First fund recommendations

Spring 2017 suggestions for beginner investors

Shares can get you a better return on your money than cash but they can also go down in value. It’s sensible to spread the risk between lots of different shares and invest for the long term. That’s why many people put their money into pooled funds where a manager (or sometimes a computer) does the investing for you. You’ll pay a small fee for the privilege: more to a human (0.5% to 0.75% of your investment) than a machine (less than 0.1% is possible).

The trouble is that there are zillions of funds out there. Some are better than others so how do you choose? We’ve asked a couple of experts for their top tips at the moment to help you pick which fund is right for you and why. All have managers with decent track records of making more money for their investors than the rest of the peer group.

Once you’ve made your choice, visit an online fund platform. We like (in alphabetical order) AJ Bell, Bestinvest, Charles Stanley Direct, Fidelity and Hargreaves Lansdown. Remember to use your Isa tax-perk allowance and that small, regular amounts (eg a monthly plan) also help to smooth out the risk factor. (Before you take the next step, remember you should have a cash cushion worth three to six months of salary or living costs.) Find your fund, follow the onscreen instructions and invest. Easy!

 

If you want to grow the value of your money:

Jason Hollands at Bestinvest picks:

a. JO Hambro UK Opportunities. WHY? The manager picks a small number of market-leading firms which can do well in bad times as well as good.
b. Majedie UK Equity. WHY? Funds invests mainly in large UK companies whose shares the four fund managers believe are undervalued and could rise in price eg Tesco which has done better recently.
c. Fidelity Index UK. WHY? This is a tracker fund (see the SMM guide here) which mirrors the ups and downs of the FTSE All-Share stockmarket index (600 UK firms). It’s a bargain at 0.9% a year in cost.

Sian Thomas at Hargreaves Lansdown picks:

a. TM Sanditon UK. WHY? The fund concentrates on large and medium firms which its experienced (and female!) manager thinks will do well.
b. CF Lindsell Train UK Equity. WHY? This fund is unusual in that it has shares from a very small number of firms which are hardly ever sold. The method works: the fund’s track record is exemplary.
c. Legal & General UK Index. WHY? Possibly the cheapest tracker fund around costing just 0.06% a year yet still managing to track the FTSE All Share index accurately.

 

If you want income from your money (you can spend or reinvest):

Jason Hollands at Bestinvest picks:

a. Threadneedle UK Equity Income. WHY? The fund invests mainly in solid firms paying regular dividends and sometimes out-of-favour businesses which the manager thinks could be due a turnaround.
b. Evenlode Income: WHY? The fund invests for the long term in profitable UK companies which can keep growing payouts to shareholders. It also has about 16% is in foreign shares such as Microsoft.

Sian Thomas at Hargreaves Lansdown picks:

a. Artemis Income. WHY? Run by a veteran manager, this fund goes for profitable firms which pay out more dividends than average to boost investor’s income.
b. CF Woodford Equity Income. Neil Woodford, possibly the UK’s most successful fund manager, picks shares according to his view on the overall economy or if he thinks they’re undervalued and due a rise.

 

Notes:
1. Tracker funds in the share income sector are few and far between. Our experts don’t recommend this route.
2. Bond funds can also produce income but are more complicated to understand. Check the recommendations in the Spring 2017 advanced guide here.