Neil Woodford investors: here’s where I’d invest my money now

Neil Woodford investors are finally getting some of their money back. Here’s a look at where to deploy that cash.

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If you were invested in Neil Woodford’s Equity Income fund, which was suspended in early June, you should now have received some of your money back. Yesterday, the fund’s corporate administrator made the first payment from the sale of the fund’s assets to investors.

Looking for somewhere to park that cash? Here are some ideas.

Funds

In my view, open-ended, actively-managed funds remain a solid choice for those looking to build their wealth over the long run, despite what happened with the Woodford Equity Income fund. That was a very unusual situation you’re unlikely to see again. Having said that, it’s important to do your research when investing in funds. Some have much better track records than others.

Funds that I hold in high regard include:

  • Fundsmith: a global equity fund that focuses on high-quality businesses and has delivered stunning returns for investors since its launch in 2010

  • Lindsell Train Global Equity: another top-performing global equity fund with a similar style to that of Fundsmith

  • TB Evenlode Income: a UK-focused income fund with a great track record

  • Franklin UK Rising Dividends: an under-the-radar dividend-focused fund that’s available with a low annual fee on the Hargreaves Lansdown platform

Just remember that it’s important to diversify your money over a few different funds, in case one underperforms. 

Investment trusts

Investment trusts could be another option to consider. The advantage of these is that, because they’re ‘closed ended’, you don’t need to worry about redemptions impacting the fund manager’s performance. In addition, they can also be cheaper than open-ended funds.

Some investment trusts I like include:

  • Murray Income Trust: an income-focused trust that predominantly invests in UK equities but also has the flexibility to invest a little bit internationally

  • City of London Investment Trust: a conservatively-managed UK trust with an excellent long-term dividend growth track record

  • Scottish Mortgage Investment Trust: a global equity trust that invests in exciting growth companies (this one is higher risk)

Index funds

If you’ve had enough of portfolio managers, or you simply want to go for a low-cost option, index funds or exchange-traded funds (ETFs) could be worth a look. These enable you to track an index such as the FTSE 100 or the S&P 500, or invest in a particular style of stock, at a low cost.

However, I would caution against opting for a vanilla FTSE 100 index fund as I believe the Footsie has a number of major flaws as an index (too much exposure to low-growth industries, not enough tech exposure, etc).

Instead, I’d go for something like the iShares Edge MSCI World Quality Factor UCITS ETF, which invests in high-quality companies listed around the world.

Individual shares

Finally, another option is to cut out the middleman completely and build a solid stock portfolio yourself. These days, it’s very easy to do your own research and put together a portfolio of high-quality companies as there’s a wealth of investing information available online for free. Over the long run, this approach could save you quite a bit in fees.

If you’re looking for information on stocks to buy, the free resources here at The Motley Fool could be a good place to start.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Hargreaves Lansdown, Murray Income Trust, and Scottish Mortgage Investment Trust and has positions in Fundsmith, Lindsell Train Global Equity and Franklin UK Rising Dividends. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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