If there’s one group of investors I enjoy reading about, it’s the UK’s ISA millionaires. Building a seven-figure ISA account requires both savings discipline and investment skill, and I think we can all learn a lot from these investors.
Recently, I was researching the most popular investment funds among Hargreaves Lansdown’s ISA millionaires. Here’s a look at three products many of them own today.
Fundsmith Equity
Let’s start with Fundsmith Equity, the global equity fund that’s managed by Terry Smith.
Now it probably won’t come as any surprise that this investment fund is popular among Hargreaves’ ISA millionaires. This has been one of the most popular funds in the UK for years now.
Much of this has to do with the fund’s brilliant performance track record. Since its launch in late 2010, it has delivered returns of over 15% a year.
This fantastic performance has probably helped many ISA millionaires get to where they are today. An investment of £50,000 at inception worth over £300,000 now.
The secret to Fundsmith’s success? Smith only invests in high-quality businesses that can sustain a high return on capital.
This approach doesn’t work in all market conditions. However, it has worked very well over the long term.
1-year return: 5%
5-year return: 79%
Lindsell Train UK Equity
Turning to UK funds, one that’s popular with the millionaires is Lindsell Train UK Equity. This is managed by portfolio manager Nick Train.
This is another fund with a great long-term track record. Since its inception in July 2006, it has returned around 10% a year. That’s an excellent result for a UK-focused fund. To put that figure in perspective, the FTSE All-Share TR index has returned about 6% a year over that period.
The outperformance here can be attributed to the fact that the fund is concentrated and tends to avoid many areas of the UK stock market. There are no oil companies or banks in this fund. Instead, it finds high-quality ‘compounders’ such as Unilever, Diageo, and Sage, which have consistently generated wealth for investors.
Of course, the lack of oil companies and banks can hurt performance at times. Last year, for example, the fund underperformed the FTSE All-Share index.
However, the strategy has worked well over longer periods.
1-year return: 9%
5-year return: 37%
Artemis Income
Another UK fund that’s popular is Artemis Income. It’s an equity income product, meaning it aims to provide both capital growth and income. It’s managed by Adrian Frost, Nick Shenton, and Andy Marsh who, between them, have vast experience managing funds.
This fund is a little more diversified in nature than Lindsell Train UK Equity. Not only does it hold more stocks but it also has exposure to areas of the market that Train tends to avoid, such as oil (its top holding at the end of February was BP) and insurance.
It still has a strong long-term track record though. Since its launch in June 2000, it has returned around 570% versus around 200% for the FTSE All-Share TR index.
One attractive feature of this fund is its yield. Currently, it’s a little over 4%.
On the downside, the focus on income here can reduce the potential for capital growth.
1-year return: 3%
5-year return: 27%
