Home Top

INVESTING TIPS: Fund and trust ideas for beginner and cautious investors

By Simon Lambert and Marc Shoffman for Thisismoney.co.uk
Published: 04:23 EST, 30 March 2015 | Updated: 05:35 EST, 24 June 2015

View
comments

If you are new to investing then the huge number of funds and investment trusts on offer can be confusing. Fortunately, This is Money's experts have some ideas to get you started.

From the bafflingly wide range, they have picked some ideas to use as starting points for what will hopefully be a successful investing career.

Of course, which fund is best for you depends on your individual circumstances and what investing story you think will unfold. So, always do your own research, choose your investments carefully and hopefully you will make your own investing luck.

Starting out: Fund tips for beginner or cautious investors

How to use our fund and investment trust ideas

This is Money asks our panel of experts to suggest investments for a variety of investors.

These are people with a long history in the investment field and looking at their choices gives you some pointers. But remember, these are just ideas and whether a particular fund is right for you is your own decision and making that requires deeper research.

Their ideas are suitable for investors opting to use an Isa wrapper or not. Go to the bottom of the page to find out why we like investing through an Isa.

Read the tips, follow the links to the funds' performance and read This is Money's Investing section to gather ideas. If you have any doubts, talk to an IFA [find an adviser].

The expert's fund ideas

Adrian Lowcock, head of investing AXA Wealth, highlights:

Newton Real Return

Ongoing charges: 0.79 per cent

Yield: 2.8 per cent

This fund aims for a real return over inflation by investing in global bonds and shares.

Well-known holdings include Novartis and Centrica, as well direct investment in gold.

Mr Lowcock says: 'For first time investors it is essential to have a fund manager who focuses on capital preservation and long term growth through a globally diversified portfolio to help reduce risk.

‘Manager Iain Stewart invests in a broad range of markets and assets to firstly protect capital and then to produce a real return on that investment.

‘This fund is structured around Newton’s global thematic views which drive asset allocation and company investments. The fund has a long term core investment in shares and bonds and around this core the managers actively invest in cash, gilts and derivatives to help reduce risk and protect capital from changes in conditions.

‘This fund would particularly suit investors looking to reduce risk in their portfolio and provide some diversification away from pure equity funds.’

Henderson Cautious Managed

Ongoing charges: 0.88 per cent

Yield: 2.3 per cent

The aim is to provide investors with a combination of income and growth by investing in UK shares and bonds. It limits the amount of risk it takes by capping the amount it invests in shares at 60 per cent of the portfolio.

Top holdings include BP, HSBC and Astrazeneca.

Mr Lowcock says: ‘Manager Chris Burvill adopts a simple investment approach by considering the economic environment, he adjusts the fund's positioning between shares, bonds and cash.

‘The equity element of the fund is largely focused on high-yielding, UK shares. He combines the fixed income element to provide some protection against more volatile equity markets. By adjusting the asset allocation he looks to mitigate the volatility of a pure equity fund. This fund can provide a good core for investors looking for a diversified UK exposure given its flexible approach.’

How to invest in an Isa

Making the most of Isa investing is not just about picking investments wisely, it's also important to make sure you hold them in the best place.

That means keeping fees down to a minimum but also making sure your platform is right for you.

Read our essential guide

Darius McDermott, of Chelsea Financial Services, highlights

Fidelity Strategic Bond

Ongoing charges: 0.67

Yield: 3.1 per cent

This fund primarily aims for income by investing in bonds, or debt, issued by governments and companies. Its main investments are in the UK, USA and continental Europe.

Mr McDermott says: ‘Strategic bond funds are the most flexible type of bond fund. They can invest in any type of bond – government, investment grade, high yield and emerging market, as well as other fixed interest investments.

‘The manager Ian Spreadbury has the experience to navigate the complex waters of the fixed interest market and he has been able to generate returns (and an income stream) with low volatility by selecting the right asset allocations for the majority of the time.’

John Newlands, of Brewin Dolphin, highlights Witan Investment Trust

Ongoing charges: 0.72 per cent

Yield: 1.9 per cent

The Witan Investment Trust seeks opportunities from global equity markets, putting your money in a variety of countries and sectors which should spread your risk.

Holdings include Reed Elsevier, The London Stock Exchange and Diageo.

Mr Newlands says: 'My current choice in this category is Witan – a trust formed in 1909 originally to host the fortunes of the Henderson family, whose finances at that time have been described as ‘so complex as to rival those of a small nation’.

'Nowadays, Witan is a slick, modern, professional operation to which smaller investors can gain access by buying a single share. Moreover Witan, which has been managed by the able and enterprising Andrew Bell since 2010, offers an ideal outlet for regular savings plans of say £100 or more per month for teenagers, grandchildren or just for yourself.'

TOP FREE INVESTING GUIDES

Tom Stevenson, of Fidelity Worldwide Investment, highlights:

BNY Mellon Long Term Global Equity Fund

Yield: 0.90 per cent

Ongoing charges: 0.92 per cent

This fund looks for companies that will keep growing and provide continuous stable returns for the portfolio.

The fund invests in companies from around the world and those with a global focus, suc as MasterCard and Adobe.

Its main regions are North America, Europe and Pacific ex-Japan.

Mr Stevenson describes this as a ‘real stock-pickers’ fund,’ adding: ‘Investors who are just starting out are most likely to have a long period ahead of them in which to build up their portfolios. This allows them to weight their investments towards riskier but potentially more rewarding assets. That is likely to mean a portfolio of shares (also called equities) and would do well to consider a global portfolio that enables them to benefit from the best opportunities all around the world.'

He also recommends the Fidelity PathFinder range which is a portfolio of funds that the platform builds for you based on your risk profile. There is a choice of three portfolios, foundation, focused and freedom and charges range from 0.25 per cent, 0.95 and 1.3 per cent respectively.

Jason Hollands, of Tilney Bestinvest, highlights:

Invesco Perpetual Global Targeted Returns

Ongoing charges: 0.82 per cent

Yield : 1 per cent

The Invesco Perpetual Global Targeted Returns fund is essentially an umbrella fund for around 25 underlying distinct strategies which invest across a wide range of asset classes including shares, bonds and currencies from around the world.

This offers diversification across investment ideas, each of which aims to generate a little return, often.

The objective of the fund is to achieve a gross return of 5 per cent a year above UK interest rates, as measured by 3 month LIBOR, with less than half the volatility of global equities over a rolling three year time period.

Mr Hollands says: ‘Although the fund has a relatively short track record, the key team members behind it were previously involved in the management of a similar, highly successful fund at Standard Life Investments and the returns so far have been impressive.

‘While bond funds have traditionally been the first port of call for cautious investors, bond markets have been severely distorted as a result of ultra-low interest rates and central bank stimulus programmes and this makes me quite nervous about the asset class. As an alternative, cautious investors who don’t need to draw an income might instead consider absolute return funds.’

Why invest through an Isa?

Investing with an Isa is one of the few opportunities we have for making money with very little tax but it doesn't offer complete tax-free status.

Every year the Government gives us a tax-free Isa allowance.

Your Isa allowance for 2015/16 is £15,240 under the New Isa regime. You can move money from an investment Isa into a cash Isa under the new rules or put your whole allowance in a cash Isa. This applies to any money you have invested in previous years.

Any gains within an Isa are free from capital gains tax. Everyone has a CGT allowance of £11,000 per year and many may feel they are unlikely to ever make more than this in profit each year from selling their assets.

However, those who invest consistently over time may one day be surprised at how much those investments are worth and holding them in a tax-free wrapper makes sense.

This is because if they opt to sell all or a large amount of their investments at one time and they are not held in an Isa, then they may be over the capital gains tax limit and face a tax bill. Whereas, hold them in an Isa and you have no such problem and will not even need to fill in a tax form if you sell.

Income from investments is also treated in a more tax-friendly way in an Isa. Corporate bonds and gilts income is tax-free.

Dividends and shares income are still taxed at 10% before they are received, so basic rate taxpayers will not gain any extra benefit, but higher rate taxpayers do not have to pay any extra tax that would normally be incurred.

if you are a basic rate taxpayer you may hope to be a higher rate taxpayer one day, so putting your investments in a tax-free wrapper is a sound tactic. Investing through an Isa also removes the headache of filling in a tax return for both income and capital gains.

TOP DIY INVESTING PLATFORMS