Investment doctor: How to invest £3,000 for 10 years

“My 18-year-old son has come into a £3,000 windfall. Please could you suggest some long-term investments? He will be investing for at least 10 years and would like to take a medium level of risk.”

Treatment tips

Alan Steel, chairman of Alan Steel Asset Management, has been investing and advising other investors for 43 years. He says: “Don’t fall into the trap of sticking the money in cash savings deposits, bonds or absolute return funds because they’re ‘safe’. You only have to look at history to spot that virtually every time the world was allegedly caving in, it was time to keep faith in shares.

“Unless you wholly fancy the US, I also wouldn’t be attracted to index tracker funds. It’s tomorrow’s winners – via actively managed funds that aim to beat stock market indices – that your son should be looking for.

“Charges can be kept reasonable by holding the funds inside a cheaper platform, Moneywise’s platform survey shows Charles Stanley Direct is best value for smaller portfolios, but performance is 10 times more important… as a wise man told me 30 years ago. “Finally, I’d remind him of Warren Buffett’s advice: ‘Hold the investments for the 10 years and leave them alone.’”

Ben Yearsley, investment director at Wealth Club, says: “Ten years is an excellent time frame for investment. Too many investors want a return over a couple of years and chop and change their portfolio too much when nothing is happening or there is slight underperformance. So spend time choosing the right funds and then stick with them.

“Often, a portfolio termed ‘medium risk’ would include bond funds. However, the recent interest rate cut and renewed quantitative easing has left bonds looking very expensive. Property, which could also feature in a balanced portfolio, isn't the best place to look either as many funds are still ‘gated’, meaning investors can neither sell nor buy.”

Tax tonic

Both experts recommend your son puts the funds in an individual savings account (Isa) wrapper, where they’ll be free of capital gains tax (CGT), even if the investment is outrageously successful. It might not seem worthwhile now with only £3,000, but who knows what the tax rules might change to in future.

Fund medication

Alan Steel would split the £3,000 between two funds that “seek to take advantage of the unbelievably fast-changing world we live in”. He has held both funds for many years and intends to continue holding them.

He says: “There has never been a time when so many remarkable inventions are sprouting forth in so many directions and disciplines. So I’d choose to invest in a well-run, well-priced technology fund, such as Axa Framlington Global Technology, managed by Jeremy Gleeson for the past nine years. He’s an excellent stock picker – look at the performance of his top five holdings: Alphabet (Google), Facebook, Apple, Cisco, and Visa.

“I’d go half also with a global smaller companies fund, such as Invesco Perpetual Global smaller Companies, managed by Nick Mustoe. In this fast-changing world, smaller companies are likely to grow faster than the big boys and also are likely to be snapped up in time, by the likes of Alphabet, Apple and Facebook which are awash with cash.”

Ben Yearsley suggests splitting the £3,000 five ways, with £600 into each of the following funds:


He says: “The core of the portfolio is in UK equites with two equity income funds, Woodford and Ardevora and a third UK fund Lindsell Train. All three have managers who typically avoid fads, invest for the long term and are predominantly invested in larger companies.

“I have been a fan of the First State fund since it launched in 2007. As the name suggests, it invests in infrastructure assets. Infrastructure can be many things; toll roads, airports, ports, power grids, water, mobile phone towers. What this fund does is look to buy into areas that are essential and have to be used, which helps it weather economic storms. An added benefit is that often the payment to use these assets is linked to inflation – something that could rear its head again in the near future.”

The final fund, Artemis, aims to beat both cash and the FTSE All Share over three-year periods. William Littlewood manages it and can virtually invest anywhere – bonds, equities, commodities, and currencies all feature. “Crucially, he can also profit from falls in prices as well as increases,” says Mr Yearsley. “With one eye on the downside, this fund can form a cornerstone of a portfolio.”

*CF Woodford Equity Income is a member of Moneywise’s First 50 Funds selection. For more details visit our First 50 funds homepage.

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