Investment funds can be an excellent way to gain exposure to sectors you don’t really understand and too diversify your portfolio into a broad selection of stocks and different markets, which you may want exposure to, but might not have the time or experience to research the opportunity.
For example, the Fidelity Global Technology offers exposure to the US tech sector, which has been on a roll in recent years. The fund’s largest holding is Alphabet, the parent company of search engine giant Google. The second largest holding is Apple, and the third is Intel. Together these three holdings make up nearly 20% of assets under management.
Actively managed investment funds have faced a lot of scrutiny over the past few years as many don’t offer value for money and have underperformed the wider market. The Fidelity Technology fund does not fall into this bracket. Over the past 4.3 years, the fund has returned 23.5% per annum and only charges an annual management fee of 0.8%, making it one of the cheapest growth funds around.
Growth and income
If it’s income you’re after, the Invesco Perpetual High Income could be a great pick for your portfolio. The fund offers exposure to some of the UK’s best dividend stocks such as British American Tobacco and BP. The great thing about owning a fund like this is that the diversification means your portfolio is unlikely to suffer significantly if one or more of the holdings is forced to cut its dividend payout. With 20+ holdings, Invesco Perpetual offers a diversified income portfolio that would be extremely costly to replicate for yourself.
The fund charges of 0.9% per annum in management fees and currently supports a dividend yield of 3.1%. Over the past five years, the fund has produced a total return of approximately 69%, with a relatively low level of volatility for investors.
So while you may be able to buy stocks that support a higher dividend yield individually, Invesco Perpetual offers a well diversified, low volatility portfolio with a relatively attractive dividend yield that requires no effort on your part.
Small-cap champion
Small-cap stocks are known for their ability to generate outsized returns for investors, but unfortunately, they are also much riskier than their blue-chip peers. That’s why it pays to buy a fund that invests in small-caps for you, so you can pocket the gains but don’t have to spend years becoming an expert on the subject. The Old Mutual UK Smaller Companies Focus fund is a perfect example.
Over the past five years, the fund has smashed its benchmark, returning 237%. No dividend is offered, but you don’t need income when the managers are able to generate such impressive capital gains. The management fee charged is a modest 0.88% per annum.
If you’re looking for a fund that offers exposure to fast-growing small-caps, with a record of outperformance at a low price, Old Mutual UK Smaller companies ticks all the boxes.
