Terry Smith, Vanguard continues to dominate, and investor appetite for our £10,000 income challenge.
Are you a Terry Smith Fundsmith Equity investor? You are not alone. Despite the market rotation to value shares, the growth fund’s investors remain loyal, and Fundsmith Equity was once again the most-bought fund of the month.
It was also the only actively managed strategy among the top 10 most-bought funds in January, according to the number of ‘buys’ among interactive investor customers.
Our latest Private Investor Performance Index for Q4 supports investors’ appetite for this fund, with Fundsmith Equity having universal appeal across all age ranges. Jeff Prestridge, an interactive investor columnist, counts himself among Smith’s supporters, saying in his most recent article, “Yes, I know, Fundsmith Equity had a dodgy 2022 (recording losses of 13.8%), but Smith is too proud an individual to allow the fund’s performance to linger in the doldrums for too long. He’ll come back with a vengeance…his long-term track record – average annual returns of 15.5% since setting up the fund in November 2010 – is quite remarkable.”
The performance of Fundsmith Equity in 2022 was the worst-ever year of performance for the global equity portfolio, with Fundsmith Equity underperforming the MSCI World index to deliver a 13.8% loss versus a 7.8% loss for its benchmark. My colleague Sam Benstead reported on Smith’s response to the figures in his 2023 annual letter to investors.
Another fund retaining its appeal among investors is Vanguard LifeStrategy 80% Equity (second place). Just like Fundsmith Equity, our Private Investor Performance Index for Q4 reveals how widely the fund is held across various age ranges. I wrote about my experience of holding this fund in my stocks and shares ISA during the Covid pandemic and various other market shocks.
Investors going global
On the last day of January, the International Monetary Fund (IMF) released forecasts suggesting that the UK will be the only G7 nation to experience negative growth this year. Even the Russian economy, which has been hit by sanctions in the wake of its invasion of Ukraine, is forecast to grow in 2023. While it is only a forecast, it still makes for gloomy reading.
In addition, tomorrow (February 2), the Bank of England is widely expected to raise interest rates again, taking the base rate from 3.5% to a likely 4%, in an attempt to curb double-digit inflation.
Given this backdrop, in January investors continued to plump for low-cost, diversified global options to help spread risk amid multiple headwinds.
Two other funds in the Vanguard LifeStrategy range, namely the 100% Equity and 60% Equity options, remained in the third and fifth place respectively. In January, the giant US fund house Vanguard had a total of seven funds in the table, including Vanguard US Equity Index, retaining fourth place; Vanguard FTSE Global All Cap Index, static in sixth place; and Vanguard FTSE Dev World ex-UK Equity Index down one place to eight.
The only movement in the table was at the bottom, with Vanguard FTSE UK Equity Income Index entering the list in ninth place. Its appearance could be owing to the publication of our popular annual article “12 funds to generate £10,000 of income”. The Vanguard passive fund is one of a dozen funds chosen for 2023’s income challenge, and it also appears in interactive investor’s Super 60 list of investment ideas. The fund invests in the constituents of the FTSE UK Equity Income index, which consists of shares “that are expected to pay dividends that generally are higher than average”. It has a higher yield than most active funds, currently 5%.
Other funds investors were buying in January included the HSBC FTSE All-World Index (seventh place) and Fidelity Index UK (10th place). The latter fund tracks the FTSE All-Share Index and is also a Super 60 constituent. The top 10 holdings include AstraZeneca (LSE:AZN), Shell (LSE:SHEL), Unilever (LSE:ULVR), HSBC (LSE:HSBA), BP (LSE:BP.), Diageo (LSE:DGE), and Glencore (LSE:GLEN).
The two funds that left the top 10 in January were Royal London Short-Term Money Market and CG Real Return.
Top 10 most-popular funds in January 2023
|Rank||Fund||IA sector||Ranking change since previous month||1-year return to 1 Feb (%)||3-year return to 1 Feb (%)|
|1||Fundsmith Equity||Global||No change||-4.5||20.1|
|2||Vanguard LifeStrategy 80% Equity||Mixed investment 40%-85% shares||No change||-2.02||13.9|
|3||Vanguard LifeStrategy 100% Equity||Global||No change||0.34||26.9|
|4||Vanguard US Equity Index||North America||No change||-2.7||31.2|
|5||Vanguard LifeStrategy 60% Equity||Mixed investment 40%-85% shares||No change||-5.1||9.04|
|6||Vanguard FTSE Global All Cap Index||Global||No change||-0.88||24.2|
|7||HSBC FTSE All-World Index||Global||Up one||0.08||24.7|
|8||Vanguard FTSE Dev World ex-UK Equity Index||Global||Down one||-1.01||27.5|
|9||Vanguard FTSE UK Equity Income Index||UK Equity Income||New entry||7.9||18.04|
|10||Fidelity Index UK||UK Companies||New entry||3.4||23.9|
Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of January.
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.
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