Neil Woodford: This Man Is Out To Make You Rich

Few people can say they have made hundreds of thousands of people richer, but Neil Woodford certainly can.

Woodford is the man most likely to be called ‘fund management legend’, because of his matchless track record in making ordinary Britons wealthier than they were.

He has been doing it for 25 years, primarily through his best-known investment fund, Invesco Perpetual High Income.

Britons have entrusted him with more than £20 billion of their money, and few have been disappointed.

Woodford, however, has moved on.

Same Man, New Fund

His name is everywhere because he has struck out on his own to launch his new fund, CF Woodford Equity Income, from 2 June.

Independent financial advisers and fund supermarkets know a marketing opportunity when they see one, and they have seized on this massive launch with relish.

The Motley Fool is a long-term admirer of Woodford, so we can understand why.

Thanks, Neil

Although past performance is no guarantee of future returns, people cheerfully waive that rule when it comes to Woodford.

In the first 25 years after launching Invesco Perpetual High Income, he delivered a total growth in 1,907%, turning £10,000 into £190,000, with dividends reinvested.

Sadly, I didn’t have the foresight to invest in his fund in 1988. But I put my faith in his reputation in 2004, investing a total of £2,697 in Invesco Perpetual Income. 

Today, that money is worth £6,643, a rise of 146%.

So Woodford has made me that little bit richer as well.

No Sell Out

Huge numbers will be clamouring to invest some of their money in his new fund. 

I’m certainly tempted. I like the idea of the great man starting with a clean slate.

But I won’t be rushed into throwing money at the fund on day one, and nor should you. His new fund is a unit trust, an open-ended fund, which means there is no limit on the amount of money you can invest in it.

They won’t be slapping up a ‘Sold Out’ sign.

So you have all the time you want to build up your stake in his new venture.

Ultimate Contrarian

There is no guarantee Woodford will instantly perform anyway. His style is to invest in large blue-chip, dividend-paying stocks, even when they are out of favour.

So he will go through periods of underperformance, as he has done in the past.

What makes Woodford special is that he sticks to his guns, even when the world is yelling that he’s got it wrong.

He famously shunned the technology boom, but when stocks crashed, his reputation soared.

Astonishingly, he pulled off the trick again, by snubbing the big bad banks in the run-up to the financial crisis, because he thought they were too risky.

You can see why he has so many admirers.

Make Yourself Richer

Woodford has made Britain richer before. Let’s hope he does it again. But you should still ignore the hype, and work out whether this fund is really for you.

There is also a price for holding investment funds. This one comes with a standard annual charge of 0.75%, which will eat into the target 4% income it aims to generate.

You can build your own portfolio of blue-chips stocks generating income of around 5% a year, without any fund manager charges, by investing in FTSE giants such as GlaxoSmithKline, HSBC Holdings, J Sainsbury and Vodafone.

There is more than one way to get rich. Even die-hard Woodford fans will want to balance his new fund with a few equity holdings of their own.

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Harvey doesn't own shares in any companies mentioned in this article. The Motley Fool has recommended shares in GlaxoSmithKline.