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Where should you invest this year?

where to invest in 2019If you’re brave enough to overcome fears of Brexit and a global slowdown, where should you invest this year? You can squirrel away up to £20,000 this year in the tax perk Isa account but you must do it by the end of the tax year (5 April) or lose the allowance entirely.

Of course you can have the money as cash within the Isa. But, if you’re thinking about the long term, shares should give a better return. In the short term, there’s bound to be a bit of up and maybe quite a lot of down because of all the bad news. Looking it another way, however, share prices are actually lower than their historical averages because of the doom and gloom and now is a cheap time to invest.

SMM would always prefer funds, which invest in shares from lots of different companies, over shares in a single company like Lloyds Bank. With over two thousand to choose from, it’s hard to pick just one or two. I’ve had a nosey at the recommended lists and thought I’d share a few selections from the experts. Today I’ve stuck to the UK; I’ll be looking further afield next week. Although no fund is without risk, I’ve also picked the more vanilla sectors which are traditionally more stable.

1. Tracker funds
These funds are run by computer and simply follow the ups and downs of a stock market index such as the FTSE 100. A little bit of your money is invested in every company in the index (100 in the FTSE 100) so your risk is widely spread. The great benefit of a tracker fund is that it is cheap with generally 0.1% or less a year of your money going in fees.

There is not much to choose between them so pick on price. Names to look out for are Fidelity, Legal & General and Vanguard. You can get a FTSE 100, a FTSE 250 (250 companies) or a FTSE Allshare which, at the last count by the London Stock Exchange, was some 636 firms.

2. UK Equity Growth
These funds aim to make money from a rise in share prices. They tend to focus on fast-growing firms with a competitive advantage, for example Merlin Entertainments (theme parks) or credit reference agencies (Experian). Fundsmith Equity and Lindsell Train UK Equity are the most recommended by experts, says research from Interactive Investor. Meanwhile Majedie UK Equity is a top pick for fund shop Hargreaves Lansdown.

3. UK Equity Income
These funds try to produce an annual return of anywhere between 3% to 5% from your money. They favour firms which pay big and dependable dividends every year and there’s less emphasis on growing the underlying value of your money. However, you can usually have the option to reinvest the income into the fund rather than have it paid out to you.

Artemis Income is the most recommended fund by experts in this category while fund shop Bestinvest tips JO Hambro UK Equity Income and Troy Trojan Income. I myself fancy TB Evenlode Income where I’ve recently put some money. The manager Hugh Yarrow has a decent track record and the fund invests in firms such as Diageo, Unilever and GlaxoSmithKline. It can have up to 20% in non-UK companies though, which makes it slightly more risky than the others.

Please see my blog on investing for absolute beginners and our SMM guide to tracker funds for more help.

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Saturday, 23 March 2019