Interactive Investor

The funds, ETFs and trusts ii customers buy every month

21st September 2022 10:23

Sam Benstead from interactive investor

Investing monthly is a fantastic way to build wealth, but doing it the right way is critical. Sam Benstead reveals how ii investors approach it and names some alternatives. 

Regular monthly investing – which has no trading fees for interactive investor (ii) customers – is one of the most effective ways to build wealth.

This is due to the magic of “pound cost averaging”, which means regular investments of a fixed amount buy more shares when markets fall, and less when they rise.

The result is that investors automatically lean into market falls and buy more shares when they are cheap, rather than fewer which is what investors normally do when they are fearful.

In this article, we reveal the most common funds, investment trusts and exchange-traded funds (ETFs) that ii customers regularly buy, using regular investment data since the start of 2022.

Not only should the list provide inspiration for investors, but our expert fund research team have provided feedback on which funds deserve the loyalty of investors, and where there are some gaps in how people are investing.

Most-popular funds

Six of the 10 most-popular funds to invest in regularly are members of our Super 60 and ACE 40 (for sustainable funds) recommended lists.

They are Terry Smith’s Fundsmith Equity, in first place, Vanguard LifeStrategy 60% and 80% Equity, Baillie Gifford Positive Change, Fidelity UK Index and Vanguard US Equity Index.

Vanguard’s 100% Equity LifeStrategy fund is also on the top 10 most-bought list, although it is not included in the ii Super 60 or ACE 40 lists, as is its FTSE Global All-cap Index. The other most-bought funds are Baillie Gifford American and L&G Global Technology Index.

Baillie Gifford American is struggling this year, as investors ditch expensive “growth” stocks to buy cheaper value shares, such as those in the energy and mining sectors.

While the outlook is uncertain, with lots hinging on inflation and interest rates, investors could look to diversify their allocation to growth stocks.

Dzmitry Lipski, head of funds research at interactive investor, said he was encouraged that investors had chosen to regularly invest in Super 60 and ACE 40 funds.

He said Baillie Gifford American could be complemented by ii-rated Premier Miton US Opportunities.

Lipksi also points out there are no emerging market funds on the list, so Super 60-rated Fidelity Index Emerging Markets, which costs just 0.2%, or Fidelity Asia, another Super 60 fund, are good options to plug that gap.

RankFund
1Fundsmith Equity
2Vanguard LifeStrategy 80% Equity
3Vanguard LifeStrategy 100% Equity
4Vanguard LifeStrategy 60%
5Baillie Gifford Positive Change
6Vanguard US Equity Index
7L&G Global Technology Index Trust
8Baillie Gifford American
9Vanguard FTSE Global All Cap Index
10Fidelity Index UK

Source: interactive investor, 1 Jan 2022 to 20 September 2022.

Investment trusts

Investment trusts are very popular on the ii platform. Not only do they allow investors to safely access private stocks and other “illiquid” investments, but they can also borrow money to potentially amplify gains.

Super 60 and ACE 40 trusts that are most popular with regular investors are Scottish Mortgage, F&C, City of London, Capital Gearing and JPMorgan Emerging Markets.

The other trusts on the list are Alliance Trust, Monks, Personal Assets, Smithson and Edinburgh Worldwide.

Lipskis says that Super 60-rated F&C is a good alternative to Alliance Trust. Both invest globally, in a diversified basket of shares, but F&C has had stronger performance over the long term.  

There are two global smaller company-focused trusts in the top 10: Smithson and Edinburgh Worldwide. Given that short-term volatility comes with the territory of investing in small-sized firms, regular investing is a good way of smoothing out the peaks and troughs.

There’s no property trusts in the top 10. Lipski points out that Balanced Commercial Property (bricks and mortar property) and TR Property (listed property) are strong options to diversify a portfolio. Both are on the ii Super 60 list.

He also said that Diverse Income Trust, also in the Super 60, is good option for income seekers. It would also complement City of London, given that it invests in large, mid and small-cap stocks. Whereas City of London has a bias towards the UK’s biggest companies – those housed in the FTSE 100 index.

RankFund
1Scottish Mortgage
2Alliance Trust
3City of London
4F&C
5JPMorgan Emerging Markets
6Monks
7Personal Assets
8Smithson
9Edinburgh Worldwide
10

Capital Gearing

Source: interactive investor, 1 January 2022 to 20 September 2022.

Exchange-traded funds

Exchange-traded funds (ETFs) allow investors to passively own baskets of stocks, normally for a very low fee.

ii customers are a savvy bunch, and regularly invest into a handful of leading, liquid and low-cost ETFs every month. ETFs are listed on the stock exchange and therefore allow instant dealing, which is advantage over open-ended funds.  

The top 10 list includes Super 60 members iShares Core MSCI World Ucits ETF and iShares Physical Gold ETC, and ACE 40 member iShares Global Clean Energy.

Other popular funds to invest in monthly are Vanguard S&P 500 Ucits ETF (income and accumulation share classes), iShares Core FTSE 100 Ucits ETF, Vanguard FTSE All-World Ucits ETF (dollar and sterling share classes) and Vanguard FTSE 250 Ucits ETF (accumulation and distribution units).

While Lipski says that the list is strong, he adds that investors could diversify their ETF exposure by adding the Super 60-rated Vanguard FTSE All World High Dividend ETF.

It owns stocks that pay a higher dividend than the global market, and currently yields around 4%. It charges 0.29% in fees. This year it has returned 4% compared with a 4% loss for the MSCI World index.

Other more niche ETFs to diversify portfolios, according to Lipski, include the WisdomTree Enhanced Commodity ETF and SPDR Morningstar Multi-Asset Global Infrastructure ETF. The former owns a basket of commodities, while the latter invests in listed infrastructure companies.

For a property play, Lipski suggests iShares Global Property Securities Equity Index fund, which owns a basket of real estate investment companies.

With funds and ETFs, the income share class pays the income back to investors, while the accumulation share class retains the income within the fund and reinvests it.

The choice of share class depends on whether you want, or need, the income to be paid to you.

RankFund
1Vanguard S&P 500 Ucits ETF (distribution)
2iShares Core MSCI World Ucits ETF
3iShares Core FTSE 100 Ucits ETF
4iShares Physical Gold ETC
5Vanguard S&P 500 Ucits ETF (accumulation)
6iShares Global Clean Energy Ucits ETF
7Vanguard FTSE All World Ucits ETF US
8Vanguard FTSE 250 Ucits ETF (distribution)
9Vanguard FTSE All World Ucits ETF GB
10Vanguard FTSE 250 Ucits ETF (accumulation)

Source: interactive investor, 1 Jan 2022 to 20 September 2022.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.