Investing in funds can be a great way to build wealth over the long run. With funds, your money’s pooled together with that of other investors and managed by a professional fund manager. This means investors don’t need to worry about picking stocks themselves.
Here, I’m going to highlight three top funds available to UK investors like myself. All three have delivered strong long-term returns in the past and I see them as excellent long-term investments.
Fundsmith
One of the best investment funds for long-term growth is, in my view, Fundsmith Equity. This is a global equity fund managed by Terry Smith. Since the fund’s launch a little over a decade ago, this fund has delivered fantastic returns. Between 1 November 2010 and 30 July 2021, Fundsmith returned 18.9% per year (but remember, past performance is no indicator of future performance).
One reason I like this fund in particular is that Smith has a very simple investment process. All he does is invest in great companies and hold them for the long term. It’s a straightforward, Warren Buffett-like approach to investing that’s easy to understand. Stocks in the portfolio at present include Microsoft, PayPal, and Estée Lauder.
One risk to consider here is that the fund is quite concentrated – it only holds around 30 stocks. So compared to a fund that owns say, 200 stocks, stock-specific risk is higher.
I’m comfortable with the risks however. Overall, I see Fundsmith as a top investment.
Blue Whale Growth
Another fund I see as a great long-term investment is Blue Whale Growth. This is a global equity fund managed by Stephen Yiu. Since its launch in September 2017, the fund has performed very well, more than doubling investors’ money (20%+ annualised return).
Like Fundsmith, Blue Whale has a focus on great companies. However, Yiu is a little more active in his approach than Smith. If he believes a stock is overvalued, for example, he may take some profits off the table. Stocks in the portfolio at present include Alphabet, Mastercard, and Adobe.
One risk here is that the fund has a high exposure to the US stock market. If this market takes a hit, Blue Whale could underperform.
I’m not put off by the high US market exposure however. In my view, it’s a good idea to have plenty of exposure to the US market simply because so many top companies are listed there.
Fidelity Global Technology
Finally, I like the Fidelity Global Technology fund. As its name suggests, this fund’s purely focused on the technology sector. Performance over the long term has been very impressive. Over the last five years it’s returned about 26% per year.
The reason I’m bullish on this fund is that we’re in the midst of a technology revolution. So, it makes sense to have plenty of exposure to leading tech companies. This fund provides investors with exposure to some of the biggest players in tech, including Microsoft, Apple, and Visa.
Now this fund is higher risk than the other two funds I’ve mentioned because it is focused on just one sector. If tech stocks pull back, this fund is likely to underperform.
I’m fine with this risk though. I think this fund can play a powerful role in a diversified portfolio like mine.
