Picking growth stocks can be an exhausting process. Evaluating companies, their background, market, and prospects can take days. Then you’ve got to keep up to date with these companies as they grow and mature. If you don’t, you could end up losing a lot of money as the prospects for growth stocks can change overnight.
As a result, I think it’s better to leave growth stock hunting to the experts. Today I’m looking at three growth funds that have a track record of beating the market.
Leading the pack
Terry Smith’s Fundsmith Equity is one of the most popular funds in the UK. It is easy to see why thousands of investors are happy to trust Smith with their money. Over the past five years, it has returned 179%. Over the past six months, the fund has returned just under 17% compared to the FTSE 100, which is basically flat.
The Fundsmith offering has plenty of overseas exposure. 65% of it is invested in US equities, 18% in UK stocks and around 15% in European companies. This should protect investors from any Brexit disruption, and it gives holders exposure to some of the best companies in the world.
With an ongoing charge of 0.95% and a historical dividend yield of 1.6%, Fundsmith is a low-cost way to access some of the top growth stocks in the world.
Ready to pounce
Fundsmith Equity manages more than £15bn for investors, which makes it one of the largest funds around. In comparison, the LF Blue Whale Growth fund manages just £205m. However, its size is not holding it back. Since inception (2017) it has returned 46%. Year-to-date it is up 31%, substantially outperforming the FTSE 100.
Blue Whale’s limited track record is a mark against the fund, but I think this could be a long-term winner. Similar to Fundsmith, 70.5% of assets are invested in US stocks. There’s some overlap of holdings between the two funds, although Blue Whale has a bigger tech focus.
The fund also has quite a bit of cash, 14.8% to be exact, according to its last update.
The high cash allocation is both a benefit and drawback. It gives the fund flexibility to invest where it wants in a downturn but could drag on returns in the meantime. I reckon the flexibility is worth it.
Blue Whale’s ongoing charge is 0.89% per annum.
Global opportunities
The final leading growth fund I’m looking at today is Rathbone Global Opportunities. Over the past five years, it has returned 127%, and over the past six months, it has returned 13.6%.
Rathbone’s offering is the cheapest of the three funds. Its total expense ratio comes in at just 0.78%, and it also has the lowest exposure to the US at just 62.5% of fund assets. More than a quarter of the fund is devoted to European equities, and there’s some exposure to Asia as well.
Technology is once again a large weighting here, but Rathbone also has substantial allocations to industrials and medical equipment companies. Considering the tech boom we’ve seen over the past few years, and valuations, this might offer some protection if the tech bubble bursts, but it has been a drag on returns so far.
