One of the most difficult things when starting a Mutual Fund portfolio is choosing which funds are best to invest in.
Before you can make a decision you need to be clear what your objective is (e.g. Regular income, high risk long-term growth, or low risk growth). To find out more on how to get started with investing, check out my article How to Invest in Mutual Funds. However, in this article I will be sharing my three best performing Mutual Funds for long-term growth. My investment strategy is to select higher-risk funds which have huge growth potential if left for 5+ years.
The three funds covered in this article are available on Hargreaves Lansdown with a minimum investment of £50 per month. So these funds are great for first time investors with limited capital.
Lindsell Train Global Equity Class D
This is the first fund I invested in and as a result has also delivered my largest return to date.
The fund was set up by veteran investors Nick Train and Michael Lindsell, who have a long history of outperforming the market.
Lindsell Train offer several different funds, but for me the Global Equity offering is the best and provides the most diversification in terms of markets and sectors. The majority of equities held by the fund are from UK, US, European, and Japanese companies. This means that it is not dependant on one market. The fund also covers a lot of sectors – these include, beverages, personal goods, media, and financial services.
One of the things that drew me to the fund was the brands it included in its mix. As when starting out investing, I had little to go on other than my knowledge of different companies. Some of the biggest companies the Fund invests in are, Diageo, Unilever, Nintendo, and Walt Disney.
Past performance is not an indicator of future growth, but it is worth looking at. On average Lindsell Train Global Equity Class D achieved over 18% in growth per year, when looking at a five-year period. To put this into figures, if you invested £1000 it would be worth almost £2000 in five years thanks to compound interest – essentially doubling your investment.
Dividends and Fees
Lindsell Train Global Equity Class D pays a bi-annual dividend which historically comes to 0.90 in total. So it’s not the best fund for people looking to make a regular income of their investment. But it does come as a nice little extra.
In terms of fees, if you invest in the fund via Hargreaves Lansdown they offer a 0.20 saving on fees. Totaling 0.54% a year, which is nothing when you factor in dividend yield and the capital growth of 18%.
For more details on the Lindsell Train Global Equity or to start investing, check out the Hargreaves Lansdown site.
Standard Life Investments Global Smaller Companies Class S
The Standard Life INV Global Smaller Companies fund is another strong performer with an average annual return of over 17% when looking at a five-year period.
This has been one of my best performing funds of 2018 to date with a 13% increase in the first 6months of the year. The focus of this Standard Life fund is equity in small global companies, these include Grub Hub, JD Sports, and Fevertree drinks. The global split is also good with this fund, with investments in the US, UK, Japan, Hong Kong, and Europe.
This fund consists of smaller company equity and there is no overlap with the Lindsell Train Global Equity, meaning the two funds complement each other well. So if possible you can invest in both and further diversify you portfolio.
Dividends and Fees
As this fund is an accumulation class and not income, the dividend payments get automatically re-invested into the fund. So the objective of the fund is long-term growth and not income.
The annual fees are 0.79% if you invest via Hargreaves Lansdown (as they offer a 0.27% discount). So, Standard Life INV Global Smaller Companies is more expensive than other funds, but the returns make it worthwhile.
For further information on the fund, or to make an investment, visit the dedicated page on Hargreaves Lansdown site.
Fundsmith Equity Class I
Fundsmith Equity is one of the top performers in my portfolio. Looking at performance over the past five years it’s average return is almost 20% per year which is really impressive.
The fund focuses on businesses that can sustain a high return on operating capital and have advantages within the market that are difficult to replicate. Companies invested in by the fund include PayPal, Microsoft, and Amadeus IT Group.
For any investor truly focused on making large long-term growth Fundsmith Equity is an absolute must, and it has little overlap with the other two growth funds covered above.
Dividends and Fees
As this is a high returns Fund the Fees are more expensive. At 0.97% Fundsmith Equity is currently the most expensive Fund in my portfolio, and unfortunately no discount is offered on Hargreaves Lansdown.
However, Fundsmith Equity can be bought in both Income and Accumulation classes. So, if you want to receive a dividend payment you can. Currently the dividend is paid bi-annually and is 0.97%. This is great as the figure matches the fees, so it essentially cancels them out.
To learn more about Fundsmith Equity visit their page on Hargreaves Lansdown.
It’s Best to Invest through an ISA
Hargreaves Lansdown enable you to invest in Mutual Funds through an ISA.
All investments made via an ISA are exempt from tax. Meaning you keep all the profits from your investments, whether they’re from dividends or capital growth.
£20,000 can be paid into an ISA each year, which is can result in large savings.
You can also invest in a ‘Lifetime ISA’, which is a great option if you’re looking to save for retirement or a first home. To find out more about Lifetime ISAs, check out my post here: ‘Should I get a Lifetime ISA’.