There are fewer than eight weeks left to use your stocks and shares ISA and pension allowances for this tax year. Global stock markets have been volatile in 2022, with fears that rising inflation and interest rates could cause a stock market crash or, even worse, a recession.
As a result, investors may be wondering where to invest their money. Funds are one way of managing risk by diversifying your portfolio across sectors and regions.
I’m going to reveal the six most-bought funds in January, across Hargreaves Lansdown, Fidelity, Interactive Investor and AJ Bell.
[top_pitch]
The six most-popular funds in January
Interestingly, only Baillie Gifford American and Positive Change featured in my article on the top funds bought in December. There has also been a noticeable decline in the popularity of specialist technology and US funds.
The most popular funds in January spanned a wide range of sectors, including the US, Global, Asia-Pacific and the UK. All but one of the funds are managed by Baillie Gifford.
1. Baillie Gifford American
Baillie Gifford (BG) American was one of the most popular funds across all four platforms in January. According to Trustnet, the fund delivered an impressive return of 121.8% in 2020, taking the top spot in the IA North America sector. However, it slipped to second from the bottom in 2021, delivering a negative return of 2.8%. It’s made a similarly disappointing start to 2022, delivering one of the lowest sector returns with a 27.9% loss.
The fund has substantial holdings in Amazon, Tesla and Netflix. As a result, it’s been impacted by the sell-off of high-growth technology shares in the US. Investors may see this as a buying opportunity with the potential for future upside.
2. Baillie Gifford Global Discovery
BG Global Discovery is another top-seller that has suffered a similar reversal of fortunes to BG American. Trustnet reported fund returns of 76.8% in 2020, smashing the IA Global average of 15.3%. However, the fund delivered the lowest sector return in 2021, with a loss of 20.6%. This was followed by a 21.5% loss to date in 2022.
With 65% invested in North America, the fund has been impacted by the recent downturn in US stock markets. However, investors may be attracted by the long-term potential returns in the fund at its current price.
3. Baillie Gifford Positive Change
BG Positive Change has a consistent record of out-performance, delivering the second-highest five-year return of 201.6% according to Trustnet. After a muted 2021, it has fallen by 17.5% in 2022, compared to a 7.2% negative return for the sector.
The fund invests in companies that make a positive impact on society or the environment, including ASML, Moderna and Tesla. With half of the fund invested in North America, it has also been hit by the recent tech sell-off in US stock markets.
4. Baillie Gifford China
Chinese funds had a poor 2021, with negative market sentiment towards the government’s regulatory crackdown. Trustnet data shows that BG China delivered negative returns of -17.7% in 2021, compared to -10.7% for the sector.
However, Chinese companies are trading at historic lows compared to their global peers. Investors may see this as a buying opportunity.
5. Baillie Gifford Pacific
Unlike its Chinese counterpart, BG Pacific delivered positive returns of 6.5% in 2021, a top-quartile performer in its sector according to Trustnet. However, it has fallen to the bottom-quartile in 2022, with a negative return of 7.5%.
Investors may be hoping that recovery in the Chinese stock markets and continued domestic growth in the Indian market may help to restore positive returns.
6. Premier Miton UK Smaller Companies
Trustnet reports that Premier Miton UK Smaller Companies was the highest performer in its sector in 2020, delivering a 77.3% return. It returned 22.7% in 2021, before slipping to a 6.5% loss in 2022.
Unlike US stock markets, the FTSE has continued to rise in the last month. The Guardian recently reported that the economy is almost back to its pre-pandemic peak. Despite this, UK companies are still trading on much lower valuations than their US counterparts.
[middle_pitch]
How to invest in funds
One of the most tax-efficient ways to invest in funds is via a stocks and shares ISA. If you’re looking for an ISA provider, take a look at our top-rated stocks and shares ISAs. We’ve also written a guide to stocks and shares ISAs for beginner investors.
If you’re looking to buy funds outside an ISA, it’s worth reading our article on the top-rated online trading platforms by fees, investment selection and ease of use.
