

Five trusts on an attractive discount
Over the past few years, multi-asset managers have increasingly turned to investment trusts as a way...
As someone who has rented in London since 2016, it’s easy to get caught up in how much you’ve “wasted” on rent over the years (more than £90,000 in case you were wondering). But according to a recent study from Hamptons, for the first time in more than six years, it’s cheaper to rent a property than it is to buy one*. Before the pandemic began in March 2020, people buying with a 10% deposit would have been better off than renters by £102 a month. But last month, the estate agent found that the average private sector tenant was better off, spending £71 a month less in rent.
“A house is made of brick and mortar, but home is made by the people who live there.” — M. K. Soni, author
Personally, I love renting and buying a home has never been goal of mine. The idea of a starter home, or flat, simply to “get on the ladder” makes me cringe inside. But I realise not everyone – including some of my closest friends – have the same view.
Generally, first time buyers need around a 5-10% deposit. If you’re looking to live in London, even at 5% that’s a steep price as the average house price now exceeds £500,000. There are several government schemes that can help first time buyers, including the Help to Buy, Right to Buy or Shared Ownership. But for most, it’ll require a move outside the capital. However, for the first time in six years it might actually be possible to save when also paying rent. Could it be the best of both worlds?
In Greater London, where I live, it’s £251 cheaper to rent than to buy*. So maybe I should invest the difference. One option would be via the Lifetime ISA (LISA). This product allows adults under 40 to save £4,000 a year with a 25% bonus from the government. In my example of £250 a month, you’d be saving £3,000 a year plus receiving a bonus of £750 from the government. If you were aiming to save £30,000 for a deposit, it would take eight years, if saved in cash.
Read more about the stipulations and requirements of a Lifetime ISA here
Our Elite Rated funds could get you there faster. For example, assuming I had saved £250 a month when I first starting renting in 2016 and I got my 25% bonus from the government, Scottish Mortgage Investment Trust would have turned my investment into a staggering £42,599.73 in just five years (including a £3,750 government contribution).**
Six more Elite Rated funds would have generated enough money for a house deposit by now:
Fund Name | £250 invested monthly for 5 years** | Including government bonus |
JPM China Growth & Income | £37,507.17 | £41,257.17 |
Baillie Gifford Global Discovery | £30,310.78 | £34,060.78 |
AXA Framlington Global Technology | £29,647.67 | £33,397.67 |
Fidelity China Special Situations | £29,621.05 | £33,371.05 |
MI Chelverton UK Equity Growth | £27,074.36 | £30,824.36 |
AXA Framlington American Growth | £26,325.65 | £30,075.65 |
Past performance isn’t a guide to future performance and these funds may not make as much money in the next five years, but why not try to have your cake and eat it too?
*Source: bbc.co.uk
**Source: FE fundinfo, monthly investments of £250 per month, 30 June 2016 to 30 Apr 2021