Interactive Investor

Top 10 most-popular investment funds: July 2023

1st August 2023 15:44

by Nina Kelly from interactive investor

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Terry Smith shrugs off Fundsmith slip as investors continue to invest in a hot trend.

Fluctuations in fund sales 600

‘If in doubt, track an index’ seems to be the mantra of many investors who are largely sticking to passive global funds. However, active fund Fundsmith Equity remains in first place in our top 10 ranking of the most-popular investment funds, according to the number of ‘buys’ among our customers in July.

Fundsmith Equity is one of our Super 60 investment ideas and the global equity fund has legions of fans, including one DIY investor who shared his investing experience with us in a new ‘diary’ series.

In his half-yearly letter to investors, Terry Smith, manager ofFundsmith Equity, discussed the fund underperforming the index in the first six months of 2023, returning 8.5% compared with 8.9%. Smith, however, was unfazed by the figures and we reported on his update where he told investors thatWaters Corp (NYSE:WAT) and Mettler-Toledo (NYSE:MTD) have both been affected by the slowdown in laboratory expenditures post the pandemic. In neither case are we bothered by this. In fact, we hope it presents an opportunity for us to buy more.”

In his update, the star fund manager detailed another stock that had hurt performance, as well as the shares doing well in the portfolio. Specialist writer Faith Glasgow cites Fundsmith Equity in a popular piece on core holdings for a pension fund, although she reminds investors that “its style bias and concentrated nature do mean there’s potential for it to deviate from the benchmark when market conditions turn against it”. In other words, expect some volatility when investing in this global growth fund.

While UK investors wait to discover whether the Bank of England will hike interest rates this week by 0.25 percentage points, or a more aggressive 0.5 percentage-point hike, everyone breathed a sigh of relief when July’s inflation readings were positive, both here and in the US. The figures caused many to adjust their UK interest rate expectations in the hope that the peak is nearer than anticipated.

But whatever decision the Bank makes on Thursday, interest rates are still on the up, and therefore money market funds are still in demand, as the return on these low-risk, cash-like investments rise as rates climb. The yield on the actively managed Royal London Short Term Money Mkt fund is 4.5%, according to the June factsheet. This fund held steady in second place in July,

Vanguard LifeStrategy 80% Equity remained in third place in July, while the 100% Equity version fell one place to sixth. Both funds cost 0.22% and invest in a range of in-house funds tracking global markets. The LifeStrategy fund range was under scrutiny this week, as we compared the popular multi-asset offering with BlackRock’s MyMap, taking in performance and portfolio choices among other considerations. Vanguard’s 100% Equity fund is also mentioned in Glasgow’s article on core pension holdings as a potential consideration for those who want both a passive fund and to keep fees to a minimum.

Three other funds from the Vanguard stable were in the top 10 in July, namely Vanguard US Equity Index (fifth); Vanguard FTSE Global All Cap Index (seventh); and Vanguard FTSE Dev World ex-UK Equity Index (ninth).

Artificial intelligence fever continues and the L&G Global Technology Index fund, unchanged from June in fourth place, was named by our Saltydog Investor Douglas Chadwick as one of the best performers of the second quarter. Another fund with significant exposure to mega-cap US tech stocks is L&G Global 100 Index, in 10th place.

Top 10 most-popular funds in July 2023

Rank  FundIA sectorRanking change since previous month1-year return to 1 Aug (%)3-year return to 1 Aug (%)
1Fundsmith EquityGlobalNo change5.91%25.90%
2Royal London Short Term Money Mkt Short Term Money MarketNo change3.48%3.80%
3Vanguard LifeStrategy 80% EquityMixed investment 40%-85% sharesNo change3.80%24.20%
4L&G Global Technology IndexTechnology and Technology InnovationsNo change21.50%58.48%
5Vanguard US Equity IndexNorth AmericaUp one7.41%45.87%
6Vanguard LifeStrategy 100% EquityGlobalDown one7.13%38.17%
7Vanguard FTSE Global All Cap IndexGlobalNo change6.99%37.00%
8Fidelity Index WorldGlobalNo change7.58%41.95%
9Vanguard FTSE Dev World ex-UK Equity IndexGlobalUp one8.13%41.49%
10L&G Global 100 IndexGlobalDown one9.49%52.73%

Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of July.

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.

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