Most-bought investments: October 2023

• Scottish Mortgage and Fundsmith Equity displaced from their top spots by City of London and Royal London Short Term Money Market 
• Growing interest in income-focused strategies, as investors aim to secure reliable income streams in the face of escalating inflation

Scottish Mortgage and Fundsmith Equity’s long run as the most-bought investment trust and fund each month among interactive investor customers came to an end in October, with income strategies taking centre stage.

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Scottish Mortgage had been in pole position among investment trust bestsellers on interactive investor since June 2019, while Fundsmith Equity had topped the fund charts every month since March 2021. However, last month they were knocked into second place by City of London and Royal London Short Term Money Market – both income-focused strategies.

Kyle Caldwell, Collectives Editor at interactive investor, says: “What has not changed is that Scottish Mortgage (LSE:SMT) and Fundsmith Equity remain hugely popular with our customers, having only dropped one place to second in the rankings.

“However, as part of a wider trend that's been playing out for around two years, growth strategies have been losing out to income strategies in the popularity stakes, further reflected in October by City of London (LSE:CTY) and Royal London Short Term Money Market becoming the most-bought investment trust and fund among our customers. The demand for income is intensifying as investors attempt to protect their portfolios against the high levels of inflation. As a result, investors are increasingly turning their attentions towards funds and investment trusts offering eye-catching yields.”

Funds

Global funds continue to dominate, accounting for seven of the top 10 most-bought funds last month. Passive strategies also remained popular, accounting for seven of the 10 fund bestsellers last month – five of which are from Vanguard’ stable.

Kyle Caldwell says: “For funds, Royal London Short Term Money Market entered our top 10 most-bought table in April and has kept its place each month since. Over the past couple of months, it has occupied second spot, with its ranking rising at the same time as its yield has been increasing. Money market funds see their cash-like investments rise as interest rates climb. Royal London Short Term Money Market’s current yield is 5.2%. Money market funds own a diversified basket of low-risk bonds that are due to mature soon, meaning that investors can earn an income on their cash with minimal risk.”

“More broadly, ii customers continue to favour fund strategies that have their fingers in a number of investment opportunities globally, offering diversification amid market uncertainty stoked by a number of factors including high interest rates, inflation, and geopolitical tensions.”

Investment trusts 

When it comes to investment trusts, there was an appetite for income-focused strategies, which accounted for six out of the top 10 bestsellers, with City of London ranking highest (second position). The trust, which has been managed by Job Curtis since 1991, is conservatively managed and a consistent income payer having increased dividends ever year for 57 years. City of London regularly appears towards the top of our most-bought investment trust rankings but has now claimed top spot.

Kyle Caldwell, says: “The demand for high income is much more prevalent among the most-bought investment trust rankings, with Greencoat UK Wind (LSE:UKW), BlackRock World Mining Trust (LSE:BRWM), and Merchants Trust (LSE:MRCH) offering respective yields of 6.4%, 7.4%, and 5.7%. The latter is one of three new entries in October.”

“Another popular choice is JPMorgan Global Growth & Income (LSE:JGGI) (yielding 4%), while Gore Street Energy Storage Fund (LSE:GSF) and HICL Infrastructure (LSE:HICL) were the two other new entrants in October. The duo, which both invest in alternative assets, an area that’s been harmed by higher interest rates, have respective yields of 12.3% and 6.9%.

“Bear in mind that high yields are not guaranteed, and in some instances can be a warning sign that the income on offer is not sustainable. In addition, while high yields offer investors the prospect of higher income today, there are no guarantees that this will result in market-beating returns from a total return perspective – when both capital and income are combined.”

Direct equities

Victoria Scholar, Head of Investment at interactive investor, says, “Investors have been opportunistically buying more banks this month with Barclays (LSE:BARC) and NatWest Group (LSE:NWG) among the new entrants. It has been a busy period for banks with earnings season in focus. The two UK lenders suffered severe share price declines during the month both announcing disappointing outlooks. That hasn’t deterred customers from snapping up these stocks which are now much cheaper than they were in September.

“Oil giant BP (LSE:BP.) has entered the list of most-bought stocks on the ii platform this month. The Israel-Hamas war has sparked volatility in the oil market. While the global benchmark Brent crude has largely been on the up since June, price action has been more challenging in October. BP reported disappointing earnings on the final day of the month with quarterly profits of $3.3 billion, down from $8.1 billion in the same period last year when earnings were boosted by a jump in oil prices following Russia’s invasion of Ukraine.

“Tesla Inc (NASDAQ:TSLA) remains a mainstay of ii customer portfolios. While shares are up around 85% year-to-date, gains have tapered off lately with the electric vehicle giant down 20% over the past month. Its most recent share price drop at the end of October was driven by updates from battery cell supplier Panasonic, which raised concerns about weaker EV demand. In mid-October, Tesla’s quarterly profit margins disappointed as its price cuts this year take their toll.”

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