Moneywise's First 50 Funds for beginners
The list of 50 funds includes index tracker funds and actively managed funds. Scroll down to see links to the selection.
Index tracker funds are low cost and can be used to build a solid core for your portfolio. They are also known as ‘passive funds’ because they simply aim to replicate performance of a benchmark index, rather than trying to actively buy and sell stocks and shares to boost performance. If you use trackers, you’ll never beat the index but you also reduce the risk of performing worse than the index.
Active funds have the potential to perform better than index trackers, but there is the risk that the fund manager may make the wrong decision. Many investors build a core of low-cost passive funds and then add active funds as ‘satellites’ around this to try to add value.
Many of these funds have income and accumulation units, and you will need to buy the right version for your investment needs.
With income units, shown as ‘Inc’ in the fund name, any income is paid as cash. This can be withdrawn, reinvested or simply held on your account. With accumulation units, shown as ‘Acc’ in the fund name, any income is retained within the fund; the number of units remains the same, but the price of each unit increases by the amount of income generated within the fund. Generally, accumulation units offer a slightly more efficient way to reinvest income, although many investors will choose to hold income units and reinvest the income to buy extra units.
We have included the ISIN identifier for each fund – this is a unique number that will help you identify it on the investment platform that you use.
The ongoing charges figure, or OCF, is the most accurate measure available of what it costs to invest in a fund. The OCF is made up of the annual management charge (AMC) levied by the fund managers and other operating costs.
Note that you may have to pay an investment platform fee on top of this, depending on which platform you use to buy the funds. You can read Moneywise’s platform recommendations here.
First 50 Funds - the selection
For ease of use, we have divided the selection into three parts:
- 20 cheap tracker funds to use as core holdings - The best 'fire and forget' funds. Use these if you want no-nonsense, cheap investing.
- 20 active funds to add value - If you want a manager to sit down and pick the stocks and bonds best alligned with your goals and boundaries, make sure to take a look at these.
- 10 investment trusts for starters - More interested in an investment trust? They can be cheaper, but due to the way they work, can be riskier than funds.
CREATE PORTFOLIOS FROM THE FIRST 50 FUNDS
We also show how you can start investing for income or growth by combining the funds in the selection.
- Turn First 50 into a potent portfolio - Moira O'Neill shows you how to build an income or growth portfolio using the funds covered above.
- Easy tracker fund portfolios for 2017 and beyond - We explain how beginner investors can use the tracker funds in Moneywise’s First 50 Funds to construct simple, low-maintenance investment portfolios.
We run regular updates on the funds in our selection, which we'll post below.
- Interview: Ainslie McLennan, manager of Henderson UK Property Fund - Helen Knapman got the lowdown on this property fund.
- Moneywise First 50 Funds: Trackers beat actives in 2016 - The tracker funds selected for Moneywise’s First 50 Funds list for beginner investors beat the performance of the active funds on the same list during 2016.
- Interview: Job Curtis, manager of City of London Investment Trust - Helen Knapman went to meet Job Curtis, the manager of City of London Investment Trust.
- Interview: Nick Blake, head of marketing and policy for Vanguard’s European business - Helen Knapman talks about Vanguard and its funds.
- Interview: Jeff Atherton and Adrian Edwards of Man GLG Japan CoreAlpha - Helen Knapman meets Jeff Atherton and Adrian Edwards to uncover more about Man GLG Japan CoreAlpha – a fund that invests in large Japanese companies
- First 50 Funds update: One third of Britain's best-performing funds are core funds - Nine of the UK’s 25 best-performing funds – and three of Moneywise’s top 50 First Funds for beginner investors – are “core funds”, according to new research from TD Direct Investing.
- Interview: Neil Hermon, manager of Henderson Smaller Companies Investment Trust - Moneywise’s Helen Knapman delves into the details of the Henderson Smaller Companies Investment Trust – one of our First 50 Funds for beginners – and meets its manager, Neil Hermon.
- First 50 Funds update: M&G Property fund re-opens for business - The M&G Property Portfolio, which is one of Moneywise’s First 50 Funds for beginners has become the latest commercial property fund to reopen its doors. Trading will resume at noon on Friday 4 November.
Also known as index funds, tracker funds replicate the performance of a stockmarket index (such as the FTSE All Share Index) so they go up when the index goes up and down when it goes down. They can never return more than the index they track, but nor will they lose more than the index. Also, with no fund manager or expansive research and analysis to pay, tracker funds benefit from having lower charges than actively managed funds, with no initial charge and an annual charge of 0.5%.
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
A standard by which something is measured, usually the performance of investment funds against a specified index, such as the FTSE All-Share. Active fund managers look to outperform their benchmark index. Cautious fund managers aim to hold roughly the same proportion of each constituent as the benchmark, while a manager who deviates away from investing in the benchmark index’s constituents has a better chance of outperforming (or underperforming) the index.
Annual management charge
If you put money in an investment or pension fund, you’ll not only pay a fee when you initially invest (see Allocation Rate) but also a fee every year based on a percentage of the money the fund manages on your behalf. Known as the AMC, the actual percentage varies according to the particular fund, but the industry average for active managed funds is 1.5%.