Building a £25,000 portfolio
We asked Heather Ferguson, investment analyst at Hargreaves Lansdown, to come up with suggestions for both a cautious and a medium-risk portfolio for someone with £25,000 to invest.
Heather Ferguson says: “A cautious investor will often have a considerable part of their portfolio held across cash and fixed-interest investments, as they tend to be less volatile than shares. An allocation to more defensive, larger companies is also included, as equities tend to outperform fixed-interest over the long term.
The below funds dovetail well together and all feature on the Wealth 150 list of our favourite funds across the major sectors.”
£6,250: Invesco Perpetual Tactical Bond
“The approach of Invesco Perpetual’s Fixed Interest team is to identify undervalued opportunities they believe will add value when markets are rising, but try to seek shelter when opportunities are lacking.”
£6,250: Newton Real Return
“This is the type of defensive fund we believe comes into its own when markets hit a rough patch but which also has the ability to deliver good long-term returns, thanks to its core of solid companies that are generally well-placed to withstand a variety of economic conditions.”
“We are comfortable in the ability of the manager, Sebastian Lyon, to shelter investors’ wealth in tough market conditions, while growing capital over the long term.”
£6,250: Artemis Strategic Assets
“We believe the fund has the potential to continue offering a degree of capital shelter in tough markets while delivering attractive long-term returns.”
“This portfolio differs from that of a more cautious investor as the level of equity exposure is higher, adding more risk but also the potential for higher returns,” says Heather Ferguson.
£5,000: Woodford Equity Income
“Manager Neil Woodford is one of the most successful, experienced and well-known fund managers in the UK. His long-term track record is exceptional, having significantly outperformed the UK stockmarket while producing impressive income growth along the way.”
£5,000: Artemis Strategic Assets
“The advantage of a diversified, multi-asset fund such as this is that different areas of the portfolio will perform well at different times.”
£5,000: Newton Real Return
“We hold the manager, Iain Stewart, in high regard and remain confident in his ability to provide good returns while offering some shelter during more turbulent periods.”
£5,000: Lindsell Train Global Equity
“This is the type of fund investors could tuck away in the bottom drawer and let some of the world’s most valuable brands work at growing their wealth over the long term.”
£5,000: Old Mutual UK Alpha
“This fund, which aims to maximise capital growth by investing in UK companies, is managed by Richard Buxton, a talented and skilled stockpicker.”
All investment returns are measured against a benchmark to represent “the market” and an investment that performs better than the benchmark is said to have outperformed the market. An active managed fund will seek to outperform a relevant index through superior selection of investments (unlike a tracker fund which can never outperform the market). Outperform is also an investment analyst’s recommendation, meaning that a specific share is expected to perform better than its peers in the market.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).