Mutual funds are a great way to invest in a variety of assets that are all focused on a central purpose. You can invest in a single mutual fund and have a little bit of diversity just from that fund.
Of course, it’s a good idea to diversify your portfolio across more than just one fund if you can but everyone has to start somewhere.
If you’ve been considering investing in mutual funds, you’ve come to the right place. We’ve rounded up the best mutual funds on the market.
| Funds | Score | Details |
|---|---|---|
| 1. Franklin Templeton UK Smaller Companies Fund | ★★★★★ | Learn More |
| 2. J O Hambro UK Equity Income Fund | ★★★★★ | Learn More |
| 3. iShares Core FTSE 100 UCITS | ★★★★★ | Learn More |
| 4. Liontrust Sustainable Future UK Growth Fund | ★★★★★ | Learn More |
| 5. Vanguard Life Strategy 80% Equity Fund | ★★★★★ | Learn More |
| 6. Man GLG Undervalued Assets Fund | ★★★★★ | Learn More |
| 7. Fundsmith Equity Fund | ★★★★★ | Learn More |
Keep reading to learn more!
What is a Mutual Fund?
A mutual fund is like a pool of assets. You and other investors come together as owners of a basket full of different assets. Those assets are all strategically related to the overarching goal of the fund. Some mutual funds will have more than a thousand assets in them, while others may have less than 100.
Every mutual fund is managed differently and this varies by company.
There are both active and passive funds. The difference? Active funds are monitored and managed more closely. They have an active manager always looking at and reviewing the fund to determine if changes should be made.
Passive funds are rebalanced on occasion, but they are not monitored as closely. They aren’t just created and then forgotten, but there isn’t a paid manager that is keeping close tabs on the fund at all time. Instead, it’s reviewed on a specific basis and updated as needed then.
All funds will have exposes tied to them. Actively managed funds tend to have a higher expense ratio since they are more actively monitored and managed.
The managers determine what to buy and hold within the fund itself. This could be a combination of stocks, bonds, and other assets. Every holding will be tied to the fund purpose. Mutual funds come in strategies and styles of every kind so you can choose the exposure you’re looking for.
The Best Mutual Funds to Invest in
Mutual funds come in so many different varieties and there are thousands of options to choose from. It can be challenging to narrow it down and figure out where you want to invest your hard earned money.
We’ve sorted through the choices and done some research to find some of the best mutual funds on the market. Don’t just take our word for it either. These are some of the most popular funds to be found and could be a great choice.
Keep in mind that everyone’s investment goals are different.
It’s important that you choose mutual funds that fit into your risk profile and your investment strategies.
Check these out.
1. Franklin Templeton UK Smaller Companies Fund
The Franklin Templeton UK smaller companies fund is one of the top choices in the UK for mutual fund investing. This fund is more than £200 million in size and measures up against the Numis smaller companies ex-investment trusts index. It has supported reasonable returns as well as growth thanks to the small company focus of the fund.
The annual fund charge falls around .80%, which is reasonable for an actively managed fund. It’s comprised of small companies that are geared towards growth or perhaps undervalued
Because of this focus, the fund could be considered slightly higher risk. However, any associated risk won’t be specific to just one industry or asset, which makes a difference.
This fund stands out because it heavily focuses on UK smaller businesses and they’ve chosen well with a positive track record through the years. They choose small companies but use a conservative plan to do so, leading to a dynamic fund with growth and returns.
2. J O Hambro UK Equity Income Fund
Looking for a fund that focuses on equities or income? This JOHCM fund might just be the choice for you. The fund is heavily geared towards long-term growth.
However, they really perfected the fund when they also amped up the dividend yield. They measure against the FTSE All Share Index average, and the dividends consistently beat the index.
This is an equity fund, which will make some investors uncomfortable. However, with the overall design of both growth and dividend income, it balances out pretty well.
The exposure of the fund is mostly small and medium-sized stocks, which is an unusual approach for an income fund.
The high dividend yields come from exposure to companies like BP, Barclays, Glencore, and other high-yielding assets. Those are paired with the small and medium stocks we mentioned earlier for diversity and growth. This fund has been around since 2004 and still maintains the original manager.
3. iShares Core FTSE 100 UCITS
The iShares core fund is governed by BlackRock and it’s an excellent choice for even beginner investors. This fund hosts more than 10 billion in assets, making it one of the largest funds on the market.
It’s simple and straightforward, with a strategy that measures against the FTSE 100. If you look at their annualized returns, they stay consistent against the index.
The fund is competitive and it has a low cost rating as well. With so much money in the total fund, it’s pretty diverse.
It’s also easy to trade and find the spread that works for you. They do offer an income version of this fund if you’re looking for reasonable dividends, so be sure to check out that option as well.
The annual fund charge here is one of the lowest you will find. It’s only .07%, which is astronomically minimal compared to competitors. This is in large part because of the fund size.
4. Liontrust Sustainable Future UK Growth Fund
The Liontrust Sustainable future fund has several different purposes. The first is that it’s a fund designed for growth and it does so with a small window.
The second is that this fund is all about sustainability and ethical investing. It’s a great choice if you’re looking specifically for sustainable investing options.
The entire build of this fund invests in companies that are socially and environmentally responsible. The fund has designated rules to categorize these companies.
The exact number of assets does vary, but in general the fund is invested in anywhere from 40–60 assets that meet their designations.
This means you have slightly less diversity than some funds out there, but enough to feel confident. The companies are all high-quality and carefully selected to provide you with a strong mutual fund choice. They have a great reputation and a track record of success. The annual fund charge is on the high side at .9%. This is due to the diligence given to managing the fund.
5. Vanguard Life Strategy 80% Equity Fund
Vanguard has a series of life strategy funds that are top performers in the market. These funds are all unique in that they are designed towards a specific strategy so you can simply choose your strategy and go with it. This is the 80% equity fund. The fund size is over 8 billion.
As the name suggests, it is heavily invested into equities. The ongoing costs are low at only .22%. The fund does pay a minimal dividend, but it’s meant to provide both income and growth in the same strategy. The fund has seen some ups and downs against the Morningstar GBP benchmark. It’s an open-ended fund.
With equities taking a drastic hit in 2022, the one-year returns are not amazing, although it maintained its dividend yield. However, if you look back further, you see promising returns from both the three and five year annualization numbers.
6. Man GLG Undervalued Assets Fund
This unique fund strives to provide you a lot of value for lower costs. It is a value fund, which means they invest in cheap stocks, hoping to see appreciation and growth over time.
This is meant to be a long-term fund that you let sit and see if the appreciation happens as anticipated. It’s not growth that is going to happen overnight.
While this may seem unstable, they have a very sound process for choosing funds, and they rely heavily on the financial strength of the companies.
Their requirements to be an asset of the fund are pretty stringent, helping to eradicate those unreliable funds and still maintain those lower prices across the board.
Some of the assets you might find include Redrow Group and Grainger. There are others too, but this gives you a general idea. This is a good choice for diversification. While it’s focused on growth, they use a different approach than most growth funds on the market.
7. Fundsmith Equity Fund
The Fundsmith Equity fund is one of the most popular choices in the UK as far as investment funds are concerned. This fund was released in 2010 and has seen phenomenal success since the release date. In the first 10 years, the fund returned more than 570%, which perhaps contributes to the popularity.
Fundsmith invests in global equities. They choose companies from all across the globe to make up the holding list.
This provides some global diversification. That being said, it’s also not overly populated with hundreds of different companies. This fund only holds about 20-30 different stock sin it at any given time.
The fund has a very strict investment policy that helps to dictate what they are going to hold and why. Those requirements include good valuation, ability to generate growth, financial strength, high return generation, and more. And like we mentioned, those high return generations have been successful thus far.
The equity funds are pretty diverse. The holdings include things like PayPal, L’Oreal, Novo Nordisk, Intuit, and more. They use some of the biggest names in the market, but spread across several industries.
Choosing the Best Mutual Fund
These top 7 mutual funds are all great in their own ways. They have unique investment concepts that set them apart. This is just the tip of the iceberg. There are many other choices out there.
It’s important to consider your needs and goals before you choose a fund to invest in.
These tips may help you choose the best mutual fund for your portfolio.
Ongoing Fees
Every mutual fund will have ongoing fees. While you won’t see those fees charged to your account and broken out, they are incorporated into the cost of the fund and will be realized in your gains or returns.
How a fund charges their fees is based on many details. The primary detail is whether it is an actively managed fund or a passive fund. However, you will also notice that funds with stringent requirements often charge higher ongoing fees too. These fees are directly related to the work required to manage discern assets and manage the fund itself.
You will be hard pressed to find any fund that charges absolutely no ongoing fees. However, you can certainly find extremely low fees. This won’t make or break your fund, but it’s something to be aware of and familiar with.
Fund Strategy and Your Strategy
As you peruse the different funds out there, take a look at the fund strategy. Every fund is backed by some sort of investment strategy that is used to guide the fund and help investors understand the principles of this fund too.
The fund strategy will provide you with some insight as to the purpose of the fund. This is how you determine whether their focus is growth, income, or a combination. Sometimes you can understand the basic strategy just by the title of the fund. However, it’s always a good idea to look at the investment strategy and ensure it aligns with your strategies in some way.
Which brings us to the importance of having your own strategy. What are you hoping to accomplish? Every investor follows some sort of strategy in their investment approach. This is an essential step to choosing funds and other types of holdings too.
You want to select things that fit.
Performance
Take the time to do some basic research before you settle on a specific fund. You want to understand their performance and whether or not the fund has been successful in the past. While this won’t guarantee success, it does give you some back history of the fund and helps to set your expectations.
We know that the market is never guaranteed and it’s constantly moving. Some funds will perform well in a specific year and then may see major downward spirals in another year. The one-year performance lets you know how they handled the most recent timeframe, but you can get a clear picture from looking at longer performance breakdowns.
Look at the one year, but also take the time to look at three and five year annualized returns and see where the fund measures up. Did they have a bad year or is there a chance the fund is floundering?
Final Thoughts
The best mutual funds have a lot to offer the world. They have so many different types and styles of holdings and you can choose the fund that most appeals to your needs and goals. Take the time to do some research and due diligence to ensure you find the right fit for your needs.
These are just our top 7 picks for the best mutual funds, but know that there are many other choices. If you don’t see what you’re looking for here, use the tips we’ve shared to help you find a great investment for your portfolio needs.
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