Having already looked at how I’d invest £5k in individual stocks from the FTSE 100 and FTSE 250, today I’m looking at the funds I might buy for a Stocks and Shares ISA if I wanted to get started in investing. Here are five that catch me eye (some of which I already own).
Off to a good start
I’m not a massive fan of active funds generally due to the high fees they charge. That said, one I have bought into is the Smithson Investment Trust, overseen (but not managed) by the highly-regarded Terry Smith of Fundsmith.
The fund only holds between 25 and 40 ‘quality’ stocks at any one time, making it highly concentrated. The majority of these are UK or US-listed and all have a market cap of between £500m and £15bn.
It’s still early days for the fund, but Smithson’s share price was up 30% since the beginning of the year by the end of November, compared to the 21% achieved by its benchmark (MSCI World SMID Index). Not bad at all.
Invest like Buffett
Another concentrated active fund that’s put in a great performance since inception has been the CFP SDL UK Buffettology Fund. By last month, it had climbed 235% in value since 2011.
Like Smithson, the fees are high, but can probably be justified assuming (and this is a big assumption) that manager Keith Ashworth-Lord’s strategy of buying the sort of stocks Warren Buffett might be interested in — high quality but reasonably priced — continues working.
Value stocks — those trading at less than their intrinsic value — have lagged super-charged growth stocks for so long that many investors simply aren’t interested in them. I think that’s a good reason to get involved, especially as studies have found that what’s ‘cheap’ generally gives better returns over the very long term.
The Vanguard Global Value Factor exchange-traded fund, which has holdings in over 1,200 stocks, is a way of tapping into this trend. It’s an active fund in the sense that it adopts a rules-based approach to picking stocks, but the ongoing charge is low at just 0.22%.
If you’re comfortable zigging while others zag, this could be worth looking into.
All that glitters
I’ve been suggesting that it might be a good idea to put some money in gold for a while. From the beginning of 2019 to early September, this call has worked out well as the shiny stuff rose 26% in value. Things have settled down since but, with global growth slowing, I still think it’s worth holding.
The iShares Physical Gold ETC is a cheap way of getting exposure to the spot price. The ongoing charge is 0.25%. There’s no income, of course, but that brings me to my final pick.
Another passive product I think might be worth owning is the iShares FTSE UK Dividend fund. The value of this fund, which holds 50 high-yielding UK stocks, may not gallop higher, but it’s worth remembering that dividends have been shown to generate a sizeable proportion of investment returns over time.
Based on its current factsheet, the fund yields 6.7%. That’s a whole lot more income than you’d generate from even the top instant access Cash ISA at the moment (1.35%). It’s also arguably a lot safer than buying its individual constituents, some of whom are at risk of needing to cut their cash payouts.
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Paul Summers owns shares of Smithson Investment Trust and Vanguard Global Value Factor UCITS ETF. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019