I believe that one of the best ways to invest in the stock market is with investment funds.
Some investors may avoid investment funds because they prefer to choose investments themselves. That is a perfectly acceptable approach. However, I believe there will always be a place for investment funds in my portfolio.
I hold this view because investment funds can help me build exposure to sectors or industries I may not understand.
Managers may also be more comfortable investing in certain companies than I am. I know in the past I have been too cautious when selecting potential investments, which has had an impact on my performance. By building exposure to different funds and fund managers, I think I can work my way around this drawback.
With that in mind, here are three investment funds that I would buy for my portfolio in 2022. I have picked these funds because I believe they can bring something different to my portfolio.
Investment funds for growth
The first fund I would buy is the Liontrust UK Growth fund. The fund’s managers concentrate on finding companies with a significant competitive advantage. This can be anything from intellectual property to businesses that have a high level of recurring revenue.
The top holding in the portfolio today is AstraZeneca, one of the UK’s premier pharmaceutical companies. The annual management charge is 0.87%, and over the past year, the fund has returned 17%.
As a UK growth fund, all of the assets are invested in UK equities. This could be a drawback if the UK stock market underperforms the rest of the world in 2022. The lack of diversification is concerning, but as a way to invest in UK growth stocks, I think the fund has tremendous potential.
A focus on small caps
Small-cap stocks can provide better returns for investors in the long run. This is primarily because smaller businesses can grow faster than their larger competitors, although additional risks come with investing in smaller companies. Many lack the checks and balances that are in place at larger enterprises.
This is why I would buy a diversified small-cap fund such as the Marlborough UK Micro-Cap Growth fund. This fund has an excellent track record of finding small businesses. It is on the lookout for companies that have a edge in their respective markets, as well as a bright growth outlook.
The largest holding in the portfolio today is S4 Capital, the rapidly expanding digital advertising agency. The annual management charge currently sits at 0.72%.
International growth
The final investment fund I would buy for growth in 2022 is Jupiter Global Value Equity. Launched in 2018, this is a relatively new fund that focuses on companies around the world with low valuations.
Just 24% of the portfolio is invested in the UK, making it a truly global fund. One of the most significant holdings is Nokia. It charges an annual management fee of 0.93% and can invest 30% of assets in non-equity instruments, giving the manager more flexibility when it comes to finding value.
Unfortunately, the fund has lagged the market recently due to a lack of exposure to high growth stocks. This trend could continue if value equities remain out of favour.
