Most-bought investments: October 2022

Income-hungry investors eat up yields from investment trusts and FTSE 100 blue-chips, Tesla jumps back into the top 10, and capital preservation-focused trusts take more of a backseat.

• Only one capital preservation strategy makes the top 10 list of most-bought investment trusts in October
• Passives continue to dominate fund purchases; with only two actively managed funds, and with Vanguard dominating

interactive investor, the UK’s second-largest direct to consumer investment platform, outlines the most-bought stocks on its platform during the month of October.

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In September, only one active fund was in the top 10:Terry Smith’sFundsmith Equity. During October, however, another actively managed fund joined Fundsmith in the top 10 – Royal London Short Term Money Market fund, perhaps reflecting the rising interest rate environment. That’s because money market funds offer a return on cash, which increases as interest rates rise.

Once again, in October - six of the passive funds in the top 10 (or funds using passive strategies) were from Vanguard.

Among direct equities in October, Lloyds Banking Group (LSE:LLOY)retained its top spot on the most-bought list among ii customers. Tesla (NASDAQ:TSLA), however, shot in at number two in the top 10 – having not made the most-bought list in September.

And while investment trusts with a capital preservation, inflation-protection angle have been a key feature in the first several months of the year, with trusts such as Personal Assets, Capital Gearing and Ruffer regularly featuring, in October only Ruffer Investment Company (LSE:RICA) made the list, in at number 10.

A number of retail-focused global ‘golden oldies’ made the top 10, such as Alliance Trust (LSE:ATST) and F&C Investment Trust (LSE:FCIT), along with some income-focused trusts and higher-yielding alternative assets.  

Direct equities in more detail

Both Glencore (LSE:GLEN) and Vodafone Group (LSE:VOD) remained in the top 10 for October.

Commenting on the most-bought equities, Victoria Scholar, Head of Investment, interactive investor, said: “FTSE 100 giants such as Vodafone, Glencore, Lloyds, and Legal & General (LSE:LGEN)maintained their spots on the most-bought list during the month of October. A key focus for investors was on financials in October amid third-quarter reporting season, which sawBarclays (LSE:BARC) added to Lloyds among the most popular traded stocks during the month.

“Following the mini-budget fiasco in September, which saw mortgage rates soar, the bond market sell-off, and emergency intervention from the Bank of England, October saw some calm restored with the appointment of Jeremy Hunt as the new chancellor. Housebuilders such as Taylor Wimpey (LSE:TW.),Persimmon (LSE:PSN), and Barratt Developments (LSE:BDEV), which were caught up in the mayhem last month fell out of the most-popular stocks list in October following the flurry of activity in the previous month. Continued bankruptcy concerns towards Cineworld (LSE:CINE) also saw its shares drop out of the most-bought list of stocks on the interactive investor platform.

“EV giantTesla (NASDAQ:TSLA), however, returned to the list of most-bought stocks on the ii platform in October, having seen its shares slump to a 16-month low during the month. This may have prompted opportunistic investors to pick up shares for a discounted price. Tesla reported a mixed third-quarter earnings scorecard on 19 October, which sent the stock lower after-hours on the back of a miss on revenue and disappointing full-year delivery guidance.”

Lee Wild, Head of Equity Strategy, interactive investor, added: “There appears to have been some bargain hunting during the month of October, and this may have paid off for some investors buying cheap US stocks. For example, those investors who bought Tesla after the first week of October, especially at the lows reached during the middle of the month, will be sitting on a profit right now. Tesla shares were less than $205, but are now $227. They’re up about 11-12%. Nevertheless – it is always important to remember there are no guarantees in investing. None of us have a crystal ball.”

Funds and investment trusts in detail

In funds and investment trust land, passive strategies continue to capture the attention of fund investors.

In October, the same top two funds sat in the number one and two spots – Fundsmith Equity at number one, and Vanguard LifeStrategy 60% Equity in second place.

Vanguard funds made up most of the top 10 most-bought funds.

Investment preservation strategies such as Ruffer Investment Company (LSE:RICA)has been a popular pick for ii customers each month, but dropped out of the top 10 in ii’s September platform purchases.

However, Ruffer (LSE:RICA)is back in the list for October, coming in at number 10.

Kyle Caldwell, Collectives Specialist, interactive investor, explains: “For the first time in several years, equities have competition from higher savings rates and bond yields. Both have risen in response to higher interest rates as central bankers attempt to cool red-hot inflation.

“With higher income available from cash and bonds, the ‘TINA’ strategy (AKA - there’s no alternative to equites) is no more. As a result, investors are now giving greater consideration to cash and bonds, particularly those who are on the hunt for income.

“This is reflected by Royal London Short Term Money Market entering our top 10 most-bought fund table in October. Money market funds offer a return on cash, which increases as interest rates rise. At the end of September, the distribution yield on Royal London Short Term Money stood at 2.08%. Such funds are low risk, but bear in mind it is still an investment, so could still go down in value.

“As was the case last month, among our top 10 most-bought funds – passive dominates, with investors preferring to own the market rather than attempt to beat it through an actively managed fund. Terry Smith, however, remains in number one spot, with Fundsmith Equity not being knocked off its perch by the lower-cost passive approach.

“Investment trust investors have still been on the hunt for income, with four of the five new entries in our top 10 most-purchased investment trust table in October having an income focus.

“Two have eye-catching yields, with Henderson Far East Income (LSE:HFEL) and real estate investment trust Primary Health Properties (LSE:PHP), yielding around 9.8% and 5.8%. JPMorgan Global Growth & Income (LSE:JGGI)and Alliance Trust (LSE:ATST), yielding 4% and 2.5% are two other new entries.

“The final new entry is wealth preservation strategy, Ruffer Investment Company (LSE:RICA), which is no stranger to the ii most-bought trust list. The trust holds a broad range of assets and aims for positive absolute returns, regardless of market ups and downs. However, it is interesting to see some of the other capital preservation trusts that usually dominate our list going out of the window in October, with only one in the top 10 in October. Capital preservation has been a consistent theme in 2022, but it seems as though they are being displaced by alternative assets. Time will tell whether this becomes a consistent trend towards the end of this year.”

Top 10 most-bought investments on interactive investor in October 2022