Investing for millennials…a practical guide

It’s the final week of our Introduction to Investing ‘course’ and, while I think many were hoping it would also be the end of lockdown, it’s clear that for many working from home is here to stay a little while longer. So, as I don’t have kids I’m trying to homeschool, I’m already browsing new courses to try. But before that, let’s jump straight into the final chapter of this particular story!

‘A simple fact that is hard to learn is that the time to save money is when you have some.’ — Joe Moore, TV personality

Where to start your research

In this course so far, we’ve covered a variety of topics to help get you started on your research journey. Week one explained the difference between an investment fund and investment trust. Week two covered active vs passive, fees, risk and share classes. In week three we did a deep dive into growth or income and determining your investment goals. And last week, we touched on growth and value as investment styles.

That’s still quite a lot of information to take in and, despite all our new found knowledge, picking an investment fund from the 3,000 plus that are available may still be a daunting task. Simply put, that’s why FundCalibre exists: we narrow down the choices and focus on consistent performers. You can take comfort in the knowledge that our investment research team has analysed each fund and trust in depth before assigning them a rating.

Unsure about how our rating system works? You can read more about it here.

Getting the most use out of FundCalibre

FundCalibre can be an excellent tool to help you pick a fund and even construct your very own investment portfolio. Let’s take a look at all the options and features offered…

Fund notes

Each Elite Rated fund or trust (and those on our Radar) have a fund note. On each note you will find information that can help you decide if this fund is for you.

Generally speaking, there are four ‘main’ things to look for when comparing funds:

  1. Don’t just look at past performance.
    Yes, a long-term track record of strong returns can be a good sign, but there is never any guarantee a fund will continue to do well in the future. We show a fund’s performance for at least the last three years. You’ll be able to see how the fund has performed against its benchmark for reference.Remember, it may be a fund that performs particularly well in one type of market, but not others. This is where your knowledge and understanding of growth vs value style could be useful. When looking at Elite Rated funds you’ll see references to style throughout our research.
  2. Research the fund manager.
    How long have they been running the fund? Do they have experience managing money in different market conditions? What support or resources (e.g. in-house research teams) does the manager have? You can learn more about the fund managers and their experience in their bio, but if you’re still unsure, our ‘key facts’ display the manager’s start date on that particular fund.
  3. Check the costs and the returns after costs.
    The cost of a fund can impact on its total returns so it’s an important consideration. You should check both the AMC and OCF (both of which are displayed in our key facts). Never choose a fund purely because it has the lowest charges. Returns after costs are arguably much more important. It’s better to pay a little more for a fund that should perform better over the long term, rather than pay less for a fund that under-performs. You should also be cautious of transitional and platform fees, these differ from platform to platform, so do your research before choosing what’s best for you.
  4. Understand the fund’s risk score.
    Every fund and trust rated by FundCalibre includes a risk score from 1 to 10 (10 being the highest risk) to help guide you. This doesn’t mean the manager is a gambler, it simply means the asset class in which the fund sits is riskier.

Ideas and Insights

Our regular blog articles cover a wide variety of topics: different asset classes, geographies, even different themes to inspire you. Curious about how lockdown will change investing? You might consider our look at the four trends that will continue post lockdown. For example, working remotely could influence a number of technology companies.

The best way to stay up to date on all our ideas and insights is to sign up for our weekly newsletter delivered straight to your inbox every Friday.

Podcasts and videos

Prefer to hear it ‘straight from the horse’s mouth’? I don’t blame you – FundCalibre conducts weekly video interviews and the occasional round up from yours truly, such as 7 unique investments in Europe. The Investing on the go podcast is a great source of bite-size information on funds – but also markets, politics and currently healthcare!

These interviews can help you learn more about the managers of the funds, but often we highlight specific holdings and opportunities. For example, Noelle Cazalis, co-manager of Elite Rated Rathbone Ethical Bond, told us about a COVID-19 social bond the fund recently invested in.

And if you’re looking for a podcast teaser, listen to our one year anniversary podcast, which highlights a year of topics and talking points, from Brexit to trade wars, climate change to elections, oil prices to stock market crashes – we take a look back at our first year of interviews.

Learn to invest

And if you want to learn more, visit our ‘learn to invest’ section where you’ll find basics such as negative oil prices explained and, of course, the millennial series in full. It’s a great tool to explore if any questions arise while you’re doing your fund research or listening to a video or podcast.

Letting the experts choose funds for you

All just a bit much for you still? Consider a multi-asset fund to take some of the stress away.

Premier Multi-Asset Growth & Income, is a ‘fund of funds’ and holds a number of other Elite Rated products, for example Baillie Gifford Strategic Bond, Polar Capital Global Insurance and Magna Emerging Markets Dividend*, within the strategy if you want to learn more about the underlying holdings.

Another ‘fund of funds’, BMO MM Navigator Distribution, is managed by Gary Potter and Rob Burdett and the nine-strong multi-manager team at BMO. The fund generally contains between 25 and 35 individual funds and, as a multi-asset fund, the managers will balance diversification and risk so you don’t have to.

If you prefer less exposure to equities, you might consider Jupiter Distribution. Sitting in the Mixed Investments 0-35% Shares sector the fund has an approximate 70:30 ratio between holdings in bonds and equities. Historically this has made the fund one of the most cautious within its sector.

Want a refresher? Here’s our guide on the different types of multi-asset funds

Whether you start with one, two or five funds, remember to monitor your portfolio – at least on an annual basis – as some of your investments will outperform and others will underperform, so your portfolio weightings may have shifted. This could mean you’ve accidentally taken on a higher or lower risk profile than you intended, and you need to rebalance. It could also be time to add another fund to your growing portfolio.

Ready to invest

Ready to make your first investment? Congrats! Our 60 second guide will help point you in the right direction

If you still find yourself lost in a sea of funds and jargon, you can get additional help by reaching out to a financial adviser. It’s better to be over-prepared than under-prepared when choosing an investment fund: getting it right (or wrong) can have a huge impact on your financial future.

*Source: Fund factsheet at 31 March 2020

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.