Investing within a Stocks and Shares ISA is a bit of a no-brainer. With these accounts, all gains and income generated from investments are completely tax-free.
Have a Stocks and Shares ISA open and looking for investment ideas? Here are three exceptional investment funds to consider.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Fundsmith Equity
First up is Fundsmith Equity. This is a global equity fund that is managed by Terry Smith (aka ‘Britain’s Warren Buffett’).
This fund is one of the most popular investment products in the UK and it’s easy to see why. Since its launch in late 2010 it has absolutely trounced the market, returning about 15.4% per year (to the end of August) versus 11.3% for the MSCI World index.
Smith’s secret to success? Well, put simply, he invests in world-class companies that are extremely profitable and holds them for the long term. This approach to investing (which is very similar to Buffett’s style) has delivered great results.
Of course, the fund hasn’t outperformed at all times. Recently, it has actually lagged the broader market a little.
Yet I’m optimistic that it can continue to perform well for investors in the long run.
Royal London Sustainable Leaders
Those looking for more of a UK focus may want to consider Royal London Sustainable Leaders. This fund – which has been a solid performer in recent years – typically invests around 80% of its capital in UK shares.
What I like about the Sustainable Leaders fund is that it tends to invest in high-quality businesses. The top 10 holdings, for example, currently include the likes of AstraZeneca, London Stock Exchange Group, Sage, and Unilever. These are some of the best businesses in the UK, to my mind.
I also like the sustainable tilt. Research shows that companies that operate sustainably tend to produce strong returns for investors over the long run.
The risk here is that the fund could underperform in the short term if areas of the market that are not deemed to be sustainable, like oil stocks, shoot higher.
Taking a long-term view, however, I expect this one to do well.
Threadneedle (Lux) Global Technology
Finally, those looking for a little more growth may want to check out Threadneedle (Lux) Global Technology. This is an under-the-radar fund with a focus on the technology sector.
This product has an incredible track record. Over the last five years, it has returned around 140%. That makes it one of the best-performing funds on Hargreaves Lansdown (and there are around 4,000 on the platform).
What’s the secret here? Well, it could be the fact that it’s run by a team of tech experts who are based in Silicon Valley and have decades of experience in the tech-investing space.
It could also be the fact that the portfolio is quite unique. For example, top holdings currently include semiconductor companies Lam Research, Broadcom, and Applied Materials.
It’s worth pointing out that because the fund is only focused on one sector, it’s going to be riskier than a more diversified product.
Another issue to consider is that fees are relatively high at 1.15% per year.
Given the incredible growth of the tech industry, however, I think it could play a valuable role in a diversified portfolio.
