Most-bought investments: May 2023

A sense of investor entrenchment prevails during a tough month for the FTSE 100, as private investors stick to income picks across equities and trusts.

• Income remains a dominant theme across equities and trusts
• Royal London Short Term Money Fund retains its spot in May, after the Bank of England raised rates to 4.5% during the month

interactive investor, the UK’s second-largest investment platform for private investors, outlines the most-bought investments on its platform in May 2023. 

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Passive funds and the Vanguard LifeStrategy range, which use passive strategies, continue to dominate. Only two actively managed funds remain in the top 10 – Fundsmith Equity, a long-term favourite among ii investors, and Royal London Short Term Money Market, which made the top 10 in April and has held on to its spot in May.

In investment trust land, income remains the aim of the game – particularly high yields.However, we saw a similar theme in the equities space, too, with investors turning towards higher-yielding stocks.

Below, ii looks at what was catching private investors’ eyes over the month of May across not only equities, but also investment trusts and open-ended funds.

Direct equities in detail 

Commenting on the most-bought equities in May, Richard Hunter, Head of Markets, interactive investor, explains: “May was a tough month for the FTSE 100, with its exposure to overseas stocks proving to be something of a double-edged sword. Concerns over US debt ceiling negotiations, inflation, further potential interest rate hikes from the Federal Reserve which could prompt recession and a faltering Chinese economic recovery, all added to a month in which the premier index lost 4.2%.

“The best buys on our list for May showed an element of investor entrenchment, with a notable focus on highly-yielding dividend stocks, such as Vodafone Group (LSE:VOD)(10.1%), Legal & General Group (LSE:LGEN) (8.5%), Rio Tinto (LSE:RIO) (8.3%), Aviva (LSE:AV.), and Glencore (LSE:GLEN) (both 7.9%). Such yields are still well in excess of cash equivalents, and provide the additional option for investors, if they wish, of reinvesting the dividends, thus benefiting from the power of compound interest over time.

“Equally, there was the usual speculative mix of potential recovery situations. ASOS (LSE:ASC) shares have declined by 36% in the year to date leading to its demotion from the FTSE 250, insurers Aviva and Legal & General have dropped by 11% and 9% respectively, while Vodafone (as with Aviva and Legal & General) also gives both dividend yield and recovery possibilities, having lost 11% so far this year.

“The continuing strength within the holiday sector continued to be positive for the airlines, and indeed Rolls-Royce Holdings (LSE:RR.), which is paid for its engines on a continued basis on hours flown. Investors chose to ride the coattails of a stock which has seen an increase of 47% so far in 2023.

“Tesla (NASDAQ:TSLA) has also been a star performer in the year to date, as have many US tech stocks where the Nasdaq index has added 24% and eliminated some of its losses from last year. The likes of Tesla have made a contribution to this turnaround, and an increase in the share price of 89% so far this year has resulted in its being a firm favourite among interactive investor customers.”

Funds and investment trusts in detail

Commenting on the most-bought funds and trusts on ii during the month of May, Kyle Caldwell, Collectives Specialist, interactive investor, says: “Europe has been a star stock market performer of late, and some investors have positioned to profit in the hope the rally has plenty of legs. 

“This is reflected by Fidelity European Trust (LSE:FEV) being one of our two new entrants to our top 10 most-bought investment trust table in May, storming up the rankings into third place. 

A key driver behind European markets being buoyant is strong share price performance from Europe’s luxury goods companies. Such companies have seen sales boosted by the re-opening of China’s economy, as well as benefitting from the resilience of spending power amongst wealthy consumers against the cost-of-living crisis.

“The trust, managed by Sam Morse and Marcel Stotzel, has exposure to this trend among its top 10 holdings through LVMH (EURONEXT:MC), which is made up of fashion brand Louis Vuitton and drinks companies Moët and Hennessy. Also, a top 10 position is French cosmetics giant L'Oreal SA (EURONEXT:OR).  

“The other new entrant is 3i Group (LSE:III), which invests in private equity. A couple of weeks ago, it reported its latest annual results (to the end of March 2023), which showed a 36% total return on opening shareholders’ funds. The resilient returns in a rising interest rate environment caught the eye of some investors, reflected by 3i rising up the rankings to seventh place in May. 

“Elsewhere, the same trends continue to play out among retail investors. In our top 10 most-bought funds there’s a clear preference to ‘buy the market’ via a passive fund, reflected by two just two active funds featuring: Fundsmith Equity and Royal London Short Term Money Market. Among the eight investment trusts keeping their places in the top 10 there’s a clear preference for income, and in particular, a high yield. Four investment trusts yielding around 5% or higher in the top 10 are: BlackRock World Mining Trust (LSE:BRWM), Greencoat UK Wind (LSE:UKW), City of London (LSE:CTY), and Merchants Trust (LSE:MRCH). 

“As well as having a market-beating yield City of London is one of eight investment trusts with over five decades of consistent dividend increases. Two others from that exclusive club feature in our top 10 – F&C Investment Trust (LSE:FCIT)and Alliance Trust (LSE:ATST). However, it is important to bear in mind that while high yields catch the eye and consistent dividends are highly prized by investors, the proof in the pudding is in the overall total returns.”

Top 10 most-bought investments on interactive investor in May 2023