The Motley Fool

Fundsmith: should I invest right now?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A stock price graph showing growth over time, possibly in FTSE 100
Image source: Getty Images.

Fundsmith is one of the most popular investment funds in the UK. For many investors, it’s a core holding.

I have a large chunk of money in the global equity fund myself. Is now a good time to invest more? Here’s a concise analysis of the fund.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Fundsmith: investment philosophy

Let’s start with Fundsmith’s investment philosophy. This is quite simple. Portfolio manager Terry Smith likes to break it down into three basic steps:

  • Buy good companies

  • Don’t overpay

  • Do nothing

When he talks about ‘good’ companies, Smith is referring to companies that are highly profitable, financially strong, are resilient to change, and whose advantages are difficult to replicate.

I really like this approach to investing. I’m happy to invest in Fundsmith knowing that this is the investment philosophy.

Portfolio breakdown

Taking a look under the bonnet, I like what I see. At 30 September, Fundsmith’s top 10 holdings were:

Novo Nordisk
Philip Morris
Estée Lauder

There are some great companies on that list. I’m particularly bullish on Microsoft and PayPal.

I’ll point out that there are plenty of other great companies in the portfolio that aren’t in the top 10 holdings such as Unilever and Diageo. Last year, I took a look at the full holdings here. There hasn’t been a great deal of portfolio turnover since then.

Sector-wise, the top three sectors at 30 September were:

  • Consumer Staples (29.5%)

  • Technology (29.1%)

  • Healthcare (22.5%)

I’m very comfortable with Fundsmith’s sector exposure. Given what’s going in the world right now (Covid-19, recessions, digitalisation, etc.) I think these are three of the best sectors to be in.

In terms of geographic split, the top three countries at 30 September were the US (67.6%), the UK (14.6%) and Denmark (6.8%). Personally, I’m comfortable with the high weighting to the US. 


Fundsmith’s performance over the long run has been very good. Between launch in late 2010 and 30 September 2020, the fund returned 18.2% per year. It smashed its benchmark, the MSCI World index (11.4%).

It’s worth pointing out that when global equity markets tanked in Q1 2020 due to Covid-19, Fundsmith performed very well. It delivered a return of -7.9% for the first three months of 2020 versus -15.7% for the MSCI World index. The FTSE 100 index returned -23.8% over that period. The strong focus on high-quality businesses worked wonders.

This long-term performance, and the performance during the 2020 downturn, is reassuring.


As with any investment, there are risks I have to consider.

One risk worth highlighting is the concentrated nature of the portfolio. Fundsmith only held 29 stocks at 30 September. That’s not many. That means that exposure to some stocks is quite high. If one or two stocks in the portfolio underperform badly, performance could be impacted quite substantially.

Another risk is the high exposure to the US. If the US market underperforms, Fundsmith’s performance could be impacted.

Fees are also worth mentioning. I invest through Hargreaves Lansdown where the annual fee is 0.95% plus platform fees. That’s quite high.

I’ll keep investing in Fundsmith

Overall, however, I like Fundsmith and will continue investing in it. I see it as a good core holding.

That said, I don’t see it as a ‘one-stop shop’. With just 29 holdings, it’s not going to provide me with full diversification. So, I will continue to invest in other funds, as well as high-quality individual stocks, as well.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Edward Sheldon owns shares in Microsoft, PayPal, Unilever, Diageo, and Hargreaves Lansdown and has a position in Fundsmith. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Facebook, Intuit, Microsoft, and PayPal Holdings. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, and Unilever and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and long January 2022 $75 calls on PayPal Holdings. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.