The investment world can be a confusing place. There are tens of thousands of stocks to choose from around the world, and there are also many thousands of investment funds all clamouring for your money.
To try and help you out, I’m going to take a look at three of my favourite investment funds and outline why I believe they’re the perfect vehicles to help savers grow their wealth over the long term.
Stick to the basics
The first is a simple FTSE 100 tracker fund. The reason why I have decided to profile this fund is that it’s so simple. As the UK’s leading stock index, the FTSE 100 is relatively easy to track and doesn’t require any management skill. Therefore, investors can get exposure to the index for just a few basis points in expenses every year.
The best FTSE 100 tracker on the market at the moment, in my opinion, is Vanguard’s FTSE 100 Index Unit Trust, which only charges an annual management fee of 0.06%. Over the past 10 years, the blue-chip index has produced an average annual return in a region of 6-8%, and I think 0.06% is an attractive price to pay for those returns.
International exposure
As well as a FTSE 100 tracker fund, I think every portfolio should have some allocation to global equities, particularly international income stocks.
BlackRock Global Income Fund offers a great way to play this theme, I believe. The £158m fund has a relatively concentrated portfolio of 51 income stocks from around the world. It currently supports a dividend yield of 2.6%, which might not look that attractive compared to the FTSE 100 dividend yield of around 4.4%, but the portfolio contains some of the most reliable income stocks in the world.
I think, in this case, it’s worth accepting the lower yield for dependability. Since its inception, the fund has produced an average annual total return for investors of 9.6%.
Emerging growth
My final fund pick is a play on emerging markets. Over the past few decades, emerging markets have become a force to be reckoned with in the global economy, and many analysts believe their growth will continue for the foreseeable future.
Attractive demographics, a burgeoning middle class and falling unemployment, are all reasons to believe emerging economies haven’t stopped growing just yet.
However for UK investors, navigating these markets can be tricky, and that’s why I think the best option investors have to buy into this growth is through a fund. And the one I like is the iShares Emerging Markets Equity Index.
Another tracker fund, this aims to track the performance of emerging markets by replicating the FTSE Emerging Index, which includes countries such as China, India and Russia. It currently supports a dividend yield of 2.3% and charges an extremely attractive 0.24% per annum in management fees.