Two new entrants after a tumultuous year for markets and investors.
How did cost-conscious Britons invest in the final month of a turbulent year during which the country dealt with four chancellors, three prime ministers, the death of a monarch who reigned for 70 years, soaring energy and food bills amid surging inflation, rising interest rates, and the prospect of a deep recession?
Well, they invested pretty much as they did in November, sticking to low-cost global passive strategies offering plenty of diversification, although two new actively managed funds did enter the December rankings.
In our top 10 table of most-bought funds, which is based on the number of ‘buys’ among interactive investor customers during the month, Fundsmith Equity retained the top spot. While active funds are struggling to attract and retain investors, Terry Smith’s fund continues to buck the trend and was the bestselling fund on the ii platform in 2022.
Three of Vanguard’s multi-asset LifeStrategy funds, 80% Equity, 100% Equity and 60% Equity, clung to second, third, and fifth place, respectively, in December. The 80% Equity option was the second most-bought fund on the ii platform in 2022, and the 100% Equity option, was the third most-bought fund. Both the 60% Equity and 80% Equity funds are part of ii’s Quick-start funds range, which offer a simple starting point for investing.
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Three other Vanguard funds were in the top 10 table in December, namely Vanguard US Equity Index (fourth place); Vanguard FTSE Global All Cap Index (sixth); and Vanguard FTSE Dev World ex-UK Equity Index (seventh). The other tracker in December’s table was the HSBC FTSE All-World Index in eighth place.
Investor caution is reflected in the reappearance in the table of the low-risk actively managed Royal London Short Term Money Mkt fund in ninth place.
Money market funds are a cash-like investment and the return increases as interest rates rise. Sam Benstead, ii’s deputy collectives editor, says: “Money market funds are back in vogue as investors seek better returns on their cash now that interest have risen. The Royal London Short Term Money Market fund generates a distribution yield of nearly 3% by investing in short-dated bonds.”
Money market funds could suit retail investors who want to reduce the risk of their portfolio. These funds allow DIY investors to park their cash, which is perfect for bargain hunters who want to ‘buy the dip’. Money market funds can be held in a self-invested personal pension (SIPP), a stocks and shares ISA, or a general investment account.
The second new fund to enter the top 10 in December was the actively managed Real Return, a sub fund of CG Portfolio Fund. The fund, which was launched in 2004, invests mainly in international government and corporate index-linked bonds.
Veteran investor Peter Spiller, who has managed wealth preservation investment trust Capital Gearing (LSE:CGT) since 1982, is one of the managers overseeing the Real Return Fund.
According to the key investor document, “the investment manager will be investing in the index-linked bond content into mainly Swedish, European, Japanese, US and Canadian domestic government agency bonds…the fund may in future invest in other domestic government and government agency bonds; in any event they will be mainly OECD government bonds.”
Benstead, who pens a weekly column on bond investing, recently explained how “higher yields are tempting investors back into corporate bond funds, with prospects of interest rate cuts towards the end of  to stimulate the economy, also providing hope of capital gains”. He added that “investment grade corporate bonds could be a savvy bet in the event of a deep recession due to their reliable income payments”.
The two funds that exited the top 10 were HSBC American Index and Fidelity Index World.
Top 10 most-popular funds in December 2022
|Rank||Fund||IA sector||Ranking change since previous month||1-year return to 3 Jan (%)||3-year return to 3 Jan (%)|
|1||Fundsmith Equity||Global||No change||-13.7||23.4|
|2||Vanguard LifeStrategy 80% Equity||Mixed investment 40%-85% shares||No change||-8.81||10.8|
|3||Vanguard LifeStrategy 100% Equity||Global||No change||-6.2||18.05|
|4||Vanguard US Equity Index||North America||No change||-9.6||31.3|
|5||Vanguard LifeStrategy 60% Equity||Mixed investment 40%-85% shares||No change||-11.2||3.9|
|6||Vanguard FTSE Global All Cap Index||Global||No change||-8.01||21.2|
|7||Vanguard FTSE Dev World ex-UK Equity Index||Global||No change||-8.2||26|
|8||HSBC FTSE All-World Index||Global||Up one||-7.8||22.3|
|9||Royal London Short Term Money Mkt||Short Term Money Market||New entry||1.37||1.61|
|10||CG Portfolio Fund Real Return GBP A||Other Bond (Morningstar category)||New entry||-3.43||6.27|
Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of December.
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