If you have just £500 to invest today, then I think the Lindsell Train Global Equity fund could be an excellent first investment.
Some might argue that investing all of your money in one fund is quite risky because there is no diversification. However, I think this view is misleading because while the Global Equity fund is just one investment when taken in isolation, Nick Train’s flagship fund has 27 investment holdings in total. These holdings include some of the world’s largest consumer goods groups, such as Unilever and Diageo.
So, while a portfolio of just one fund might not appear that diversified at first, the reality is that by investing in this offering, you will be acquiring a well-diversified portfolio of 27 different stocks at the click of a button.
It would be difficult to achieve the same kind of diversification with just £500. To spread this across 27 single stocks, you would need to invest £18.50 in each opportunity, excluding any commissions or stamp duty. That’s not economically viable.
Index funds could be another alternative, but the Global Equity Fund has smashed the performance of these passive trackers over the past 10 years, and I believe there is a good chance that this trend will continue.
Market-beating
Train has been able to outperform the rest of the market by concentrating on high-quality blue-chip stocks. He is not afraid to take significant positions in these companies. The top three holdings in the Global Equity portfolio each account for more than 7% of the portfolio.
Another advantage this offering has over other UK-focused investment funds is its international focus. This international focus should give investors some protection against UK political and economic uncertainty over the next five or 10 years.
At the time of writing, around a third of the portfolio is invested in domestic stocks, with another third in US equities, 21% in Japanese businesses and the remainder invested in European companies and cash.
Quality over quantity
Another reason why I’m a strong supporter of Train’s offering is his focus on quality over quantity.
The fund manager wants to buy and hold high-quality stocks. He’s not interested in diversifying his portfolio just because that’s what the City wants him to do, or move away from high-quality businesses towards fashionable stocks.
Train is happy to buy and hold what he likes through thick and thin, running the winners and cutting his losers.
Admittedly, this does expose investors to some risk. There is always going to be the chance that Train will make a series of mistakes, and this could be detrimental to the fund’s performance.
However, considering his track record, I think the risks of this are low. The fund manager is also staying away from illiquid private market investments, which hastened the downfall of Neil Woodford.
