per share, across a broad range of asset classes, which is paid monthly. This means the capital is not eroded to produce the income and strong absolute and relative growth is also possible.
Investors looking for a core UK equity income fund could consider Artemis Income. It is a flexible, high-conviction portfolio of UK stocks and has been a stalwart of the sector for more than 15 years. The managers can, and often do, invest up to 20% in overseas stocks and their philosophy is that shareholders are rewarded by investing in companies with a sustainable business franchise, quality management teams, and often a unique product, at an attractive valuation point in their business cycle. The yield is currently 3.78%*.
If you are looking for a little more diversification but still want equities to be your ‘core’, a global fund is an option. Guinness Global Equity Income typically invests in approximately 35 equally-weighted stocks, which are usually held for three to five years. The managers have the freedom to avoid entire countries and sectors if they don’t like their outlook. They look for growing, rather than high, income and their one-in, one-out philosophy means the fund stays up to date with the managers’ best ideas. The yield is currently 2.81%*.
This is another global equity income fund that could make a good core holding. It is well-diversified and lower risk than many of its peers and may suit investors seeking a stable, and potentially rising, global income (the yield is currently 2.95%). When considering potential investment opportunities, the manager places a large emphasis on the sustainability of the dividend and whether the current share price provides an adequate margin of safety.
*Source: FE Analytics, fund fact sheets, January 2018.